Steps Needed To Start A Small Business – For your convenience, many of the products I link to are also affiliates, which means I can earn money if you buy the products I recommend.
A few years ago, Aaron and I made a bad business decision and lost $55,000 (yes, you’re right). We are incredibly stupid. I deleted some old posts and thought you might want to read about my ignorance.
Steps Needed To Start A Small Business
If you want to start a business, I recommend reading this article that shows the factors that can contribute to business failure.
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PS If you’re ready to start your first business, check out my new book: How to Start Your First on the Side.
Yesterday was me and Aaron’s garage clean out day. It’s worth visiting the lake I mentioned, that’s why we had to clean out our garage.
About four years ago, Aaron and I were approached by a friend who was looking for a business investor on eBay to resell shoes.
Our friends have extensive experience in this industry and have been eBay resellers for many years. I’m no business expert, but I can read financial statements and the numbers look good. These are not disproportionate high profit delusions and our friends informed us that this is a minimum 2-3 year investment.
Top 9 Steps To Starting A Business
We’re excited to try something new, and even though we’re in the middle of our debt reduction process, we’ve decided to invest $15,000 (mistake 1). We took money out of our emergency fund (mistake 2) and went for it.
This post was written in part because of that stupid decision – 4 Questions to Ask Yourself Before Using Your Emergency Fund
It wasn’t what we planned, but we decided to run with it and see what happens.
Our friend continued to run the company, hoping that he could later buy the company from us. In the meantime, we created a profit-sharing system to counter that it should be his business.
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In our opinion, it was still his company, we were involved in rare cases when he asked for advice, but for the most part it allowed us to check everything (Error 3).
Fast forward a year and the numbers look pretty decent. We are constantly making small profits and sales are increasing every month.
Our friends feel it’s time to take the business to the next level, which means cashing in.
We reviewed the history, checked the preforms and decided to add $25,000 (error 4). We also allowed him to increase the company credit card to $15,000 (error 5).
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With our line of credit, our liability is now about $55,000. Our friend also invested $25,000 right after.
Taking the business to the next level also means our friend can’t run it from his house, which means we need storage space. We signed a lease and immediately our monthly expenses exploded along with the cash flow (mistake 6).
This means that money is diverted from product purchases. On the other hand, rents, employee insurance and other costs have increased.
This industry is very cyclical and the timing of your sales cycle is critical. We can’t make our sales so big that we can order the product in time to get it listed and for sale in time.
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At the same time, our friend had emergency surgery and some personal issues that distracted him. This means less inventory control and higher costs.
Aaron and I should have stepped in and filled in the gaps, but we were both dealing with our own work issues. More importantly, we don’t have the knowledge to help when needed (mistake 7).
Six months ago we closed the business and ended up with somewhere in the region of 800 shoes to put in our garage.
Last week one of our Tupperware plastic bins exploded. It was at the bottom of the bin so all the bins collapsed. They dropped a 50-gallon water tank (which should have been full), causing the wheels to fall, causing another pair of shoes to fall.
Getting The Most For Selling Your Business: How To Get Top Dollar For The Company You’ve Nurtured For Years: Fialkovich, Jessica, Ciminelli, Anne Mary, Daum, Kevin: 9781510769632: Books
It might be a good thing that the trash can has fallen over, forcing us to face cleaning out the garage.
There is nothing worse than sending an entire Saturday package of shoes knowing that your $55,000 investment is now down to 800 shoes. Unfortunately, I don’t need to break down $68 for each shoe.
Right now I’m willing to sell each set for $10-$20 to get it out of our garage. Let me know if you are interested in purchasing a pair.
** Editor’s note: I’m slowly selling shoes through Thredup, I’m not making much money, but at least I’m getting rid of them. If you have used clothes, this is a good way to make a little extra money.
Steps To Creating Your Own Small Business
I spent a day reflecting on all the mistakes we made in running our business. It was a long day so I had plenty of time to review all the mistakes we made. I read extensively about the top causes of business failure and was not happy to know that I had made the same mistake.
10 Steps to Starting a Successful Small Business: 1. Treat your business like a business from the start.
Our biggest mistake is assuming our manager knows what he’s doing because he’s been in the business for so many years. He knows the industry inside and out, but that doesn’t mean he knows how to run a business.
His business decisions are based on his form and what he thinks is going to happen, not actual numbers in the world. He is incredibly smart, but he simply lacks the knowledge and skills necessary to make business management decisions.
Establishing A Successful Small Business — Merced County Events
I quickly picked up on his lack of financial skills, but didn’t take the time to teach him those skills or intervene myself.
As a business owner, I should be there every step of the way to provide him with the necessary guidance and training. He will pick up this skill quickly.
If I had given him the business knowledge he needed, combined with his industry knowledge, there is a good chance this post would have been very different.
Aaron and I both thought it was his company. If you own a business, even if it happens casually, you need to treat it as your business.
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It’s my responsibility to run the business, not just bury my head in the sand because I’m busy.
We never take the time to prepare a formal budget. We have a profile, but we never have a system to turn a profile into a budget.
More importantly, there is no obligation to follow the preform / budget. We check performance and think things are going well, but as a true business person knows, your promotion is just an educated guess (or even an idealistic wish).
The real picture emerges when you compare your actual sales to your profile and make financial adjustments based on actual events. Then you reformat your procedure and go through the process over and over again.
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I remember my grandfather saying a few years ago that once you’ve put together your budget, you need to double your expenses and expected income by ½ and then rework your numbers.
Initial claims are just speculation, and if you base all of your decisions on them and don’t correct them as you experience the real world, you’re flying in the dark.
If you are going to become a business owner, you need to know all the details of your business. When you grow up, you can delegate, but most entrepreneurs start doing everything themselves.
If you are closely involved in the management of the company on a daily basis, you will have a sixth sense about potential problems.
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Granted, we have no plans to own this business, but we should still know every detail of what’s going on.
When our friends were in danger, our family could not come to our aid. Aaron has a general idea of how to manage day-to-day functions, but I have no idea.
At the time, I was working 50-60 hours a week and frankly, there was no time. Since I never bothered to spend time, losing $55,000 was not a good decision.
If you’re thinking about starting a business, do your research. When I say research, I mean research thoroughly. Read all the resources, listen to podcasts with industry experts. Don’t just learn your business, learn how to run one.
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When we first got involved with this investment opportunity, I spent a lot of time reading up on eBay companies and how they operate. I asked a lot of questions and really looked at the numbers
Which I didn’t
