Coming up with a small business idea can be as simple as identifying a problem in your local area and finding a solution to it. But there’s a reason why many small businesses fail in their first year, and there are a lot of things that can contribute to a business’s downfall.
I started a software consulting business in college and it failed because my target market rejected my service offerings and pricing completely — I hadn’t thought them through. Here are seven essential things to remember when starting a small business to avoid going under:
Don’t over-complicate your concept.
Most businesses start from a simple idea or solution to an everyday problem. Make sure that your idea doesn’t end up turning into something too complicated. Simplicity is best. The more elaborate your idea becomes, the more expensive it can get. Overly-complicated solutions to problems are more difficult to both market and to implement. Start small and narrow your focus.
Find out how you can deliver a simple, high-quality product or service, and then go from there. Simplifying your product can help cut down on costs, and also helps with determining your minimum viable product (MVP) should you choose to develop a software solution to scale in the future. This is exactly what I’m doing with a passion startup of mine now: We have proven a gap in the marketplace, gained proof of concept and used our lean business process to identify an MVP for a web-based software solution.
Focus on the market instead of the product.
Many startups and small businesses make the mistake of relying too much on their product to drive sales. What this means is that they fail to take into consideration the market they’re getting into.
Small businesses should focus on delivering a product that people are actually willing to buy. You can come up with the most revolutionary product in the world, but you won’t get anywhere if there isn’t a market for it. Focus on niches. Getting a small market share is better than trying to invest in a market that doesn’t exist.
Always overestimate costs.
Give yourself some leeway when it comes to expenses. Chances are, you’re going to be overspending a lot. Prepare for the worst and overestimate your business’s costs. Give yourself room to work. Don’t assume that your expenses will always be in the green. Be prepared for emergencies.
Establish a support team.
You can’t run a business on your own. Establish a team to support you from the get-go. These people don’t necessarily have to be your business partners. They can be family, peers, friends or mentors. Having someone to fall back on can help you in times of crisis.
ALSO READ: TIPS TO START YOUR OWN BUISNESS
Always assess your business idea.
Understanding that a market exists for your product is only the first step. Don’t neglect to assess your business idea. Market research is something that you should definitely never skip.
Find out how the industry or niche you’re getting into works. Assess the strengths and weaknesses of your competition. Find out what drives the interest of your audience. Look for opportunities that are just waiting to be discovered in your niche. Don’t go into things blindly.
Understand the commitment behind starting.
Before you start, determine if you’re actually prepared to start a business. Running a brand, no matter how small, takes a ton of dedication. Expect your day-to-day life to change. Not only will you need to put down a significant financial investment, but you’ll also need to put down some emotional investment as well.
Be prepared to lose sleep and feel stress. Be prepared to build connections. Remember that as your business grows, you’ll need to dedicate more and more time to it. Failing to manage this aspect of running a business properly can damage your relationships with other people.
Generate income as soon as possible.
Cash flow is important, especially for newly-established brands. Income is the lifeblood of every business, even small ones. Your business should start generating cash as soon as it is able. There are a ton of ways to achieve this. Whether it’s through pre-orders or deposits, make sure that your brand is generating income as early on as possible.
Starting a small business has never been easier. That said, there are still a ton of factors that can lead to a business crashing. Take note of these tips and work hard to get your small business out there.
Focus on the customer and fully understand the market
There are many examples of companies that do not have the best product/service or are not first to market, yet are very successful because they have mastered online marketing and sales.
Research the demographics of your potential customer base and understand their buying habits.
Watch competitors, talk with similar businesses, browse your competitors’ websites, and understand what their customers are saying about them on social media.
Start small and grow
If possible, self-fund your business idea and then go for funding when you can create a growth story. This might cause you to break up your product/service offering into smaller pieces so you can fund the early stages and get some traction and experience.
Tip: Use this advice to determine how much cash your small business should have.
Understand your own strengths, skills, and time available
When running a business, know when you need to engage an accountant, lawyer, insurance agent, marketing specialist, web page designer, or other professional. This will start your management process as a business owner.
Constant Contact offers a variety of professional marketing services for those who need professional assistance or want to jumpstart their online marketing efforts.
Surround yourself with advisors and mentors
Launching and growing a business is difficult, and more than half will fail within 5 years.
No one person can have all the knowledge, experience, or even perspective to handle every business situation. Gain from others’ skills and experiences.
Get a mentor
If you’re not sure where to find a mentor, SCORE is a great place to start. SCORE mentors are free — just visit www.SCORE.org to find a face-to-face mentor near you or a mentor to contact via email or Skype.
Also at this site are many free workshops, webinars, and templates all focused on helping entrepreneurs successfully start and grow a business.
You can also find mentors on sites like LinkedIn, by attending a local small business meetup, or just asking around. You might be surprised at people in your circles who can offer useful advice based on their experiences.
Write a business plan
Starting a business is difficult and risky; it’s easy to spend all your time and resources at it. Before you start, figure out what type of business you will have. Will it be a sole proprietorship, partnership, corporation or LLC? Then put together your plan.
Having a written plan with your projected results and personal goals is the best way to stay on track.
As an example, your business may make a $20,000 profit. But if you live in a large city, support a family and maybe elderly parents, and are trying to save for kids’ college and retirement, then most likely $20,000 is not enough.
Don’t try to do everything at once either. Focusing on the key components of a business plan will put your ideas in concrete terms and help you identify places to change the business model where necessary.
Know your numbers
Have a good grasp on the numbers that tell you how your business is doing and what you can expect. These include your start-up costs, sales, projected profits, cash flow, and much more, depending on the nature of your business and how you define success.
You will be making many decisions “on the fly” and knowing the numbers — the business economics — will help ensure you make the right decisions.
Tip: Here are 10 ways to market your small business on a shoestring budget.
Understand there are no entitlements
Don’t underestimate this one: You will work hard for all your achievements.
Being a small business owner is one of the hardest jobs around. In a recent survey, 40 percent of small business owners said they don’t take vacations and have their money tied up in their business.
Have a passion for what you are doing
Being a business founder can be very lonely and there are not enough hours in the day to accomplish everything.
From big successes to large letdowns, if you’re not fueled by passion at every step of the way, your job becomes that much harder. Remember why you started your business and let your passion drive you continuously.
When in doubt, don’t go it alone
Just because you’re taking your ideas and turning them into reality doesn’t mean you need to figure everything out on your own. There are plenty of online marketing tools available to make your job as a small business owner easier. But tools aren’t everything.
To position yourself for success, you’ll need to tap into the expertise of those who are experienced in the small business world of the digital age. A good place to start is with The Download, Constant Contact’s free online marketing guide. It takes you through all the basics of online marketing, step-by-step, in a way that’s approachable and easy to understand.