With about 80% of small businesses failing in their first year, it seems like a useless task to start a small business if you will inevitably fail. But there are 20% who are successful. They make it through the first year of business. How can you be part of the 20% who survive their first year of business?
Research your business idea
You have a sparkling new idea bouncing around your mind. It is triggering fancy ideas of overseas holidays and meals at lavish restaurants. But will your business idea be profitable? Your idea may be good but will someone take their hard-earned cash and purchase your product? This is where research is important. It is important to do a survey with independent consumers who are not family and friends and see if there is a true demand for the product or service you want to offer. If you can create a prototype and test it on your market, then do it. This will further create an awareness for your product so that if you do go ahead you will already have a set of potential customers.
Draw up a business plan
Some entrepreneurs leave this only until they need financing or to pitch for a tender, but it is important to have a plan before you venture further with your product or service. By writing out your mission statement and doing a SWOT analysis you will be able to make sure your business is on the right track or you can identify areas where you need to tweak it. A business plan gives you a clear idea of your purpose. With this in mind you can assess your decisions and make wise ones which will continue to grow your business.
Keep expenses low
The best way to start your business is to use the lean start-up method. This method is where you only have the things you need to run your business. You invest in items which will bring returns. If the item will not contribute to the sale or making of the product, then you can wait for the purchase until you are making a profit. If you don’t need an office, then don’t rent one. It is important to look at your needs and wants objectively when you start your business.
Reinvest your money
This is one area where entrepreneurs often fall short. They forget that when they start a business they will be the last to be paid, especially in the first year. You must reinvest your money into your business to help it to grow from strength to strength. If you do not reinvest the money, your business may become stagnant.
Manage your business well
Another reason small businesses fail in the first year is because of poor management. There are many areas in a business – finance, sales, product production, purchasing, and employing and managing employees. It is important to know which areas you are strong in. The areas in which you are weak, you need to educate yourself about them. You can do this through attending a free online course. Furthermore, you could employee someone or outsource the work to a professional. If you neglect business management you will struggle to keep your business afloat.
It may be exciting to see your business grow quickly but you could come to a grinding halt just as fast. It is better to grow steadily. Build a good foundation for your business and then stretch from there. If you don’t have a solid foundation, then when you stretch your business it may crumble. Expand as you have the resources available to grow into the market you love.
Have a good location
Location is another critical aspect which often gets disregarded when people start their business. When you choose a location for your business whether physical or online you need to consider the following questions:
- Where are your customers?
- What is the accessibility like with regards to traffic, parking, lighting and disability access?
- Where are your competitors located?
- What is the condition of the building and is the building safe?
- Will the community accept your new business in the location you have selected and what is the history of the site?
When you have answered these questions, you will have found an ideal spot for your business.
By keeping the following seven points in mind you will be well on your way to being part of the 20% of entrepreneurs who successful complete their first year.
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