Moving Your Business to the Next Level
September 26, 2011
For many years, I worked part time while building my Virtual Assistant business. While building up my clientele, funding my marketing strategy and contributing to the household expenses I worked four days per week in paid employment and concentrated on my business in the evenings and weekends. There comes a time for all of us where we need to make a decision to take the risk and work on our business full time in order to grow to the next level, or to close the business and concentrate on paid employment; the following article in the NZ Herald has some very good advice.
“Plan needed to take part-time ‘service’ to full-time business”.
How do you take a part-time business and turn it into your sole source of income?
That’s the problem facing Rebecca Melton, who runs Molly Moo Cow Moosic, children’s music and movement classes for under-5s, three times a week in Grey Lynn and Ellerslie.
It’s going well – some children have been coming to her classes for a couple of years – but she can’t get it to the level where she can quit her fulltime job to work solely in her business. “I duck out to do the class and come back,” she says.
Melton says if she worked it out over a week, she would get paid about $1 an hour from her business. “But if I gave it up I’d be letting the kids down. It’s almost like I’m providing a community service at a loss.”
She says her time is taken up by taxes, PAYE, accounts, payroll and marketing, which she needs to grow the business. “Active promotion requires so much time and money.”
She needs her job to pay the marketing costs of her business. “I’m at that stage where I’m wondering do I take it to the next level, or do I flag it?”
Bruce Taylor, of Advantage Business, says the first thing Melton needs to do is to work out the numbers. She needs a business plan, looking at financial aspects and to work out staffing and building costs.
To break even she needs to know how many children she must have in her classes, at $120 a term.
Business coach Marti Amos agrees Melton needs a cashflow forecast. “If she wants to earn $50,000, how many clients does she need before she can quit her job?”
From there she needs to work out daily, monthly and yearly targets to reach that goal, then come up with a 90-day plan, setting key performance indicators, benchmarks and milestones along the way.
She should have an idea of what her business will look like when it has reached its full potential – is it just a couple of classes a week, or does she want to expand throughout New Zealand?
Taylor says Melton could reduce her marketing costs by making use of resources such as social media. Set up a Facebook page on which people who like the business can get special deals and get their friends to do the same. Also offer Twitter discounts.
Amos suggests linking with local kindergartens and daycares as a low-cost way of getting the message out about the classes.
If she knows she faces a one-off bill for a particular kind of marketing or promotion, she could offer discounts to customers who pay further ahead than usual, so she gets a surge of money into the business.
Amos suggests Melton hire some low-cost help, such as student interns, to take some of her workload. He says AUT’s website has a section on which you can offer students 10-week internships.
There is no golden rule as to when the tipping point is to switch from a part-time business to a fulltime one, but Taylor says if Melton has a plan it will help her see whether she is on the right track. “And you have to have the passion for it because it usually takes more time than people think.”
Amos says she needs to work out her reason for doing it. “Is it to provide a service or to quit her job?”
He says she could consider approaching friends and family to invest in the business or borrow against her house if she is really serious.
Melton mentioned that processing pay for any staff she hired took up a lot of her time. To cut that down, she could call in the services of a listed PAYE intermediary.
Depending on who she chooses, it costs about $60 to set up, plus $15 for each employee, then about $1 an employee, plus a weekly service fee, for each pay.
There are no annual fees and it’s a Government-subsidised option available only to small employers who pay less than $500,000 in wages.
IRD returns and KiwiSaver deductions are filed and paid automatically, deductions are taken care of and payroll reports are available.
Your Turn: If you could give one piece of advice to a start-up company, what would that be?