1. KEEP THE PROFIT IN THE BUSINESS
This is fundamentally the most important tip for any startup. There are CEO’s who want to start paying themselves a salary or distributions when the company begins to make a profit. This is the wrong thing to do. It is vital to the success and longevity of any startup to reinvest 100% of any profit back into the business, for as long as they can. This is crucial because you must be able to build the infrastructure needed to support your future workforce, inventory, technology, and payables. This will ultimately allow you to scale the business at a SPEED which is advantageous to your startup, especially when you are trying to compete against an established company. SPEED is the ultimate ROI for any business. It allows companies that are B2B or B2C an advantage over their competitors because they can quickly deliver a product of better quality and quantity. Without the proper infrastructure in any business, it’s only a matter of time before the business fails.
2. OUTSOURCE ACCOUNTING AND PAYROLL FUNCTIONS
It’s important for CEO’s to self-audit themselves to know where their weaknesses exist. You can then hire people or other companies with skill sets that strengthen your weaknesses and compliment your business. For example, not many CEO’s of startups have the financial savviness to properly manage the accounting/bookkeeping of the company. As a matter of fact, there are many startups whose CEO’s don’t know how read a P&L or Balance Sheet. If a startup doesn’t have the resources or funds to hire a finance manager (most don’t), they should outsource as needed. I suggest all startups outsource (1) Accounting/Bookkeeping (2) Payroll Services. Those two functions, not executed correctly, will destroy a company and eventually cause it to go out of business. I have seen many startups go out of business when the CEOs are unable to pay the business taxes, business licenses, or payroll taxes because they spent the money on other things. When the federal or state revenue commissions come knocking on the door, these companies don’t have the necessary capital to pay outstanding payments, interest, and penalties. This will make companies go out of business, literally overnight.
3. HUNT WITH A RIFLE RATHER THAN A SHOTGUN
Ambition and drive are important for a startup, however, it’s more important to have a tactical plan when looking for customers. Startups need to strategically identify their end user, which will allow them to engage in highly targeted marketing campaigns that turn prospects into long-lasting, loyal customers. The Customer Acquisition Cost (CAC) is an important calculation to know. It determines a company’s profitability by looking at the difference between how much money can be extracted from customers and the cost of extracting it. The best platform for target marketing, in my opinion, is Facebook and Instagram. When executed properly, these platforms give companies the best ROI. For example, if a business spent $100 on a targeted Facebook or Instagram ad and acquired 50 new customers, the CAC is only $2.00. Meaning it only cost that business $2.00 to gain a customer. By using the rifle approach to acquiring new customers, it will allow the startup to earn larger profits and it will give them the ability to reinvest the profits. This gives the company the ability to scale with SPEED.