The growth of small businesses has been exponential since 2018. Its success rate may be encouraging, but creating and growing a startup into a mature business is no easy feat. According to Business Trends, “40% of startups are profitable.” Most startups are less than 5 years old and have not yet achieved scale.
When building a business, it takes time to build a profit. On the other side of building your revenue, new business owners should be mindful of their expenses, particularly their dollars spent on advertising and promotions. Discovered by HubSpot, “startups spend 11% of their revenue on their marketing budget.” So, as you begin your business journey, find the balance between dollars earned and dollars spent. To be successful, you’ll have to place efforts into your marketing strategies which comes at a dollar amount.
Helping our small business owners achieve their dreams, we’re giving you tips on how to make your new business a success.
1. Take your Time
One of the biggest mistakes a new business owner can make is moving too quickly. Our ever-changing economy and rapidly adapting marketplace equips entrepreneurs with many resources needed to get a business off the ground. In a little as six days, a new business owner can achieve the basic state and federal guidelines necessary to operate a business (registration, obtaining a TIN number, opening a business bank account, etc.). However, starting a business within six days requires research, discipline, organization of paperwork, and a checklist. There are many steps you should take to make sure your business is a viable venture before taking the plunge.
When starting your new business, take the time to research your competition. Understanding your competitive advantage gives you insights on how to market your product/service, and if leveraged correctly, can help to strengthen your position within the marketplace.
2. Test your Business Solution
In addition to researching your competition, you’ll need to test service or product within the marketplace. By doing so, you will determine how your product or service will perform, giving you the opportunity to tweak weaknesses within your business model. A great way to test your business is to arrange focus groups of your target buyers. Analyze your consumer’s reaction to your product or service, keep what works, and make adjustments before launching. Investing time and research into focus groups gives you first-hand feedback on how to improve your business model. Real, impactful changes based on research and data will be a key ingredient to your business’ success.
3. Financial Management
You may have the best product or service in the world, but if you practice poor cash flow management, your business will soon fail. Many new business owners struggle in this area, so it’s always best to understand your business’ cash flow model and work with a financial professional when needed. You’ll need to analyze your fiscal profit and losses to identify opportune areas of efficiency, and inefficiency, and to determine how to use your business’ funds.
Smart financial management begins with establishing a realistic budget for operational areas within your business like personnel, marketing and advertising, and overhead costs (rent, utility bills, supplies). Utilize a management tool like QuickBooks to track your revenue, expenses, and payments in real-time and to develop financial reports more quickly. Tracking these key items through a software or app is the easiest way a business owner can gain understanding of their business’ operations. Working with a financial manager or CPA are also smart financial management activities. Both, will ensure your business possess a positive cash flow (or work with you to achieve a positive cash flow), and can help you plan for your business’ future. Design future projections and construct long-term business goals with a professional, in house or contractor, to define present-day actions. Also, having strong financial management practices will aid, in the event your business needs to seek additional funding through a credit line. Banks and other lenders value smart financial practices and clear financial documentation.
4. Establish Business Credit
While there is nothing wrong with bootstrapping your business to get started, it is not a sustainable model. If you have plans to grow and scale your business, it will be necessary to build business credit. It is essential you keep your business and your personal life separate. Formulating your business as an LLC is the best business structure to protect yourself against asset confusion. Having a business under an LLC structure protects and separates your personal assets (i.e. personal credit) from your business assets.
Therefore, it is essential you establish business credit to complement your small business. Strong business credit affords business owners access to more funding resources, government/contractual opportunities, and better interest rates on high value charges. If your growth trajectory includes investors or bank funding, you cannot ignore this step when getting established.
5. Build a Strong Brand
Establishing a strong brand starts with a memorable and bold idea that will connect with your target customers. Your brand is more than a logo, a color scheme, and fancy letterhead – it’s how your audience will identify you within the marketplace, what makes your business stand out against its competitors, and supports your business model. If you’re not fully familiar with this process, it is best to hire a professional who is. Don’t rush this process. Strong brands are not developed overnight.
6. Establish Standard Operating Procedures (SOP) and Processes
If you’re considered a technician of your trade, you’re used to doing things a certain way. But, when you decide to build a business around this trade, it is smart to document those processes that work, and ditch those that don’t. To build a strong business with the intention of scaling, SOPs are necessary. SOPs build consistency within your business, allowing you to deliver predictable results. It is one of the key reasons franchise models are so successful. Consider studying the SOPs and processes of some of your favorite franchises to benchmark SOPs that might work for you.
These are just a few ideas of how you can make your new business a success and stay ahead of the setbacks. The best advice we can give you is to take your time and do it right. Don’t hesitate to hire professionals to guide you through your journey. One of the core services of VAAS Professionals is working with small businesses to coach them through the startup process and we have been doing so for over 20 years. Consider scheduling an appointment with one of our professionals to discuss your startup plans.