Are you an entrepreneur looking to set up a brand new business?
Congratulations! You probably have no idea what a significant contribution you’ll make to the economy of the country.
Take a look at these statistics released by the U.S. Small Business Administration Office of Advocacy. Small businesses make up 99.7% of companies working with employees on salary. Further, they created jobs for close to two-thirds of the population between the years from 1993 to 2016.
However, the SBA also has some worrying numbers you need to look at closely.
About 20% of small businesses fail within the first year and close to half of new enterprises close shop within 5 years of opening. Only a third of the small companies opening today will make it through their first 10 years.
Let’s take a closer look at the essentials for a successful business that many entrepreneurs tend to overlook.
1. Lack of Expert Assistance Can Contribute to Why Small Businesses Fail
The statistics you’ve just read are not designed to discourage you. On the contrary they are intended to warn of the worst case scenarios and that you may want to plan well in advance for them. Even as you work hard to get your new enterprise off the ground, it is advisable to have a professional assisting you through your efforts. Hire the services of an expert who can work with you as a one on one business coach to help you stay focused on your goals. He can also guide you through the aspects of business planning that you may lack in. For instance, you may have an amazing idea for a product or service but executing the production and managing the company are completely different fields.
2. Understanding What the Audience is Looking For is Essential
How do your customers view your products? Do they like how the product works? What are the downsides? What can you do to make the service better? Not knowing what the consumer is looking for is one of the main reasons why small businesses fail. The success of your business depends on how your audience receives your products and services. And, to understand what they think, you need to build a connection with them. Like a feature in the Forbes explains, the internet and social media channels are the best medium to get the necessary feedback.
One of the first steps you must take at the time of setting up your business is to develop an online presence. Create your website side-by-side and open digital channels so your customers can communicate with you. Use their tweets and FB updates to develop that special Unique Value Proposition (UVP) that sets your offerings apart from the rest.
3. Underestimating Cash Flows and Financial Requirements May Affect Sustainability
Many entrepreneurs make the fatal error of not planning for hidden expenses. Because of their lack of experience, they are likely to overlook various operational, management, and maintenance costs. As a result, they spend their seed money too quickly. A business coach can help you foresee those expenses and plan well ahead for them, as well as help you determine whether you should take out a personal loan to help. He may also help you keep a close watch on the areas where you’re making large purchases. That’s because getting into a large debt is another of the prime reasons why small businesses fail.
Like the folks at All Business warn, entrepreneurs also go wrong in estimating how soon their product will take off and the revenues will start to come in. Work with an expert advisor for an estimate on how soon after the product launch you can expect to see any real profits.
4. Detailed Planning Can Affect How the Business Performs
Before you actually go into production, you may want to plan every detail of your business operations down to the last detail with the help of your business coach. In addition to working out the finer nuances of the product you’re planning to develop, you could work on how you intend to advertise and sell it. Choose your marketing channels and locations carefully. You may also want to study competing companies and the kind of products they’re selling successfully. Also, plan for the workforce you may need to hire and the functions it will be performing. Many small businesses fail because their owners haven’t executed the planning stage properly.
Most important, work with your business coach to understand the legal and taxation aspects. Is your business compliant with the laws of your county and state? What are the company registration laws and other regulations? What are the taxes you could incur? Will your cash flow be sufficient to cover these expenses?
5. You May Want to Find Your Feet Before You Consider Expansion
Once you taste success and the revenues start to come in, it is understandable that you can’t wait to expand your horizons. Perhaps, you may want to add more products, rev up production, or capture a wider market base. This article in SmallBizTrends explains that many small businesses fail because they start growing too soon. A smarter move is to understand carefully how the market works. Give your product and services time to develop a dedicated customer niche that will choose only your products above the others in the market.
You may also want to work out the added expenses you’d incur for hiring new employees or say, purchasing advanced machinery and equipment. Are you ready to take on this expense? Will your business be able to sustain the financial pressure?
Your New Company Need Not be a Statistic in the 20% of Small Businesses
Setting up and running a company may involve a lot more aspects than you initially plan for. Accordingly, it is wiser to have an expert business coach on board who can assist you with the decision-making process. Such professionals also help you remain focused on your goals and keep you accountable for the targets you initially had in mind.
Use all the assistance you can get to prevent your company from becoming a part of the 20% statistic. And, there’s no reason why you’ll have a successfully running (and, expanding) business on your hands 10 years down the line.