Twenty-two percent of all businesses fail within the first year, according to Business Know-How, and that figure increases to 50 percent after five years. That's why it's so important to fully understand the business you're getting into, who your main competitors are and how large the potential market is for your products or services. If you're just now in the process of starting a new business, here are some suggestions on how to make things run more smoothly.
Select the Best Financing Options
Determine how much of your own money you can afford to use and look into potential loans. One source is your bank. If you have other sources of income and are starting your business part-time, you may qualify for a business loan. Your eligibility is usually based on your collateral and credit history. Other financing options include retirement accounts, finding a partner or forming a limited liability corporation. A limited liability corporation is a hybrid business that combines the limited liability facets of a corporation along with the operational flexibility and tax efficiencies of a partnership. Whatever financing methods you choose, make sure you account for all expenses you'll incur, including overhead, product purchases and advertising.
Protect Your Business
Get patents for all products you design in advance. You must also fully understand the laws associated with the type of business you run. You may need a Health Department Permit, for example, if you sell food items. An attorney can help you determine which licenses you need. It's also essential that you pay your taxes. You should also purchase small business insurance to protect yourself and the customers you service. This will help protect you against potential lawsuits.
Create a Business Plan
Don't just start your business blindly. Write a business plan that includes your organizational structure, operational procedures, advertising and market analysis data. Spend time determining how many employees you need. Decide how much money you'll invest in advertising and marketing each month. One way to allocate advertising dollars is to estimate the dollars you'll need to generate a specific sales volume. You can also designate a certain percentage of your total projected sales revenues to advertising.
Know Your Target Market
Every product or service has a specific target audience. The key is to correctly identify the consumers or businesses to whom you're selling and then use the right media to market to them. However, you need to know if the target market is large enough in which to sustain your business. Several factors determine this. First, study your competition to determine if there's room for another company in the industry. It's easy to sell products, for example, when they're in the introduction or growth stages. But if the market is saturated and there are a dozen competitors, it may be difficult to make a profit. When establishing a target audience, you must also determine whether you're just trying to reach local folks or selling on a regional or national level.
Don't Over Expand
While you'll have more business on a regional or national level, master the operations, market research, design and packaging of your products before you take them to the next level. You lose flexibility when expanding too fast. You can also waste a lot of money and put yourself out of business if everything's not hunky dory before you expand.
Select the Right Location
Just as in real estate, a good location is essential to surviving in the competitive marketplace. If you run a restaurant or retail establish, for example, select a location that generates lots of traffic. Moreover, spend time planning your in-store marketing, including lighting, signage, layout, displays and point-of-purchase materials. Enable customers to use all five senses when viewing your products.
Take the time to plan all aspects of your business before launching it. Incorporate some of the aforementioned tips. You only have one shot at opening a business, so you might as well do it right.