By Chris Riley, Managing Director, Sercura
You’re tired of the corporate politics, you don't like your boss and you think the company might be downsizing
again soon. This might be the time to grab a few customers and set yourself up in your own business.
Compared to most Western countries, setting up a business in Hong The business plan will tell you at which stage
Kong is painless and swift. Taxation is clear and fair and the red tape is minimal. If there is you should break even and how much cash
any place in the world to take the entrepreneurial plunge it is here. Below are a few rules you need to plug the gaps until revenue
that have proven useful. consistently exceeds overheads.
Rule 1: Never borrow money from the banks. They will gouge you on the interest. They Rule 4: Be conservative. If you think you
will try and inﬂuence your business and when you are at your most exposed will start making proﬁt by the end
they will ask for the money back. of Year One then make sure you
have enough cash to carry you
Rule 2: When planning to set up a new business, make sure you have enough of through to the end of Year Two.
your own cash to get the project safely off the ground, through the clouds
and up to cruising altitude. A good rule of thumb is to have at least two Rule 5: If the start up capital required is beyond your savings, consider bringing in a
guaranteed customers where the revenue from one alone will cover your ﬁnancial partner. In Hong Kong fortunately there are plenty of people with spare
monthly overheads. Count on customers not coming through with all money to invest. A common formula might be that if you need 1 million HKD for
their promises. your start-up but only have half a million of your own money a ﬁnancial partner
would contribute the other half in exchange for 50% of the company's equity.
Rule 3: You should make a business plan in the form of a simple Profit & Loss You will need to choose your partner with care and have a good shareholders
projection. First list all the customers from whom you expect to receive money agreement in place but all parties will beneﬁt from the success of the venture.
and break the expected revenue down by month for two years. Take into An ideal partner will contribute to strategy, revue finances monthly but not
account seasonality such as a possible drop in business at Chinese New interfere with daily operations.
Year or Christmas. Make sure you do enough research with your prospective
customers without getting yourself into trouble. A sad reality is that many Rule 6: Most new businesses fail because of bad cash management not for product
customers who trust you while you are working for an established corporation or service reasons. There is nothing more important than being paid on time
won't give you business when you are in a start-up situation. Once you gain and maintaining a healthy cash balance in the bank account. If possible
momentum they will be more comfortable to switch work to you. develop schemes where you can be paid in advance such as that favourite
trick of ﬁtness centres where people sign up for a package of twenty sessions
Make two sets of projections: best case and worst case then take the median. Plug the in exchange for a discount. Another solution is to have customers pay online
numbers into the top part of your business plan. Then work on the expenses. Staffing through mechanisms like Paypal.
and office rental are the biggest expenses unless your business nature requires heavy
equipment investment. Nowadays the costs of setting up computers and phone lines are Have your accountant generate a weekly cash position statement and a weekly
very reasonable. Try and trim these costs as low as possible by initially working from home receivables list. Never wait until the end of the month. Don’t let your accountant chase
or sharing an office. Avoid all marketing expenses except a decent website. Your other unpaid invoices. Do it yourself or have your sales people do it. As a new business,
biggest expense will be traveling to meet customers. If you have to ﬂy, obviously it will be customers will try and take advantage of you by demanding lower prices or longer
economy class and stay with friends or in cheap hotels. payment terms. Negotiate the most suitable terms so you get the work but don’t run
out of cash.
Rule 7: You don’t need to invent a new product or service to be successful. Take an
established industry but find a new twist to providing better and more cost-
effective service. This may simply be how you hire and motivate your staff or how
you use modern technology in an innovative manner. Often that’s all it takes to
carve your own niche in and old industry.
Christopher Riley is the owner of Sercura, a global quality and compliance solutions
company providing consulting and other services to retailers and their suppliers
manufacturing in Asia and beyond.
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