The harsh reality of starting a business is that the odds of failure are very high. Forbes reports that nearly 80% of small businesses don’t survive past 3 years with that number rising to 95% in cases of online businesses.
This stark reality exists because many people try to build their own business in the hopes it’ll make them rich quickly without first building a foundation upon which to grow a lasting business. The stronger the foundation, the more likely the business will survive and thrive.
YFSmagazine walks us through three basic steps to take to build a solid business foundation and avoid becoming a statistic.
1. Divide Business Functions
To manage and grow a new business, you have to be a jack of all trades. This means knowing everything from payroll to marketing, customer service to HR and technology to product development. Since there’s so much to do, it’s important you don’t play favorites. Make sure you’re giving the proper time to each segment of your business and not neglecting the more stressful tasks.
You may want to delegate functions and tasks you don’t like to do or are not competent doing to a contracted specialist or a part-timer. They can help lessen the burden, but being in a position to do so probably won’t come overnight.
By compartmentalizing your business functions you’ll also grow stronger psychologically and be in a position to hand off elements as the business grows.
2. Develop a Comprehensive Business Plan
The research shows having a solid business plan can double your chance of success.
YFS says to begin with an executive summary before branching into a company description. Then refine your products and services, market analysis, marketing strategy, management summary and financial analysis. I believe it’s better to create your plan first, then go back and write the executive summary and company description. After working through all the elements it will be much easier to summarize into a comprehensive introductory document.
The financial analysis should make clear how your business is being financed now, and how it will be financed in the future. Getting a clear understanding of this early on will increase the odds of you meeting your goal .
3. Create a Realistic Budget
The Houston Chronicle reports that small businesses can spend $5,000 and up on one year’s worth of insurance alone. Your specific cost will depend greatly on a number of factors, including the type of industry you’re in, your location and how many employees you have.
Add the cost of marketing, product shipping and overhead like vehicle maintenance and office space rentals and your budget can be consumed very quickly. Use social media and build a solid website to help lower your marketing costs; with the internet providing a much less expensive, often free, environment for you to reach your target market, you should use it whenever possible to cut down on costs.
You will also want to invest in an accountant to help you get the most out of your budget, including expert knowledge on tax write-offs.
There is a lot to consider when taking the leap into small business ownership but the better foundation you lay down, the better your chances of long term success.
If you’re putting together a business plan and would like help with creating a budget, I’m happy to help.