How to Start a Small Business that Succeeds
Small businesses in the U.S employed over 48% of the private workforce in 2013, according to the Small Business Administration. That translates to 1.1 million jobs! In 2015, employment rose by 2.2% in this sector. Currently, there are more than 28 million small businesses in the U.S. but only about 2/3 of businesses that have employees survive after two years. Each year after that, the numbers dwindle even more dramatically.
One reason many businesses fail early on is that the business owner had no plan and no vision. You never want to make the decision to become a business owner on a whim. How well-prepared you are before investing your time and money will determine whether or not you’ll succeed. Also, if you don’t like taking your work home with you, note that starting a business as a sole proprietorship or an LLC is a sure-fire way to tether yourself to your job. With that said, running a small business can be very fulfilling, if you do it the right way.
Here are some tips that can help you start a business that succeeds.
Ask Yourself Some Questions
- Why do you want to start a business?
- Do you plan to quit your job when you first start (can you afford to?)?
- What skills and strengths do you have that are relevant to owning your own business?
- What are your weaknesses?
- Knowing that most businesses fail, how much money are you willing to gamble on a business venture and how will you raise money to start your business?
- How much do you know about the industry you want to open a business in?
- How much in demand are the products or services you’re offering?
- Who is your competition? How are they operating as an organization and how are they marketing themselves? Where are they advertising?
These are big questions, but important ones you’ll want to be able to answer before you take your plan a step further. Until then, don’t quit your day job. You don’t want to psych yourself out but you want to be sure your intentions are solid and your chances of succeeding are high.
If you hate your current job, that’s not much of a reason to start a business. If you just want to dress in business casual every day, that’s definitely not a reason to take the plunge. Surely, finding a better, more fitting job is much easier than setting out as an entrepreneur. However, if you feel excited about what you’ll be offering to consumers, that’s a very good start. If you are very skilled and experienced in the industry and are knowledgeable about the processes, your chances of succeeding are certainly higher than if you spent your valuable time learning through trial and error.
If you have realistic expectations of the amount of work and dedication it takes to run a successful business, you’re way ahead of the game because a lot of work is exactly what you’ll be doing, much of it before you even think of buying business cards!
Do Extensive Research
If you’ve made it to this step, you have decided to stick to your guns and become a business owner. Congratulations. Next, you’ll be wise to spend hours upon hours doing very meticulous research. Many people choose to continue working their day jobs during this phase of the venture because, during the initial phases of setting up a business, there is lots of work required and zero dollars made.
Your business idea is most likely not entirely unique so thank goodness for market research. You have things in common with competitors no matter how “different” you think your business idea is. It’s important to research them thoroughly. Only then will you get a sense of the numbers (of customers, of dollars made annually, of employees needed to run the operation, the amount of overhead the business truly has, etcetera).
Number crunching to see how much money you need to run your business is crucial. Otherwise, you’re risking not raising the kind of money that will get you off the ground. Getting a clear idea of what it takes to get going is why you’re delving deep into the numbers behind your competitors’ revenue, location, customer demographics and anything else you can get your hands on. If you’re not interested in numbers and being analytical about how to get ahead it would be wise to find a partner who thinks more strategically than you do.
Create a Business Plan
Having a business plan is essential, so it’s a good idea to have one that will keep you on track. The more detailed it is, the better. If your business will need an investor or the support of a financial institution, you’ll need a more thorough one than if you don’t. For example, if you’re an insurance agent starting an insurance agency business, visit our step-by-step instructions on how to make your business plan from beginning to end. You can easily find a template for a business plan in the relevant industry and simply tailor the specifics to fit your type of business.
A business plan is never set in stone. It begins to evolve right along with your business, which changes as it grows. It’s always a good idea to revisit this plan to tweak it and also allow it to give you direction if you feel lost.
Estimate Annual Expenses
You need to figure out all the initial costs and how much it will cost to continue producing and/or selling your service/product for a full year. It may not be much or it may be a lot, but you must have a rough idea of what expenses you’re looking at before you begin making money. There are several very important upfront costs, like a business license, business insurance and permits/certificates relevant to the work that you plan to do.
Business insurance is one cost you should never put on the back burner. You are liable for losses as a business and having the right kind of insurance can protect you against bankruptcy if anyone makes a claim against your business.
If you need to hire employees, add estimated salaries to your spreadsheet. Figure in all advertising and marketing expenses. And don’t order your business cards until you add this to your excel sheet as a cost. Yes, document every tiny expense. If you’re looking for the support of an institution or investors, you’ll need to estimate annual expenses as well.
You may have saved the money to start a business or you may have a financial partner. You also have the option of taking out a small business loan, but only after you find as many small business grants as you can. Some people have been known to raise the money they need to start a business by crowdfunding. There are many options out there for starting a small business.
Choose a Business Structure and Name
When possible, speak with a Certified Public Accountant (CPA) to help you choose between a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation. This is important to figure out before choosing a name. Your business entity may restrict your choices for a business name. Your business structure will definitely affect how you file your taxes.
After thinking long and hard on a name, you’ll need to check to see if it’s in use or if it’s trademarked before you register it. Contact your state or county clerk for more information. You’ll also need to register a domain name for your business website.
Get All the Required Permits and Licenses
These vary according to industries and business types. Find out what you need. One permit you didn’t realize you needed may prevent you from getting started.
Get Everything Set Up
You’ll need to figure out an accounting system using accounting software that works for you. This will help you with your budget after you set prices. It will also determine how you file taxes. You’ll need to set up a business location or you may work from home. It’s best that you speak with your accountant about all of the above choices you have to make. If you’re hiring people, you’ll most likely be operating out of an office although remote employees are becoming more common lately.
Promoting a Small Business
Make sure you have an Internet presence, even if you use Squarespace to create your own for very little money. Use social media channels, like LinkedIn, to make business connections. Use Facebook, Twitter, Instagram, and Pinterest, to get the word out about what you do. Also helpful are websites like The Better Business Bureau (BBB) and Google My Business. Have happy clients or consumers post positive reviews on those pages so you can begin to market yourself effectively. You’ll also want to look at traditional methods of advertising. Hopefully, during the research phase of starting your business, you looked into how your competitors are marketing and branding themselves. You hopefully also investigated what kinds of ads they are running to see where you need to make yourself visible.
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Often, costs take on a life of their own and begin to really eat away at profits if you don’t take care to control them. Sometimes, a business’s inner workings can become so complicated that we overlook the simple and obvious changes we can make to improve our business practices. “A penny saved is a penny earned” could not be any more true.
Most businesses have general liability insurance because accidents happen. They happen even more the bigger your company is.
If you are a business owner, you will need to make sure that you have an adequate amount of business insurance to protect both your personal and business interests.
Quick and easy tips that every business owner should be doing.