Achieving FIRE is something many people aspire to achieve – but these goals require a lot of hard work. It can be difficult to retire early when you simply work for someone else throughout your life, so many early retirees guarantee their independence through investments and by starting their own businesses.
Investing in a Small Business
If you’re ready to start a small business with the goal of achieving financial independence, try the following five tips:
Set aside plenty of time for research
Patience and good research are easily the most important parts of investing in opening a small business. For example, don’t set up yet another ice-cream shop if there are already four on the same street. So take a look at what’s missing from your community. Make an educated decision when choosing what kind of business to start. While running a dog-grooming business may not have been your childhood dream, such a business might be your best bet at success if you’ve noticed a large number of pet owners in your town and very few pet-related businesses.
There are plenty of small businesses that you could consider starting. Perhaps your area lacks a music school or needs more affordable interior decorating or gardening companies. Cafés and small restaurants are other great businesses to design and run. Just make sure you plan and budget for all the required expenses. The hospitality sector can be challenging to succeed in and often requires large upfront investments. Make sure you have accumulated enough savings before you begin!
Have a plan for all possibilities
To run a successful business, you need to consider your most likely outcomes – whether they’re good or bad. Ensure you have a solid plan or ‘second option’ in the (hopefully unlikely) case your business doesn’t take off. This might mean having savings that can sustain you for several months, or a comprehensive action plan about how you’ll resell inventory and look after your employees if you need to restructure your business.
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Avoid debt whenever you can
This may seem like a given for anyone interested in making money rather than losing it, but it’s amazing how quickly people can fall into the trap of debt. Debt is the major enemy of financial independence, as it can add up incredibly quickly and all but destroy the progress you’ve made with your business.
One tip is to keep your suppliers happy. The last thing you need while running your new business is to fall behind on payments. Being unable to source items vital to your business from unhappy suppliers would be devastating.
If you’ve managed to network well over the years, consider calling upon your contacts for help with your business needs. You may be able to negotiate an exchange of services, depending on what type of business you run.
It’s important to remember that while you should avoid serious debt as much as possible, you might not need to cut up all of your credit cards just yet. Using a card and paying it off in full each month can be a great way to improve your credit rating as well as gain monetary rewards.
Consider succession planning
When investing in a small business, it’s important to always think about the future. Ideally, you want to create a successful business, achieve your goals, and then retire. So you’ll need to consider what kind of people or company will eventually take over your business.
For example, if you work in the hospitality industry, consider how you can improve your reputation and interest future buyers or investors. For example, café customers are becoming more aware of the impact that shopping and eating out can have on the environment – including plastic pollution in the world’s oceans caused by the careless disposal of plastic bags and packaging.
As the owner of a modern business, consider how you can improve or adjust your services to become the eco-friendly company that your customers need. For example, you might get involved in a recycling scheme for your plastic, paper, and food waste, or provide reusable coffee cups for your customers to purchase.
Your strong ethics will make your current customers respect and recommended you, leading to a positive reputation that will become a selling point for potential buyers. Plus, upholding environmentally-responsible values in your business ensures you are setting a good example for others around you – a trait that will be admired by many in today’s world.
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Focus on your clientele
While you work on improvements to your products and services, it’s always important to anticipate the needs of your current clientele and work for them. Knowing your business has a loyal base of customers may help to persuade future buyers or investors. To find these valuable customers, identify your target audience and market to this specific group.
If you don’t already have a strong presence on social media, now is the time to build it. Remember to always treat your customers with kindness, compassion, and respect. And although you can express disappointment at unfair criticism, never badmouth your competitors on social media. Post consistently and create interesting, interactive content that will engage your target audience and watch your followers grow. You’ll be surprised how many people will find out about your business via social media.
Try your best to make wise financial decisions, but don’t be anxious about mistakes when they do happen – that’s what planning and saving are for! Gaining financial independence from a small business relies on many different factors, but as long as you’re ready for the commitment and understand the risks, the results are definitely worth the challenge.