Entrepreneurs and small business owners usually get started with a dream, a passion, a skill, an idea, an intuition, some luck and sometimes a push from the people around them. Spending the time visualizing the business and the work is extremely exciting, but starting a business is a challenge and there is no easy business to start. Statistically speaking, roughly 20% of these dreams will end after the first year and half will fizzle out after five years.
While there are many factors that impact these failure rates, short-term thinking, complacency and an inability to change are likely the most common attitudes that precede failure. In this way, the biggest roadblock to long-term sustainability isn’t necessarily the competition or consumer behaviors, but the small business owner and entrepreneur themselves.
Of course there are circumstances and unfortunate events that can derail a new business that are outside the control of the business. Nonetheless, here are four tactics that will help protect your business from an early exit.
Find Your Passion
As I mentioned above, if you’re starting a business, the work you will be doing must to be something that you love, have a passion for, and is something you believe in whole-heartedly. This is the foundation that will give you the energy and persistence to run your business as effectively as you can.
If your primary dream is to just make money, then you are already in the trap of short-term thinking and your focus will be on where money can be made or saved. This doesn’t put your customer first and therefore, you are likely to make decisions that benefit your pocket book vs. improve the lives of your customers.
Of course being able to support oneself is necessary for any business, but if you’re singularly focused on dollars and cents, the fun and excitement of your dream will most certainly fade. So visualize yourself running a business you have a passion for and with that foundation, you can start to bring the dream to reality, let it go, or let it transform into something better.
Do Your Research
Now that you’ve identified your passion, it’s time to see if there is any real-world potential with your business by conducting market research. This is a sobering experience as we often start to identify the risks and holes associated with starting a business. But this is part of the process. Very few strike gold after one swing of the pick axe.
Instead of jumping into a business head first, this research will protect us from getting to financially invested in a business idea that has no prospects. It’s important that we be honest with ourselves about what we find in this process. More specifically, the research we need to do includes the following:
- Industry Analysis: Here you look at the industry you are entering into. You want to find out how big the industry is, if there is a gap in service in your local market and what the future of the space is projected to look like.
- Consumer Surveys: When you have identified who you think would be potential buyers of your product or service, you should survey them to see what they think about your offerings.
- Competitive Analysis: See who is offering the same or similar products or services in your market and start to see what makes each of them unique and what makes them the same.
Here are some examples of questions that you will need to be able to answer when you are done with your research:
- How big is the industry you’re getting into and what are future projections?
- What’s the potential demand for your business?
- Will your products/services resonate with your target audience?
- Roughly how many people in your market would fall under the “prospect” category?
- What percentage of prospects would you need to convert to customers in order to be profitable?
- How competitive is your industry in your specific market?
- Where are there gaps in the market and opportunities?
- What makes your approach different/unique?
On the other hand, we must take into consideration the limitations of our research. Even if the data show that there are no prospects for your business, it doesn’t mean it won’t be a success. There is no fail-proof way to predict the future, though we like to think there is. Nonetheless, conducting the research is an important exercise because it often opens you up to new ideas and possibilities that can improve upon the business you hope to start.
Identify a Greater, Long-Term Purpose
Now that you’ve identified your dream and held it in the light of thorough research, it’s time to define the features of your product or service that seek to benefit the greater good. If you aren’t trying to change the world for the better with your business, then you’ll resort to running a business based on finances.
Again, financial responsibility is important, but businesses that last a long time seek to solve a problem their potential customers have and do so in a way that makes for a great customer experience. Finding your mission and guiding principles is not only important to your success but also shows your customers that you’re in it for more than the paycheck.
For example, at Rithm Marketing, one of our missions is to “deliver sophisticated, brand-quality digital marketing at rates small businesses can afford.” Here are some examples of others:
- Detroit Bold Coffee: “Establish Detroit as a world leader from cars to coffee.”
- Google: “To organize the world’s information and make it universally accessible and useful.”
- Ford Motor Company: “People working together as a lean, global enterprise to make people’s lives better through automotive and mobility leadership.”
Strategize & Plan
So you’ve found your passion, checked its viability in the real world and identified your mission. Now you are left with what is probably the most difficult task of all, creating strategies and plans. This road map will take into account the preceding three steps and you’ll need to efficiently and effectively bring your passion to potential customers, protect against real-world market fluctuations or changes and stay true to your mission. For example, you’ll need a unique plan for each the following areas:
- Hiring: Do you need employees for your business? If so, who are the ideal candidates? What can you afford to pay them? How will you manage the hiring process? When does it all happen?
- Accounting: How will you manage your books? Do you need an accountant or some accounting software or both? Will you accept payments online or in-person? How will you process credit cards? Do you have a business bank account set up?
- Funding: Does your business need capital to get started? If so, how much and where can you get it?
- HR & Payroll: If you have employees, how will you manage payments? Also, what kind of resources or benefits will you provide your employees?
- Marketing: What channels are you going to use to promote your business? How much can you spend on this per month or per year? Are you going to manage these efforts yourself or hiring an expert to do it? Do you have budget for advertising on the various channels? Who will make your website?
- Supply Chain: If you need physical goods to run your business, how will you manage the ordering of inventory to make sure you don’t run out? What tools or providers will you use to make these orders? How much do you plan on ordering?
- Software: What kind of online tools or digital software do you need to manage your customers? Will you invest in a customer relationship management (CRM) tool? Do you need custom tools to manage appointments online?
- Facilities: If you need a physical location, where is the best strategic placement of your business? What can you afford to spend on the lease?
- Licenses: Does your work require special certifications or licenses in order to practice your craft? Where do you get these certifications and how much do they cost?
Beyond these typical business needs, your strategy must explore more subjective and intangible aspects. For instance, if you have multiple products and services, you must decide on if you open your business with everything all at once, or you sequence the launch and release of these offerings over time. Also, do you do a “soft launch” in order to build buzz and get some more know-how on what it will involve to run your business?
Also, setting goals needs to be part of this strategy and planning work. You must determine what you expect to accomplish in one month, six months, one year, etc. These goals must be reasonable and realistic but should be set up in a way that you can afford. Also, you must answer the hardest question of all: If the business doesn’t grow as expected, how long can I afford to operate a loss?
While nothing is guaranteed, these efforts will provide you with a foundation that you can build upon. But now you’re only half way there. You’ll need to get moving on the following:
- Execute the Plan
- Measure the Results
- Innovate & Evolve
Whether you’re a brand new business, or you’re within that 5-year window, we offer a variety of research services that will help you create a solid foundation for your business.