The entrepreneurial spirit is as much a part of the fabric of America as baseball, democracy, and McDonald’s. We dream big, work hard, and invest our finances into something that we truly believe in. While our intentions may be noble and our ideas unparalleled, there are many things to consider before launching a startup business.
A study from the University of Tennessee published some astonishing facts earlier this year including that 25% of all startups fail in the first year and by year four, 50% are no longer exist. The leading causes for startup failure include poor management of financial decisions, lack of managerial experience, inadequate inventory, and lack of planning and research (no focus, bad advice, burnout, poor market awareness, etc).
Here are some things to consider as you manage your new company:
Know the Law – There is a ton of research, legal jargon, and paperwork that comes with opening your business. What are your long-term objectives and do you want to run your business as a C Corp, S Corp, LLC, LP, etc.? Have you scoured the internet to make sure that your business name is solely yours and won’t be confused with another company? Do you have a partner and is everything clearly spelled out as to how funds will be divided, who is the acting CEO, or what happens if one partner needs to exit the business? Employee rights, IP protection, complying with federal or state securities laws, understanding third party contracts, etc. can be very overwhelming. Hiring a startup lawyer can save you time, money, and headaches in the long run, especially if you are not set up to succeed – legally.
Proper Investment – Many small business owners underestimate how much it’s going to cost to run a business and overestimate their returns in the first year. A common rule to consider is to have at least 24 months of expenses covered for operations since most startup businesses take a year or two to bring in a substantial profit. Meet with your CPA, finance attorney, bank lender, or a successful business owner for a reality check.
Losing Focus – Do one thing and do it really well. Offering a lot of mediocre services or products won’t bring your customers back. Consider this: it costs five times more to obtain a new customer than to keep an old one. Draw up a detailed business plan that you fully believe in, frame it, and look at it daily.
Product Market Fit – Customer persona research, product testing, knowing your market, determining who your competition is, finding the right location, and a million other details need to be in order before you set up shop.
Poor Marketing – You can have the greatest product in the world but if no one knows you exist, you’re dead in the water. Sometimes you have to spend money to make money, and this is one of those times. Much of the time, your first impression to potential customers is most likely going to be through your website. Make it reflect your brand, keep it simple, and highlight what you do best and what makes you different from your competitors. Next, hire a designer to create a stellar logo (and make sure to trademark it!). This starts your brand recognition, so make it memorable and impactful.
David Rockefeller once said, “Success in business requires training and discipline and hard work. But if you’re not frightened by these things, the opportunities are just as great today as they ever were.” Are you ready?
[Photo Credit: Activision]