The entrepreneurship rate has dropped steadily since the mid-1990s, with the number of jobs created by new establishments decreasing from 4 million in 1994 to just a hair over 3 million in 2015. Even in a volatile market, starting your own business has the potential to pay tremendous dividends and provide you with an asset to pass down to family members (or sell for a profit) – but doing your homework before jumping in is crucial. Read on to learn more about some of the contributing factors to a successful business, as well as some tips and tricks that can allow you to begin turning a profit more quickly.
What Should You Know (And Do) Before Starting A Business?
If you’re currently working for an employer, having as many of the below factors in place prior to putting in your two weeks’ notice can save you a tremendous amount of time and stress.
- A feasible idea
Successful businesses can take a number of different forms, but all have one thing in common – they fulfill a unique or specific need for potential customers. For example, opening the fourth pizza restaurant on the block can seem like a quick plan for failure, but opening the only pizza restaurant that provides gluten-free crust or a dairy-free environment could appeal to a number of customers with allergy issues and set you apart from other nearby businesses.
In addition to having a plan to serve an unfilled need in your area, you may want to focus your entrepreneurial efforts on industries that are friendlier to new businesses. According to the Bureau of Labor Statistics, hospitality, health, and social work industries tend to generate businesses that stick around, while the construction industry is a tougher nut to crack (particularly post-recession).
If your unfilled need falls into one of the industries seen as unfriendlier to entrepreneurs, this doesn’t mean you’ll need to give up on your idea – but you may want to do even more research and preparation to ensure you’ll be in the minority of businesses that survive their first year.
- A storefront (usually)
While some online-only businesses have enjoyed great success, in many eyes, a business isn’t “legitimate” until it has its own physical presence and an address that isn’t a post office box. You’ll want to take costs into consideration, especially before you’re established or turning a profit, but you may find it much easier to expand your business once you’ve already established a neighborhood presence than to try to get it up and running from behind a computer screen.
On the other hand, those in high cost-of-living areas or other places in which simply signing a lease agreement can be cost-prohibitive may want to initially put out feelers or have a “soft opening” online, then increase overhead expenses only after developing a dedicated client base.
- Relationships with area vendors
Much of your new role will include forging relationships with local vendors and other business owners. These partnerships can be invaluable, both in their ability to provide you with access to low-priced inventory and the potential for referrals and partnerships.
You’ll want to begin attending networking events and developing friendships with fellow entrepreneurs in your area, particularly owners of businesses that provide a complementary service to your own (like pet-sitters with veterinary offices or screen printers with local clothing stores). This can provide you with the chance to cross-market your own business and become a participating member of the local entrepreneurial economy without costing you precious advertising dollars.
- Dedicated employees
Many businesses fail not because of a bad idea or even poor implementation, but because of unsatisfactory employees. Having employees who are disinterested, unfriendly, or who make frequent mistakes can drive away customers and cost you money – and because you’ll likely be busy performing the other innumerable tasks involved in starting a business, you may not notice that one or more employees presents a problem until you’ve already begun shedding customers (or worse, never getting them in the first place).
While it may be tempting to essentially take what you can get in the employment market during the early stages of your business, it’s worth it to put in the extra time and effort to find employees who are loyal, motivated, and who can take direction well.
- Goals and expectations
Having concrete goals and expectations for your business before launching it can help keep you on track. Even something as simple as “cover all overhead expenses from net revenue within 6 months” or “increase the sales revenue by 20 percent from Year 1 to Year 2” can give you something to work toward, rather than simply plugging along until you feel as though you have some breathing room.
It’s also important to have a tangible point at which you’re willing to pull the plug. Even if you have all the tools for success at your disposal, starting a new business can be risky, and knowing how long you’re able or willing to work at improving your profits before closing shop (and how much additional money you’re willing to invest in the process) can help you avoid long-term financial harm.