With unemployment still in double digits and an unforgiving job market making it difficult for people who are out of work to find new job opportunities, many are considering starting their own small business and giving self employment a try. Starting a business is one of the most challenging things an entrepreneur can do and many are unsuccessful. According to statistics, one in four businesses won’t survive their first year and half of all new businesses fail within their first three years.
Starting a business is always a challenge but it can also be one of the most financially rewarding decisions an individual can make. Being your own boss means no more clocking in and out, no more being micro-managed by a boss you don’t like, and in many cases no ceiling to the amount of income you can earn. To give your small business the best chance of success, here are some things you need.
An Idea: A business has to start with an idea that is feasible and useful. Whatever product or service you’re offering needs to have a market. In an economy like the one we’re in today, people aren’t spending a lot of money on unnecessary or luxury items so there has to be a need that your idea can fill or a problem that your idea can solve. Run your idea by some people that you trust and ask them for an honest opinion. Starting a business and failing can have long-lasting financial consequences and sometimes it can be avoided by asking for feedback.
A Business Plan: Starting a business is not something that can easily be thrown together. A successful business starts with a plan that is well thought out and efficiently executed. An effective business plan will help a business owner to convey his or her vision to potential lenders, customers, suppliers, and other stakeholders. Business plans won’t do any good gathering dust in a file cabinet—you should be constantly referring to your plan and making adjustments as necessary.
Financing: Most people don’t have a giant pile of money set aside that can be used to fund their business startup. Small business financing isn’t always easy to find. One of the first places to look is within your own family and circle of friends. Many of the people that trust you most might be in a position to help fund your dream. Banks are more likely to loan money for businesses if you have some kind of collateral to put on the line in case you’re unable to repay the loan.
Record Keeping: Many small business owners pour thousands of dollars into their business without really keeping track of where the money is going or what level of sales they have to achieve to be profitable. Proper record keeping can help a business owner become more efficient and provide more accurate information to lenders, stakeholders, and the IRS at tax time. Many business owners have great ideas but they don’t always do well with the details of running a business every day. If this is an area of weakness for you, consider finding a partner or hiring someone to run the financial side of your business.