In a nutshell: Before you start out, make sure you’ve taken care of finances, location and employees.
Are you thinking about starting your own business? It can be rewarding, but no one will tell you it’s not hard work.
According to The Balance’s “The Advantages of Owning Your Own Business,” it’s better to own a small business than be someone else’s employee because you’re the one in charge, you can create a flexible schedule and you can potentially make more money. But, these attractive reasons shouldn’t muddy the sobering survival statistics of small businesses. According to the Small Business Administration (SBA), only about two-thirds of businesses with employees survive at least two years and about half survive at least five years.
Small businesses likely fail for a multitude of reasons, but these three things will not only mitigate your risk and increase your chances for success, but they are must-do’s if you’re ready to make your move.
Before you start raising money to get your business off the ground, you need to know how much it’s going to cost. Don’t skip this step! According to the SBA’s “How to Estimate the Cost of Starting a Business from Scratch,” no two businesses are the same in terms of start-up costs, so it’s worth your time to do this calculation carefully. You’ll want to think about preparation expenses, like market research, consultants and mileage associated with location research, as well as capital expenditures, like inventory, property and vehicles. Additionally, consider operational expenses, like utilities, rent and payroll until your business becomes self-sustaining.
Once you have a figure in mind and have taken into consideration your own assets to support the business, you’re ready to seek funding to back your business. There are several ways to go about doing this, including credit cards, banks loans, SBA loans, 401(k) plans, crowdfunding and friends and family. Look closely at the pros and cons of each of these fundraising options to find the best fit for your needs.
Location, Location, Location
No matter what the business, location is a consideration that can make or break your start-up. Working out of a home office or solely having an online presence for your retail business doesn’t require you do conduct much research, but a location must be thoughtfully considered. In terms of seeking a storefront, Entrepreneur’s “How to Find the Best Location” provides three tips for when you start down this path: Check your demographics, look at where competitors are and seek professional help. Additionally, it provides 22 questions to ask, including inquiring about existing utility hookups, lease terms and needed repairs or setup, for each of the sites you’re considering.
Something else to consider in terms of location: lease or buy? While owning real estate offers income statement and balance sheet benefits, renting reduces the cost of regular maintenance and emergency repairs. You’ll find just as many reasons to rent as to own. Enlisting the help of a financial advisor to help you determine the best option for your business is a good idea.
Find Trusted, Capable Employees
InsuranceQuotes’ “Why Do Businesses Fail” infographic points out that 23% of businesses fail because they don’t have the right team. Don’t become part of this statistic! While you may not have unlimited financial resources at your fingertips to seek out the most qualified employees, getting creative will go a long way. Try partnering with local educational institutions, ask standout employees for referrals and cast a wide net that includes social media networks, industry trade groups, friends, relatives and neighbors.
According to Entrepreneur’s “How to Hire the Right Employees for Your Startup,” there are five boxes you should check before making a hire to maximize your chance for securing a model employee:
- Hire desired skills.
- Hire relevant experience.
- Hire competitive drive.
- Hire persistence.
- Test performance.
Additionally, Entrepreneur suggests comparing resumes with your written job criteria to quickly sort through candidates. It may be tempting to hire an available and top-earning salesperson when you need a marketing director, but remember, you’re looking for a marketing director for a reason.