7 Things to Know When Starting a Business
According to the Small Business Administration, 30% of new businesses fail within the first year. That statistic can be intimidating for aspiring entrepreneurs, but it should not deter you from pursuing your passion. What if Henry Ford or Steve Jobs had given up on their dreams? Where would we be without mainstream automobiles and iPhones? Owning a business or creating a side hustle is no easy feat, but with these tips, you’ll be well on your way to becoming an entrepreneur.
Keep reading to find out more about the 7 things to know when starting a business.
1. Understand Your Strengths and Weaknesses
You have a great idea for a new business, and you’re excited to launch, but maybe you have no idea where to start. Maybe you want to start a business, but you have no idea what type of business or industry you pursue.
When identifying what business to pursue or where to start, you must evaluate your strengths and weaknesses.
Ask yourself the following questions:
- What skills do you have?
- Where does your passion lie?
- Where is your area of expertise?
- How much can you afford to spend, knowing that most businesses fail?
- How much capital do you need?
- What sort of lifestyle do you want to live?
- Are you even ready to be an entrepreneur?
Honesty is critical, as your answers will create a foundation for your business plan.
2. Business Plans are Critical
Lack of planning is one of the reasons that many businesses fail, therefore creating a business plan is imperative to your success as an entrepreneur. It will serve as a guide for developing your company objectives, and it will be required when securing funding. Before you quit your job be sure to have a thorough plan.
The U.S. Small Business Administration provides a general guideline of what your business plan should include in addition to several examples.
- Executive Summary: Briefly tell your reader what your company is and why it will be successful. Include your mission statement, your product or service, and basic information about your company’s leadership team, employees, and location.
- Company Description: Use your company description to provide detailed information about your company. Go into detail about the problems your business solves. Be specific, and list out the consumers, organization, or businesses your company plans to serve.
- Market Analysis: You’ll need a good understanding of your industry outlook and target market. Competitive research will show you what other businesses are doing and what their strengths are. What do successful competitors do? Why does it work? Can you do it better?
- Organization and Management: Tell your reader how your company will be structured and who will run it. Describe the legal structure of your business and use an organizational chart to lay out who’s in charge of what in your company.
- Service or product line: Describe what you sell or what service you offer.
- Marketing and sales: There’s no single way to approach a marketing strategy. Your strategy should evolve and change to fit your unique needs. Your goal in this section is to describe how you’ll attract and retain customers.
- Funding request: If you’re asking for funding, this is where you’ll outline your funding requirements. Your goal is to clearly explain how much funding you’ll need over the next five years and what you’ll use it for.
- Financial projections: Supplement your funding request with financial projections. Your goal is to convince the reader that your business is stable and will be a financial success. Include any specifics. For example, if you run a freight company, provide an example of a shipping quote.
- Appendix: Use your appendix to provide supporting documents or other materials were specially requested.
3. Secure Funds
As mentioned in the previous paragraph, you will need your business plan to secure funding. There are several different options for funding and methods to evaluate your plan to ensure it’s attractive to lenders and investors.
You may consider the following options to fund your business:
- Self-Funding
- Grants
- SBA Loans
- Bank Loans
- Online Lenders
- Crowdfunding
- Independent Investors
There are options for every entrepreneur to fund their business. The key is identifying the right option and using your business plan to secure it.
4. Hire Help
Another leading cause of business failure is over-expansion. This happens when business owners confuse success with how fast they can expand their business. A focus on slow and steady growth is optimum. When your business begins to grow, evaluate your employees. Do you need extra people? Does it make financial sense? Be sure to continuously evaluate when expanding. You should also consider hiring help for areas outside of your expertise, such as accounting or legal. Maybe small administrative tasks are taking up too much of your time? Consider hiring an assistant. Many times virtual assistants from sites like Upwork can be found at a great rate. The key here is understanding when to delegate tasks. You can’t and shouldn’t do EVERYTHING.
5. Protect Yourself
Understanding the legal requirements of starting a business can become a daunting task, but there are resources and attorneys to assist you. Invest up front to establish yourself as a credible business owner and to avoid legal costs or fines later. Begin with the following items when establishing your business but be sure to contact the appropriate authorities and/or an attorney.
- Choose a Business Structure
- Decide Where to Form Your Business
- Choose a Name
- File Your Business Formation Papers
- Understand Sales Tax and Licensing Requirements
Resources like Legal Zoom provide services, such as filing your paperwork with the state, obtaining your EIN from the IRS, and connecting you with independent lawyers and tax professionals.
6. Find a Mentor
“I don’t wish anyone had given me advice, ” said no one ever. In fact, most entrepreneurs say the opposite. It’s always nice to have someone in our corner who has been in our shoes before. A mentor can provide invaluable wisdom, networking opportunities, and help you navigate difficult times and business challenges. Finding a mentor will be one of the most beneficial things you do as an entrepreneur.
7. Embrace Failure
“Failure is the only way to begin again wisely.”
These words came from the iconic American businessman and innovator, Henry Ford. Henry Ford, known as one of the most successful businessmen in the world, actually filed for bankruptcy twice before successfully launching Ford Motor Company. Failure is something you can be sure of as an entrepreneur, but in the words of entertainer, Pharrell Williams, “you don’t have a failure. you have research and development.” Let your failures be important lessons and continue to use them to improve your company.
Using these Things to Know When to Start a Business
Now that you have 7 things to know when starting a business, it’s time to take action. The hardest part about starting a business is actually starting, but now you have the tips needed to get the ball rolling. You can be part of the 70% that succeeds!
