Start up in business

Setting up an online business is a relatively simple process – but every week there’s news of more start-ups going bust, and unfortunately the vast majority fail within the first few years.

To make sure your new venture doesn’t become a statistic, it’s important to focus on building a strong, sustainable online business with the capacity to respond to ever-changing consumer preferences. Here’s how.

Talk to your customers
As an online business, you have access to powerful tools to help you gauge how well you are meeting your customers’ needs – and what they want from you next. Use them!

That doesn’t mean setting up camp on every single social media platform – you have a business to run, after all – but it’s vital that you establish a clear channel of communication with the people you serve, and keep a dialogue flowing.

Find out which platform your target customers use – Facebook, Instagram, LinkedIn, Twitter – and invite people to interact with you. The key is responsiveness – answer their questions or complaints, ask for their opinions, explore their pain points and provide them with useful content that proves how much you can help them.

Our social and commercial environment is changing so rapidly, and these days it’s incredibly easy for customers to find alternatives and switch their loyalties – so it’s vital you keep pace with important developments and stay relevant to your client base.
Hard as it may be, you need to be prepared to pivot and take your business strategy in a new direction if that’s where developing technology and your customers’ needs takes you. To be sustainable, you’ll also need to be agile.

Monitor your financial performance
While it’s vital to know where you’re going, it’s equally important to know where you are. It’s all too easy to get caught up in the excitement of growing your business – but you simply can’t make sensible strategic decisions unless you have a thorough, up-to- date picture of how your business is performing.

The only way to achieve that is to conduct a detailed monthly review of your financial performance, including full financial statements, analysis of key ratios like your Return on Capital Employed, and projections of profits and cash flow.

Be sure to drill down to see which areas of your business (customers, products, sales channels, marketing initiatives) are performing well, and whether any are merely draining your profits. Together with the information you gather from your customers, this will enable you to make important decisions about where to focus your precious resources and whether you have the resources to invest further in your business.

Keep your cash flowing
There’s one main reason businesses go bust: cash. No matter how great your sales growth is, or how profitable you are on paper, if you don’t have the cash on hand to pay your bills, you’ll end up out of business.

Most businesses go through quiet periods, when sales are slow and income fluctuates. Unfortunately, the overheads keep mounting up, and there’s always the risk of unexpected expenses. It’s absolutely crucial that you have enough working capital to meet all your regular obligations, and a healthy reserve
to see you through the tough times.

Maintaining a realistic rolling cash forecast will enable you to foresee potential issues and take action before you hit a crisis. If your cash pool is lower than you’d like, you could consider a small business finance option available for you, such as an overdraft or business credit card, to draw on should you
need it.

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