New Businesses Beware – The Rules Have Changed

It is estimated that over 600,000 new businesses opened last year. That’s fantastic, but I am concerned and have a warning for you. The old business rules no longer apply. It’s a new age and economy, new rules are in control and there are few places to get guidance about what works and what does not work. I have just written a book on the topic called Successfully Navigating The Downturn (Don Todrin) that was recently published by Entrepreneur Press and is available from Amazon.com and other book merchants.

You must recognize that this is not a short-term cycle; the changes in the economy are long-reaching. Many aspects of doing business are no longer the same. What used to work may no longer apply. It is one thing to make changes and adjust to the new way, it’s another thing to start new with a clean slate and embrace the changes from the outset so you can succeed immediately. This works.

Here are a few thoughts to consider.

1. Business skills are more important than ever. You must pay attention to your numbers and ratios and manage with them as guides. You cannot ignore this important requirement. Far too many business operators do things by the seat of their pants, guessing and acting intuitively. Don’t make this mistake. Manage with numbers, install a key indicator system, know your profitability, understand the ratio of payroll-to-revenue, and understand your overhead burden. It’s profit that counts, no longer gross revenues.

2. Reconsider using traditional media for marketing. Utilize the Internet instead. Social networking is the rule and the way. Test market first before you commit to a large campaign to make certain it will work.

3. Find your niche market, focus, concentrate, and specialize. Be the best at something.

4. Create your budgets and cash flow pro formas, then live by them.

5. Raise adequate cash. Do not try and bootstrap, it will not work now.

6. Earn before you grow. Do not staff up and anticipate volume. Overtax your resources before you add on.

7. Limit inventories.

8. Do not compete with price. It’s better to compete with perceived value. Maintain profit margins.

9. Be careful of taking on too much debt. Think twice before borrowing.

10. Create a flat organization. Delegate and inspect.

11. Get help, do not do it alone. Have advisers and listen to them.

These are a few ideas you need to consider before you start out with a new business. The risk is high but so are the rewards. If you do it right the rewards are great. Pay attention to the details. Success is more a function of your ability to run a business than about the product or service you are marketing.