Are You A Budding Entrepreneur? Check out these Back to Basics business tips.

Being an entrepreneur sounds like the ultimate dream job to an increasing number of people. You get to work for yourself, set your own schedule and earn a living doing something you really believe in. And then there is the Mark Zuckerberg factor – become worth billions and control the world.

And yet the stark reality is, this dream job can quickly turn to a nightmare if not approached in the right way. In fact, a 2017 report showed a 42 per cent increase in failure rate across the startup sector in Australia.

Such statistics are scary, but it reinforces the importance of knowing the key principles of entrepreneurship before setting off on an expensive venture. In my upcoming SBS series, The Employables, I take a group of jobseekers on an eight week crash course to turn their ideas into viable multi-million dollar businesses. Here are some of the lessons they learnt along the way.

1. Cash is king

There’s an old saying in business: “Revenue is vanity, profit is sanity, but cash is king.” Entrepreneurs have varying definitions of what this means, but at its core, cash flow is the most important factor in your early business’ success or failure. Without positive cash flow, even the most genius business ideas will be bankrupt.

The first step towards good cash flow is to focus on income first and foremost. Revenue, profit and valuation are imperfect tools to forecast the health of your business against. It may a good idea to hire an expert to help you lay the foundations for cash flow in the beginning, rather than reacting to the issues when they inevitably come.

2. Lean and mean

It’s tempting to splash the cash in the early stages. I see many startups with slick inner-city offices and employee perks that make work seem like a paid holiday. Unsurprisingly, they tend to struggle once the adrenaline (and cash flow) runs out.

It’s important to prioritise low overheads especially during this challenging stage. Keep a lean team and don’t sign up to unnecessary ongoing expenses. For example, hire a co-working space instead of forking out for a 3 year lease on the trendy office with your sign out front. It might not look as good on your Instagram feed, but it will save you lots of money down the line.

3. People power

We all know tech is important, but it can be cripplingly expensive. The trick is to start with a minimum viable product (MVP), which is just business language for a product with just enough features to satisfy early customers. This is also the stage where you’ll gather all-important feedback for what customers really want in your development build.

You’ll also need to seek out a minimum viable team (which is much more positive than it sounds). These are the hard-working, ambitious people you’ll trust to help you get your product off the ground. To quote the consummate entrepreneur Richard Branson: “Success in business is all about people, people, people. Whatever industry a company is in, its employees are its biggest competitive advantage”. How can you incentivise these assets with company upside rather than high salaries. Read “Slicing the Pie” by Mike Moyer for how to dish out shares in your company.

4. Start local

Before you can approach the big distributors, you need to prove you have an existing market (for the sake of their confidence and yours). Start selling to local customers, including those in your existing circle. Sell online, or make a deal with a local store to test the waters. You can also use social media to build your following without spending a cent. Other options include forging a partnership with a company that already has customers that your product or service can be cross-sold to.

5. Under the radar

I see many businesses get excited about investing in patents, trademarks, complicated legal agreements, company structures and other protections. But the time and money they’ve spent trying to set this up could have been better served to build traction on their product. Legal and accounting advice is always important but do the minimum until you have something to protect. The “apple-esq” branding can also wait until you confirm your business name and focus isn’t going to change.

6. Keep it simple

You don’t have to create something outrageously unique or cutting-edge for it to sell. With limited tech and manpower in the early business stages, such lofty ambitions can often lead to disappointment.

Instead, focus on simply being one step (or two) ahead of your competition. Be faster, cheaper and better. It’s the KISS principle: “keep it simple, stupid”. Once you have that groundwork in place, only then is it time to innovate.

Lastly, remember that anybody can be an entrepreneur with the right philosophy and people in place. In the past months working on The Employables, I’ve been lucky enough to meet jobseekers with potentially life-changing business ideas. It has been tough, intense and eye-opening – but ultimately inspiring. The stakes may be high, but the thrill of running your own business is something money can’t buy.