How to start a business that lasts
Many of us dream of starting our own business. Whether it’s a bakery, coffee shop, or an accounting firm, or the next big tech company, business ownership is a big part of the American dream. Unfortunately, about 20% of small businesses fail within the first year for one reason or another, and this worrying statistic can make us anxious about our prospects. After all, nobody teaches us how to start a business. You must figure it out on your own, which can be a daunting prospect. That said, it is possible to start a business that lasts. With a little bit of research and planning, you can learn how to start your own small business.
Research the market
One of the most critical steps to starting a business is to conduct market research. Market research is the process of learning about consumer behavior and general economic trends to make sure that your business idea is viable before you pour time and money into it. When you’re researching the market for your small business, you should focus on things like demand, economic indicators, market saturation, and pricing.
Demand is the business term that describes whether people want a particular good or service. If you’re going to open a hookah bar, you need to make sure that there are people in your community who want to go to a hookah bar. If you’re going to open an accounting business, you need to know how many small businesses, sole proprietorships, or private citizens will want to use your service. Without demand, your business will flounder: no customers means no money. Demand is closely tied in with supply, which is the availability of a given product or service on the market. If your town already has five hookah bars, is a sixth one really a viable idea? This is the principle of market saturation,the point where a good or service is so readily available that new entries into the market are not likely to thrive. On the other hand, if there are no accounting firms in your town, it’s likely that the lack of supply will work in your favor. Supply and demand are the core mechanics of any economy, so it’s critical that you understand how they apply to your situation when you’re thinking about how to start your own small business.
Another essential component of market research is pricing. If your product is overpriced, most consumers will ignore it. If your product is underpriced, consumers may become suspicious that it is not a good product. Finding the “goldilocks zone” of pricing is a challenge to any business owner, but setting your pricing scheme is one of the most important steps to starting a business. You’ll need to understand how much overhead you have and what the production costs are for your particular product or service, and then decide what kind of profit margin you want to set. Your pricing will also affect market share: higher-priced products will likely not capture as much of the market as lower-priced products, so your pricing strategy is key to your overall business. Are you planning to make money on volume or make more money by moving fewer units?
Mentally prepare for the long haul
Running a business is challenging. Markets change, the economy shifts, and unforeseen global catastrophes like our recent pandemic affect the entire operating environment. One of the critical steps in learning how to start your own small business is preparing for the long haul. It’s easy to be optimistic and assume that we’ll be in it for the long haul, especially when times are good. If your business is growing, your customer base is expanding, and you’re making more profit, it’s easy to stick it out. But that won’t always be the case. There will be hard times, and for your business to be viable for the long term, you must be willing to endure both the good times and the bad. There will be times when your business is having trouble: maybe the market crashed, maybe your product hit a roadblock in development, or perhaps an unexpected upstart is competing for customers. You must mentally prepare to survive these inevitable challenges.
Establish a budget
An absolutely critical thing to do when you’re figuring out how to start a business is to establish your budget. Budgeting may not be sexy or fun, but it is hard to overstate the importance of a reasonable, thoughtful budget. A well-developed budget will help you keep control of your business and run it in the most efficient way possible.
Since budgeting is one of the most important steps to starting a business, you should become familiar with the process. The first step to establishing your budget is to look at your revenues or, in the beginning, your capital budget. Take away your fixed expenses like rent, payroll, depreciation, taxes, and so on. Now examine variable expenses: these are things like your own salary, professional development costs, marketing costs, utilities, and upkeep or turnover of equipment. Now, set aside some of the remaining money as a contingency fund so you’ll have money available to help cope with unexpected challenges such as a market crash, a fire, or equipment failures. Now it’s just math: subtract your expenses from your revenues or capital, and whatever is left over is your profit! Alternatively, if you have negative money left over, you’ve lost money. Don’t panic! Businesses lose money all the time, and small businesses that are just starting out often lose money at first. Examine your budget in detail and find opportunities to trim costs. Above all: keep a positive attitude and don’t throw in the towel the first time you lose money.
Know your finances
Understanding your finances is essential when you’re learning how to start your own small business. Finances and a budget are not the same: your budget outlines how you will spend money, but your finances explain what your money is doing and where exactly it is going. For your business to survive long term, you must have a close eye on your finances. While delegating tasks to specialists is a good management tactic, you can’t wholly abrogate your responsibilities to attend to your company’s books. It’s easy to nod and act sage when someone is telling you about financial reports, but you need to learn how to read financial statements in detail, including understanding what all the complex and technical accounting and finance terms actually mean. Understanding these things is critical to the successful operation of any business enterprise, and it can help you survive hard times if you are savvy enough to know where your money is going and what expenses can reasonably be trimmed or cut.
But what if you don’t understand finances and have no idea about this part of running a business? You can easily take a class: most community colleges will have great finance classes available at a low cost, or you could even take an online class.
Keep your customers happy
It’s not enough to know how to start a business: you have to know how to keep your business afloat. One of the best ways to keep your business running over the long term is to keep your customers happy. We’ve all had bad experiences with businesses. The company might be unresponsive or unreliable, or their employees might be rude and alienated. Big companies often have notoriously poor customer service, but they can get away with it because many of them are pseudo-monopolies or confusopolies. As a good person and a small business proprietor, you don’t want to be like that. You need reliable, repeat customers who will tell their friends and help drive more business to you. The best way to achieve that is to keep your customers happy.
So how do you keep customers happy? It’s not that difficult. Think about how you would like to be treated by a business that you buy from, and treat your customers that way. You should be responsive, courteous, honest, and fair. Don’t try to screw your customers with bad deals or confusing language, and don’t condescend to them. Provide them with helpful information and answer their questions. Ask follow-up questions of your own: did we meet your needs today? What did and didn’t you like about our product or service? Engage with your customers and make sure you’re fulfilling their expectations.
Invest in your web presence
One of the most important steps to starting a business today is investing in a high-quality web presence. Have you ever wanted to find out about a business, only to find that their website is awful, clunky, and slow — or even worse, to find out that they don’t have any web presence at all? In an age where everybody is attached to mobile devices all the time, it is foolish not to invest in a good web presence. This should include, at a minimum, a modern website that contains relevant information, a social media presence on the major social platforms, high-quality original content, and a good domain name.
This doesn’t mean you have to do all these tasks by yourself. You should hire a competent web designer to help you build a great website and consider hiring a marketing or public relations person to manage your corporate social accounts. Be sure that you have a company email address that is monitored by a specific person at your business, and be sure to respond to customer inquiries in a professional manner. Investing in a robust and modern web presence will help you attract customers and engage with them even if they are not physically at your place of business.
Branding might not seem important when you’re first learning how to start your own small business. There are dozens of fundamental attributes of a business that need to be sorted out to get it off the ground — does branding really matter? If you want to keep your business operating for the long term, branding matters a lot. Think about the brands we interact with every day: Starbucks, Coca-Cola, and Apple are all well-known brands that consumers associate with specific things. We know that Starbucks has a particular kind of coffee, served in a distinctive, finely-tuned atmosphere that defines their brand. We know that Coca-Cola is going to be the same brown, fizzy soda no matter where we get it. And we know that Apple’s electronics are going to be beautifully designed and easy to use. Your brand is more than just a name and a logo: it is the set of features that make your organization distinct from the competition. Starbucks and Dunkin both serve coffee, but each brand is distinctively different, and consumers have different sets of expectations from each. Taking the time to develop your brand, including specific elements like your brand identity and brand values, will help your company last.
Promote your business
When we talk about how to start a business that lasts, one of the most important steps is to promote your business. Customers won’t just materialize out of the woodwork or randomly appear in your store: you need to spread the word that your business exists and is worthy of consumer dollars. Depending on your business, there are many ways to promote yourself. Social media promotions can be highly effective in today’s world: a few hundred dollars spent pushing your business to a specific demographic using Facebook or Google is often an excellent way to promote yourself to plausible customers. Press releases can be valuable, and many local markets have business circulars or free magazines that feature locally owned businesses. Finally, don’t underestimate the power of networking. When you’re promoting your business, meeting prospective customers face-to-face at community events and business conferences is a fantastic opportunity to cultivate new business partners and customers.
Persistence and dedication
Whatever kind of small business you are starting up, the most important thing to do is to put in the effort. We live in a society that values instant gratification, but businesses are not instantly successful: they require a lot of attention to thrive. Persistence and dedication make a big difference in the business world. If you show up every day, put in the sweat equity, and try your hardest to learn everything you can about running a successful business, there’s an excellent chance that your enterprise will succeed. Hang in there and keep at it. It will be worth it in the end.