Setting Your New Business Up for Success
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Originally Posted On: https://www.thenexthint.com/setting-your-new-business-up-for-success/
The US has, on average, around 4.4 million new businesses starting each year. It also sees 20% of these businesses fail in the first two years, 45% fail in the first five years and only 25% of companies still operate after 15 years or longer.
What does this tell you? While there are undoubtedly many economic issues affecting how long businesses can run, not to mention the evolution of technology making some industries and sectors obsolete, AKA disruptive innovation (Blockbuster is one such victim of this), a lot of businesses fail because of poor planning, poor management and poor cash flow, all of which can directly be attributed to how the business is run.
The excitement of starting a new business, being your own boss and getting up and running is something that trips many people up. It can lead to mistakes which in turn can lead to gaps in the foundation, causing things to crumble after a certain period of time; it can be ego getting in the way and not listening or paying attention, thinking you know better, or it can be an unwillingness to put in the work.
The top reasons for businesses failing are;
- Poor cash management
- Bad location
- Ineffective marketing
- Being too rigid
- Expanding too fast
- Not putting enough effort into the business plan.
So how can you avoid these common mistakes and ensure you are setting yourself up for longevity?
Building the foundations is essential, and this post looks at how you can put a solid foundation in place to help you go the distance and withstand anything that threatens to bring down what you have built.
Research is key. You shouldn’t be attempting to run any business until you have done your research. And your research needs to be extensive too. So what do you need to find out?
You need to know the ins and outs of the current market, the general economic climate, and how it’s affecting trade in your niche area. Are sales up, is business thriving, and how saturated is it? Can you slot in nicely, or do you need to think of a new angel to help fill a gap?
You need to know where your position will be for you to get a foot in the door and have a unique proposition to entice people in; you can’t expect to do what everyone else is doing after they have been doing it for a while; this won’t always work in your favour.
Look at your competitors locally if you are opening a bricks and mortar location or in the industry. Is there enough of a demand to get you up and running, and will this demand be sustainable, or are you just jumping on the bandwagon that is likely to see its day in a few weeks (anyone remembers fidget spinners, PPE post-pandemic items and the loom band craze?).
Once you know the state of the market and the level of competition you will be up against, you will have a better idea of what you will be up against, the value of the sector and if it is worth pursuing.
What type of suppliers will you be working with, if required? What are your options, and how well do they currently fare with established businesses in your sector? For example, if you are opening a cannabis or CBD store in a location where this is legal, who will you be supplying your products from, what grade will they be, and can they meet the needs of your customers? You will want the best quality products, the best terpenes, and accessories, and you need them in a wide range to attract different customers to your store and keep them coming back. Regular users will know the difference between good quality cannaproducts and subpar ones, and you need to be working with the best suppliers to elevate your products and retain reliability and consistency across the board.
How you will fund your new start-up is a vital consideration. While some businesses can start with just a laptop and an internet connection – more likely if you are offering a service virtually, most require some level of cash injection to get up and running.
Can you find this yourself, and if so, what money will you be using? Are you looking for investors? Will you be offering shares? Do you want a straightforward business loan so you retain complete control? All crucial questions as is knowing how long it will reasonably take before you start to earn a profit. Let’s take a look at the restaurant industry. Generally, the initial 6 months are a whirl of people trying it out. Still, it can take around 3-5 years to make a profit, meaning you need to be able to cover your costs for the period in case you experience a lengthy time before turning a profit.
The location of your business matters. If you are setting up in wholesale or logistics, you need a sizeable base with easy access to major highways and quotes in your area to allow people and transport to get to you. If you are opening a new bakery, you need an area with good footfall in an established location without too much competition. If you sell virtual products, dropshipping or services via the internet, the site isn’t as important as your online visibility.
People need to know where to find you, so you must know how to make that happen and choose the right location for your business. If this is something you are doing digitally, then you need a minimum of a good web host, brand name, domain name, and social media accounts.
You need to allow your marketing budget to take up around 2-5% of your projected revenue. Neglecting to put your marketing in place will cause you massive problems down the line, whether you are opening up a shop or digital storefront or providing a much-needed service.
Because without marketing, how are you going to reach people? How will they know you exist and where to find you? Your marketing needs to be consistent- from your product packaging to your website to your social pages so spend time getting this right.
Marking in the digital age has opened up many avenues for businesses to reach people easier than ever before in a more personalised and targeted way. You need to know how you can see these to your advantage, what the best marketing options for your business are and develop a plan to get your marketing up and running before you even open the doors.
But digital marketing isn’t just where it’s at; you can still use traditional and digital together or separately if you so wish; this is where research comes into play. How are your competitors marketing themselves? What is their social media strategy, and what approach works best for them? From here, you come up with a plan to execute your own marketing strategy and generate a buzz ready for opening day.
Lastly, the good old business plan. If you are obtaining finances to support your new venture, your lenders will, without a doubt, want to see your business plan, and the more detailed, the better.
A business plan needs to be well thought out and detail your journey from now to opening and beyond. It needs to take into account what you are doing, how you propose to do it, what you can expect at first and possibilities for you to expand.
First, you need to cover the “3 C’s”, which are;
- Concept – what your business is about
- Customers/clients – who are they
- Cash flow – where the money will come from/how long will it take to make it
From here, you can then go into the specifics of your business, how you will get up and running, and what your plans look like.
As a guide, your business plan needs to cover in detail the following points;
- Executive summary – a brief description of what you are planning and how you will achieve it. Think of it as your introduction or your Dragons Den pitch, if you will. This is what will get people interested.
- Describe your company – this needs to be your business name, address, company formation etc.
- Nature of your business – including what you will be doing, the key players in the company and how the sector is performing now.
- Goals – simple points that you want to achieve and where you see yourself in the future
- Products/services – you need to describe what you will be selling and how it is required in the market.
- Research – you need to show your research into the sector
- Marketing and sales – how you plan to reach people and raise awareness for your company.
- Financial projections – how you plan to make money, pay back investments and what you forecast for the next three years at least.
Your business plan will need to be detailed and will require you to compile all of the information and details learned in this post. Ensure you have covered all of your bases and are ready to present your business to the world.