Probably not the news you want to read, but almost 50% of all small businesses fail within the first two years of operation. The primary reason for business failure is inadequate planning. The second reason is under-capitalization.
Before you remortgage your house, or get into debt financing your business, you need to know if your business is going to do more than survive — you want to know if it’s good enough to thrive! Here are three key components that can be found in most businesses that have been operating successfully for five years and longer:
A Killer Idea – A successful business start-up always starts with an idea. Something that makes your business stand out from all the rest. So how do you know if you’ve got a good idea?
You’ve probably got a good idea if you can answer yes to any of the following questions: Does your idea provide the solution to a significant problem for your target market? Does it satisfy a need or want? Does it create an opportunity?
The most successful businesses either fix problems (either real or perceived), or they increase your customer’s pleasure. They create a repeat need for a product or service among the target market.
The market – Your chances of survival are better if you can answer the following questions with a yes: Is there already a market for your product or service? (It’s much easier to fill a need than trying to create an entirely new market.) Can your target market afford to buy your products or services? (If they can’t afford it, it doesn’t matter how great it is, you won’t sell any!) Will your target market perceive your product or service as valuable? (If they want it, but don’t think it’s worth what you’re selling it for, you won’t make any sales.)
Your ability – Do you have the people, the resources and the knowledge to be able to consistently provide your products or services to your target market? Can you maintain a competitive advantage? Do you have enough manpower? Can you purchase the supplies and materials you need over the long run?
Your first step always is to create a solid business plan. Your business plan is more than an essay on “Why I deserve to get funding for my idea” however. Don’t spend all the time creating a business plan and then toss it in the bottom drawer of your desk. Your business plan should be a living, breathing road map that helps you make sure you’re on course and reaching the goals that you set for your business.
The second step to business survival is getting enough financing. Although the term “bootstrap entrepreneur” describes most small business owners, having enough capital to be able to keep your business afloat is vital to your survival.
If finding financing is a problem, either because you don’t have enough credit or equity, or there are other problems, take the time to look into the resources that are available in your community. There are a wide variety of grants and loans (including micro loans) for entrepreneurs, if you know where to look, such as Chamber of Commerce.
It’s a long difficult road, but we’re also here to help you. We offer solid advice and actionable tips for running a successful business. If you would like to learn more, jump in and immerse yourself with pages and pages of superb advice.
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