Tips on Starting Your Own Small Business – Things to Expect and Avoid
If you are thinking of starting your own small business, you probably have heard all of the dire predictions. People will remind you that 4 out of 5 business start ups fail and that it will be much harder than you think, but remember that the successful businesses faced the same odds and there is nothing like the freedom of being your own boss. There are some major pitfalls that, if avoided, will greatly enhance your chances for success, and some actions you can take that will increase your ability to grow your business even in a rough economy.
One of the most important factors that increase a small business chances for success is that it is properly funded when it is launched. Most budding entrepreneurs spend a great deal of time preparing a business plan that accounts for nearly every conceivable scenario, but “murphy’s law” inevitably will show up proving that “anything that can possibly go wrong, does”. For this reason, you should always plan on it costing more than you think to get your new business to the point of profitability. The type of business you are starting, it’s operating costs and your personal finances will all be factors in how much money you will need, but plan on needing more than you think. If your business is well funded, it will better withstand the potholes you will likely encounter.
It is also imperative that you have a solid accounting system in place before you even begin to spend or collect any money. Small business owners are often sloppy in accounting, especially when they first start their business. Trying to figure out where your income came from for your accountant, months after the transaction, can be a very frustrating waste of time. Keeping clean organized books from the outset will save you a lot of grief later and will also enable you to track your business growth ( or lack of growth) accurately. A program like quick books can be a great lifesaver for your business and may even help you to grow it faster with less risk.
Taking the time to properly structure your business can protect you legally in the future and help in the business planning process. Deciding whether to form a corporation, LLC or to operate as a sole proprietor are important things to consider before you start your business. It is much more difficult to change the ownership structure after you start, and having a framework for your business will help you prepare for the growth that will hopefully happen once it is launched. It is a good idea to talk to an attorney if you are having trouble deciding what legal structure you will use in your new business.
Preparing an effective marketing plan is an area of business planning that many small business owners do not spend enough time on. Today, marketing is very different from what small business owners did just a few years ago. Once you start your business, you will be tempted by phone book salesmen to purchase display ads in the local phone directories. This is a total waste of money today. In large metropolitan areas, a 1/4 page display ad can cost thousands per month and a full page ad can run $30,000 to $60,000.
There will also be salesmen from newspapers and other publications that will be calling soon after you get a business phone number. Be very careful about how you spend your advertising dollars and know that these salesmen will make a strong case to get you to sign a contract right away. Avoid signing those contracts until after you have had time to think about the contract and how the expenditure fits with your business plan.
In this “internet” age, most people looking for services or products look to the internet first. In fact, studies show that over 40% of all searches for businesses online are local in scope. This means that your potential customers are far more likely to look for your business online before they turn to a phone book or newspaper. Taking advantage of this fact may even give your business an edge over your established competitors because a surprising number of small businesses do not have an active online marketing plan.
An added advantage to marketing your business online is that your business will be able to take advantage of Search Engine Marketing. This type of marketing allows you to place your business in front of your potential customer at that exact moment in time that they are looking for you. If your business is a local one, the chances of you being able to be found online are very high if you learn how to market online or retain an online marketing specialist.
Finally, you should have a vision sheet or dream board that sets out personal goals for your business. The whole reason you are probably thinking about starting a business is to both improve your income and your lifestyle. To obtain that goal, you need to have a plan. Many small business owners end up creating a “job” for themselves where they work much harder than they ever did when they had a real job. Sure, you will probably work extremely hard when you first start your business, but you need to know you are progressing towards your ultimate goal. Setting that goal with multiple “milestones” along the way will help keep you motivated and let you know when you are getting off course.