FT Guide to Business Start Up 2012, 7th Edition

27

Moving ahead

There comes a happy stage for most entrepreneurs when the grinding and

grubbing eases off. You’re past the break-even stage, you’re protable, and

you can start to focus your mind on what else you might achieve.

At its basic level, you might decide that all you want is to provide your-

self with a good income and your ambition is limited to maximizing the

income, not just in the short term but for the future too. But for others,

income maximization is not sufcient. Instead, you can see opportunities

to transform yourself from a small business into a larger business. You may

even decide that you want to go for growth in a major way, ending up

with looking to obtain a quote on one of the stock markets – the growth

of the Alternative Investment Market (AIM) has been a huge success for

the stock market, and more than 3,000 companies have raised money on

it. After all, there are businesses in the FTSE-100 that 20 or 30 years ago

were still small. And ironically some of the companies with major stock

market values are not huge at all but are valued very highly by investors.

Companies may have relatively small revenues, may still be unprotable

but are nevertheless worth millions because of their perceived potential by

stock market investors.

Generating large capital values from a business that you start is a roller-

coaster, and many businesses lose their founders along the way. Someone

else with different management skills may be needed to take up the chal-

lenge on your behalf. What you want to achieve is to maximize the value

that you can obtain for your efforts.

352 The Financial Times Guide to Business Start Up 2012

What is in this chapter?



how to increase prots (p. 352).



going for growth (p. 358).



Phase 2 money (p. 360).



managing change (p. 362).

How to increase prots

The billion-dollar question is: ‘How can I increase my prots?’ The whole of

this book should help you to do so: the sections on how to set up your busi-

ness in the most efcient manner and those on how to plan and control

your business, how to increase your sales and how to manage the workplace

properly. All of these can help you to make bigger prots.

However, if you strip running a business down to bare essentials, there are

three main ways to make bigger prots. The rst two methods are what you

would use for the short term; they apply particularly if you are struggling to

reach break-even point. But any well-run business should constantly be on

the lookout for the sort of improvement you can make. The two methods

are cutting costs and increasing prices.

The third way of increasing prots will take longer to achieve the desired

result. It is selling more. It will also, very often, involve you in spending

more money to carry it out.

The quickest way of selling more is to try to sell more to your existing

customers. This implies that your existing customers are happy with your

service or product. That is the rst step – focusing on and improving the

quality of what you do already. Selling more may require greater invest-

ments in promotion or selling effort, but obviously your aim should be to

make the existing levels of investment work more effectively for you.

You should not overlook the few occasions when you can increase prots

by altering your sales mix; it may even mean selling less. This may occur

if you have a range of products, one or more of which does not cover its

costs. The answer: rationalize your product line. An investigation of your

customers may reveal that some of the very small ones do not buy suf-

cient quantity to cover the cost of selling to them. This may also lead to

the conclusion that selling less means higher prots. There may also be the

odd occasion when you can alter your sales mix by introducing a product