- Draw up a business plan and include day-to-day running costs
- Pay as many expenses upfront to keep a tight rein on cash flow
- Use your networks for business advice and to network for potential customers
- Keep your bookkeeping simple and talk with your accountant
Max Wald has been in the business of bringing a splash of glamour to events and places for more than 15 years. He can transform a function room into a Parisian cafe, design fashion parades for shopping centres or mastermind a lavish wedding.
Max learned the art as an in-house stylist for high-end hotels in Australia and Brazil. He then progressed to event production and design, teaming up with audio-visual and lighting specialists to create the full experience.
When Max decided to start his own Melbourne-based event-design company, Clymax, he knew the risks of starting a business from scratch. He took a conservative financial approach, 'I tried to minimise risks,' says Max of his first year in business. 'It's very easy to not have a small business.'
The challenge: keeping costs contained
Max drew up a business plan to anticipate costs. He researched this by talking to mentors with similar small businesses and also by drawing on his industry experience. He broke the company's goals into three stages, the first stage based on working from home to contain initial overheads. Clymax's philosophy was to pay for most expenses upfront. Following advice from his accountant to keep things simple, Max drew up a basic spreadsheet of incomings and outgoings, avoiding using software tools. He then shared the document with his accountant.
In that first year, Max used $15,000 in savings to stay afloat, buying a computer and a printer, as well as other office incidentals. The biggest expense was a car, essential to transport decor items that are needed for the event, such as vases and table linen. 'I tried to keep things really tight,' says Max. 'At that size you really can't afford big surprises.’
Fortunately, the planning paid off and there were no debilitating outgoings. Max was also vigilant in keeping cash flowing in by drawing up a cost estimate for clients long before the events. 'Because we have an outlay before we go onsite, we require 50% prepayment. Then seven days prior to the event the balance is due.'
Issues along the way: growing your business means extra costs
Within a few years the second stage of his business plan went into action: to move out of home into a more professional environment to expand his client base and share more jobs with peers. Max is now well into this stage, working from an office in inner-city Melbourne. He used the oldest, cheapest but most effective means of finding the right office space - spreading the word via his wide-spread network. A former colleague who runs an offsite catering company offered Max a sub-lease on a floor in her building. 'I wasn't expecting a first-floor dwelling with offices but this fell into my lap,' says Max, gazing around his sunny space with a spacious foyer and three separate rooms for offices. He made the most of the space, turning it into so-called creative studio and sharing the rent with a fashion designer and an IT professional. He also works on jobs with the catering company.
Despite a good deal on the office and provision for standard costs like public liability insurance, furniture and utilities, there were unexpected outlays. The building is old and the office was vacant for 18 months. 'I had to spend a couple of thousand dollars in cleaning and painting just to get things presentable,' he says. 'I thought I'd need maybe 40 litres of paint - I needed 100 litres.'
Then there was another $1,500 to $2,000 to rewire old telephone lines and the loss of rental income from one of the rooms that he hasn't time to refurbish. All up, Max estimates the move has cost him about $9,000.
By moving into an office and expanding his reach, Clymax has managed to roughly double its revenue and make a profit in the past year. Max continues to make the most of his networks to tout his business and to partner with other event experts.
'I've had a busy year, the business is still in its infancy,' says Max. 'I should be making at least 100% growth over the next few years.'