The advice I wish was told to me before starting a (smol) business

DISCLAIMER: This article is sponsored by OCBC Business Banking, who supports businesses of all sizes – including smol businesses like us.

At the turn of the 2010s, the startup scene in Singapore exploded. Many people built fantastical businesses on sheer wit and pluckiness. Then they got millions of funding and became unicorns.

…we weren’t amongst them.

Instead, we spent most of our working lives as employees. Tucked away in various creative departments, we didn’t need to worry about stuff like revenue, operating expenses, taxes etc etc.

As a result, the learning curve in business was especially steep.

That said, we’ve run a boring, five-person publishing business without going bankrupt for two years. Hardly entrepreneur-of-the-year material, but it’s not nothing either.

Looking back, here are some things that would have smoothened out the journey. If you’re thinking of also starting a business in 2022 (or any time, really), here are the things that we’d actively look out for.

Cashflow will make or break you

I hate to say this, but many of your clients are going to be paying late. Especially so if they find out they can get away with it. The regular employee will be paid monthly, but the business owner must be ready to be paid once every 60/90 days, or in a doomsday scenario, not at all.

In the meantime, freelancers, employees, internet providers and landlords will still need to get paid.

As a business owner, you’re not only responsible for providing for yourself but for your employees as well. Ensure you have enough savings to tide everyone through when times get rough.

Not paying them will often result in a loss of reputation, or the total implosion of your business. Often both.

To overcome this, you’ll need contracts with clear terms and conditions with non-payment or late-payment clauses. In addition, it’s paramount that you keep enough cash reserves to tide through any winters of payment.

On a separate note, ensuring your cash flow is managed well can also help you to establish good credit standing for financing options in the future. While we’ve always been self-funded as a business, we’ve heard that this is a pain point from many business owners so we thought it was worth mentioning.

Of course, how much your cash can last depends on how much you spend, which leads us to the next point.

Live below your means (aka keep OPEX low)

What is ‘monthly expenditure’ on the individual level will translate to ‘operating expenses on the company level. Essentially, this is how much it costs to run your business.

The bane of many businesses?

High operating expenses.

What I’ve observed is that many business owners fall in love with the image of success, and are willing to spend quite a bit to look the part. In the regular person’s eyes, a successful business owner has a swanky office with plenty of staff.

As such, there is an innate pressure – perhaps more than non-business owners – to look the part. In reality, staff costs and rental costs can be the very thing that kills your business.

For that reason, we prefer to be conservative when taking on the lease for an office space.

At the same time, think long and hard before adding members to your team.

The same principle applies to hiring; see if you can automate or streamline tasks using software before hiring staff whose only role is to manage payroll or to do simple accounting.

Don’t be afraid to re-invest in YOUR business

There’s nothing wrong with investing your own money in the stock market (effectively other people’s businesses), or other financial instruments.

However, after securing a 6-12 months runway by having enough operating expenses, you might also want to consider spending money on your own business to earn more money, or save more time.

These investments can come in the form of employees, equipment or other income producing assets.

Here’s an example: If you invested $100,000 in a simple S&P 500 index fund on 1 Jan 2021, you would have earned a profit of $28,710. That’s not bad at all for something with relatively low effort needed.

However, let’s say you invested $100,000 to expand your capacity to take on more business, which allowed you to take on $200,000 of projects. You’d have earned a profit of $100,000. Then that’s also pretty decent (albeit with significantly higher risk and effort).

Be prepared to be very, very lonely

Yes, you read that right.

In our years operating this page and replying to DMs, we’ve come to find out that many people have a dim opinion of SMEs and their owners.

SMEs have a reputation for paying their staff below market rate, offering little or no career progressions, and are, at best, a stepping stone for a role in a bigger company.

The sheer one-sidedness of these criticisms makes me inclined to think that many are oblivious to the challenges SME owners face; smaller budgets, difficulty in attracting and retaining talent.

Under the pressures and stresses of keeping a business afloat*, it’s not uncommon for a person to have their mental health affected. This may even affect their ability to be good bosses.

Indeed, entrepreneurship is a lonely journey. I’ve met people who remarked to me that even their own spouses don’t understand the challenges and struggles they face, especially if they come from a different industry.

(*None of which should be used to justify any toxic or abusive behaviour.)

If you can find a business partner, community or a mentor who can provide sanity checks and function as a good sounding board, hang on to them for dear life.

Half of new businesses die before their 5th year

For anyone starting a new business, I think there are two meaningful ways to interpret this statistic.

The first is a reminder to stay humble. Some success can lure you into making overly aggressive plays that put the survival of your business at risk. It can also give you the illusion of invincibility. Like people, businesses must constantly adapt to stay relevant.

The second is one of acceptance. I find it comforting that the rise and fall of businesses are as natural as the ebb and flow of the tides. This means you don’t need to beat yourself too hard if you’ve tried your best, with regards to a failed business.

I think one of the most underrated skills of an entrepreneur is knowing when to quit. Deciding to persist for years can easily turn a formerly profitable business into a loss-making operation. Or even worse, some form of personal bankruptcy.

Your business is an avatar of your entrepreneurial will.

What matters far more is your ability to learn from past mistakes, as well as manage your risks; so you can live to fight another day.

As Ms Frizzle of the Magic School Bus used to say: Take chances, make mistakes.

Get messy.

Stay woke, salaryman.

Start your business right with OCBC Business Banking

If you’re thinking of starting a business (or you’re already an existing business owner), you’ll probably need all the help you can get. Help comes in many forms too – whether is it a reliable business partner, good and efficient employees, or even the bank you choose to transact with.

OCBC Business Banking has tons of resources you can leverage on for your business journey, from starting to growing your business. They offer (amongst other things):

  • An all-in-one business account: By simply opening an account, you get to enjoy many perks as an OCBC Business customer. The account comes with free cashflow and e-invoicing tools, particularly useful to monitor your inflows and outflows and bookkeep more efficiently, so you can make informed decisions and allocate the right resources towards certain activities.
  • Same-day online incorporation and account opening: This allows you to start your business right away. Skip paperwork and meetups. Everything is done online and you get everything you need to start a business (incorporation, corporate secretarial, accounting, HR and bookkeeping services) as a bundle. Pretty convenient, if you ask me.
  • A digital specialist: The digital specialist will give advice on all the things you need to get started, like engaging a corporate secretary, getting information about CorpPass and business licenses you need, recommending ways to go digital and cashless and more. So you can get started faster and on the right foot.
  • Free resources and guides: They have compiled insights from an extensive pool of experienced business owners to create a knowledge hub for you to start, run and grow your business. Check out the free Business Starter Kit to help you do things smart, right from the start!

START RIGHT HERE with OCBC Business Banking.

PS: They are offering a free 1-to-1 business consultation. Simply get in touch with them here.

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2 replies to “The advice I wish was told to me before starting a (smol) business

  1. Thanks for this article. It is comforting to hear from another smol business owner that the travails we face are so similar as a micro SME.

    Only the business owner knows the challenges and loneliness.
    Or maybe we are the less successful SMEs, others which are not lonely are basking in their success. 😛

    As sour grapes as it sounds, I sometimes wonder:
    What if we get a solid MNC CEO, disguise him, no mention of his name or contacts / resources.
    Ie, put all limitations of an SME to him. Contacts, Fame, Funds, resources etc.
    Will his MNC CEO skill still be able to drive and grow a SME?
    Maybe some production company or broadcaster can pick this up as a reality TV show!

    Cashflow is the number one killer of businesses. That was something I read and remembered from day 1 of my journey years ago.

    I also have seen friends and contacts who run their own businesses, getting drowned later due to
    expanding too fast, or thinking they scored a huge deal and spend on luxury before they are paid.

    I always say, money in the bank isn’t money in the bank until its in the bank. Hahahah.

    Sometimes my friends and I gather and cannot fathom the new (x)tech entreprenuers.
    (where x = industry shortform. eg, ‘fin’ )
    Where loss making businesses can still be raking in millions of investor money.
    Yes I know the logic behind. Expand fast, get user base, kill competition, then thats where the rewards come in.
    Honestbee anyone?

    Clients paying late or not at all.
    So true.
    Its amazing how large corporations and even some listed big names can bully the micro SME.
    They dispute, dont pay and its too expensive for us to seek legal redress.

    If I were a bank, and charged for interest on late payments (we do state late feest in our contracts, but if we enforce it, well, its bye bye client), non payments, and defaults,
    Well, I could kick back and relax for a couple of years man…

    Re-investing in your business (compared to S&P500)
    Welllllll…. on the other side of the coin, if you really could get your 100k to bring you 200k in business, that additional 100k may not be so simple.
    It may have added much more complexity and headache.
    When getting more jobs / bigger jobs, you cant be that smol micro company anymore.
    It needs to grow in staff, capability etc, and that leads to more opex, and that leads to the need for more revenue etc.
    Unless you have a business model that can scale up and down as needed
    whilst still maintaining QC and in-organisation knowledge.

    “The most underrated skill…is knowing when to quit”
    Scary but perhaps very true.
    That statistic of most companies die in 5 years, is that a local SG statistic?

    So so many pain points.
    Many times, media portray only the employee point of view.
    Those darn bosses, getting rich, bullying us employees.
    Well, if running a business didn’t commensurate with the stresses accompanied by it,
    why should I run a business?
    And the downstream effect of that… no job for a potential employee and I myself instead of creating a job for the economy, have now added to the pool of jobseekers seeking a job.

    But there is 1 point I enjoy.
    That is ‘freedom’.
    I am able to write this long reply during office horus without any boss breathing down my neck.
    Though I’d probably do some catch up later.
    I can go for a beer at 4pm (and maybe do work at the same time)
    Its a disciplined type of freedom that some can handle, some may abuse.

    So speaking of beer, if the author of the article would like one, I’ll buy and we can trade stories.
    Or any other SME owner too.

    Trying to stay woke.

    Salary-Paying Man

  2. Navigating the landscape of entrepreneurship can be a daunting journey, and your insights shed light on the challenges that many business owners, especially small ones, face. An important stage in any business is choosing the location for its establishment. Here https://www.matchoffice.sg/lease/offices/orchard, you can find interesting options. It’s commendable that you’ve shared your experiences to benefit others embarking on a similar path. Best of luck in your ongoing business journey!

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