One of the most common stories you often hear from entrepreneurs is that they started businesses and failed many times before finally succeeding.
Starting a business is hard, and the data on small businesses confirms this – about 20 percent of small businesses fail in their first year, 50 percent fail by their 5th year, and 70 percent fail by their tenth year. How can you avoid becoming another statistic and find success as a thriving entrepreneur?
According to research by CB Insights, the number one reason businesses fail is because there was no market for their product or service to begin with and the second reason is they ran out of cash – these two reasons are inextricably linked.
In this article, we help businesses have a better chance at succeeding by exploring the 12 steps to launching your startup while keeping in mind how your business can avoid failure.
- Due Diligence (DD). The first and most important thing you need to do to start your small business and ensure its success is to conduct market research. Ask yourself and answer the following questions: Am I solving a problem, fulfilling a need or offering something people want? Has anyone else solved this problem, fulfilled this need, or tried offering this product/service before with their own business? If your business idea has competition, can your services or products compete against them – can you offer a better deliverable they can’t knock off or offer at a lower price? If you can, how big is the market and is it growing?Most importantly, does this business align with your personal values and does it provide value to other people? There’s no faster way to experience burn out than with not caring about what you’re doing.
- Draft a business plan and identify your key performance indicators (KPIs). Once you’ve done your DD, draft a business plan that reflects a concrete vision for your business. You’ll share this business plan with potential investors or use it as a reference for growth.Your business plan should at the very least answer the following questions: what problem/need am I solving or what am I offering; what are my startup costs and how much money will I need to get started; and, who are my customers and how will I reach them?Be sure to establish realistic KPIs you want to track so you know whether your efforts help your business move towards your larger goal.
For example, if you’re selling a product online, it would be a good idea to track visits to your website and what percent of those people are buying your product. Try to identify three to five important KPIs for your business.
- Fund your business. Your business is going to need cash, and probably a lot of it to fund your startup. Most small businesses start by either self-funding, taking out a line of credit or finding investors. This could be the most crucial part of your business, since not having enough capital to fund your business can quickly set your company up for failure.Make sure to spend some time researching the overhead startup costs for your business and ensure you have enough funding at the get go to get started generating cash flow.
- Pick a location for your business. If your business requires a brick and mortar location to operate, you’re going to need to register the business with the city and state, pay taxes, get licenses and permits and make sure you understand your local zoning ordinances.In the digital age, having a physical location improves your online presence, helping you market your business to attract local customers from the internet.
- Choose a name that works for you, not against you. Try to pick a name that reflects what your business does and is also memorable both visually and audibly. Some examples for strong, descriptive business names can include “Pizza Hut,” “Netflix” and “Shopify.” A startup business with a name like “Jack Daniels” can have a hard time attracting new customers since it doesn’t exactly reflect the product or service.
- Choose a business structure. There are many types of business structures, but you’ll need to research the type of structure that makes the most sense for your business. For example, does it make sense for you to separate your personal assets from the business by enlisting your company as an LLC or a type of corporation or can you operate as a sole proprietor because you’re an artist who sells paintings?Business entities you may want to consider include sole proprietorships, partnerships, Limited Liability Corporations (LLC), corporations and S-corps.
- Register your business. Unless you’re a sole proprietor, you’re going to need to register your business with the federal government to get a federal tax ID. You’ll will also need to register with your state and local government depending on the structure and type of business you’re involved in.
- Apply for licenses, permits and a business bank account. Once you’ve registered your business, ensure that you’re staying legally compliant by researching and adhering to local, state and federal laws regarding the type of business or industry you’re involved in. By this time you will have received a federal Employer Identification Number (EIN) number which will allow you to open up a business bank account so you can finally start keeping track of, depositing, and withdrawing your earnings.
- Identify your strengths and weaknesses. Now that you’re ready to do business, identify what your business does best and how your business can improve. You’ll likely use this information to shift your marketing and sales strategy to highlight your business’s most attractive features. Focus on what you’re good at, and hire people that are smarter and more skillful than you in the areas you may not have the most expertise in.
- Pick vendors and partners you can build relationships with. Treat vendors like customers by helping them as much as you can. You want your business relationships with vendors and partners to grow with your business so you succeed together.
- Don’t be afraid to ask for help. As Arnold Schwarzangger once said, “there’s no such thing as a self-made man.” Your business will struggle. Don’t be afraid to ask for help along the way if you feel stuck or need guidance on what your next steps can be to improve your business. Learn to leverage your resources and take advantage of the opportunities your business has access to.
- Profit Matters. Most businesses take two to three years to become established and profitable. Once your business becomes profitable, you’ll want to reinvest that capital into growing your business operations. This includes prioritizing your employees and paying them at market rates or better and offering good benefits.
Further, you’ll want to reevaluate your team and ensure every employee is working to bolster your business’s services. Failing to reward good employees can be just as bad, if not worse, than failing to fire a poor-performing employee. If you want to get the most out of your business, you need to understand all the costs associated with your business, from salaries and operation costs to marketing costs and taxation.
It goes without saying that if you aren’t profitable, your business will fail. Ensure you’re making all the right moves by following our 12-step guide on how to launch your business and avoid failure.
**Resources**:
– https://www.thebalancesmb.com/starting-a-small-business-4161641
– https://www.dummies.com/business/start-a-business/small-business-for-dummies-cheat-sheet
– https://blog.hubspot.com/sales/how-to-run-a-business
– https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
– https://www.sba.gov/business-guide/10-steps-start-your-business
– https://www.wikihow.com/Run-a-Small-Business
– https://www.businessnewsdaily.com/4686-how-to-start-a-business.html
