About 20 percent of business start-ups fail within the first year of operation, and of those that do survive the first year 60% will have closed by the third year, according to the Small Business Administration.
This means that If you’re starting a business now or thinking of starting one in the near-future, it’s worth thinking about how not to join this statistic. Although this sounding alarming, most new businesses make the same common mistakes in the research, planning, and management stages of their business venture.
Part 1 of this series will start with three areas to focus on when you first consider starting a business. Aim to get these right in the early stages for a greater chance of success.
Passion: do you love what you’re doing?
Ideally, a business should fill a real need or gap in the marketplace. But, if you’re thinking about starting a new business, you may be looking at 10, 20, 30 years or more in the industry. Make sure the business activity is something you love being involved in and that you’re passionate about.
Most successful business owners achieve success because they’re passionate about their business.
Go into business for the right reasons. From my experience in helping small business, successful businesses are built from the following foundations:
Of course, most people also want to make money, and maybe even lots of it. Going into business to make lots of money can be a viable medium to long term goal, but it’s passion that will fuel your drive during the early stages of development, when cashflow can be challenging and things may get hard.
Research: how well do you know your marketplace?
If you want your product or service to be successful, research is critical.
Invest the time to determine the potential demand and opportunity that exists for your business idea, as well as whether you can meet the possible demand you envisage.
Understand the business key performance indicators, such as your selling price points; what the costs associated with delivering this offering are; and what your profit and return will be, based on the capital and time invested.
It is also important to consider who your main competitors are and what the potential barriers for entry and exit into the marketplace are.
A plan: have you mapped out the road to success?
I’ve seen many initial business plans that either make grandiose claims of success with little detail on getting there, or have no plan beyond “we will sell product/service x at the price of $y”. No business plans for failure; but many businesses don’t effectively plan for success either.
All new businesses should begin with a high-level business plan, that grows and evolves as the business itself does.
This plan ensures that you strategically focus your time and resources during the early stages of your business development, in order to gain the maximum value possible. Further, businesses that follow a strategic plan in the first 12 to 18 months are more likely to continue to succeed as they grow.
Your plan should consider the following:
Understanding these three key aspects of starting a new business will greatly assist in your plans to build a successful business.
In part 2, I will discuss four other key areas of your business that you’ll want to focus on, once the business is up and running.
If you’re starting a new business and would like to discuss this process further, contact DW Mathers & Co. today.