How To Sidestep The Chances Of Failure With Your New Business
Choosing to begin a business has its risks.
You have probably seen the stats online that indicate the percentage of how many businesses fail. Would you want to be another statistic? No, of course you wouldn't, but if researchers are to be believed (hint: we probably should believe them), you might well end up being among that 20% who fail in the first year, or among the 50% who fail after five. It's enough to make you reconsider starting a business in the first place, because after all, why would you put money into something that might only fizzle out and die down the line.
And yet here's the thing. 20% of businesses fail within a year, but turning those stats around, 80% of businesses don't. 50% of businesses close after five years, but 50% of businesses survive! You see, there is hope.
So, don't be put off by the thought of business failure because it doesn't have to happen to you. If you take steps at the beginning of your business to alleviate the risk of failure, then you may survive past the first year, and even past your fifth. Heck, you might even pass the 200-year mark as these businesses have, although whether you're still around to run the business that far into the future is more than a little unlikely!
Here then are some of the things you can do at the start of your business to avoid the risk of failure.
#1: Set business goals
It's no good starting a business with no idea of which direction you are going to go in. While you can't see the future, you should still consider it, asking yourself where you want your business to be in the next 5, 10, and 15 years, etc. Your business goals are a key part of your business plan and are the starting point for the tasks you need to accomplish to meet them. With a long-term gameplan in place, you will be able to look at it sporadically to assess how your business is doing, and what you might need to change in order to meet your goals. Check out this list of small business goals for a few handy examples, and add them to your business plan.
#2: Research your competitors
It's rare that any business will be completely unique, so you will have to consider your business rivals. Who are they? What do they offer their customers? Where are they based? You can do a Google search to find out more about them, so make sure you do this at an early stage, as you might want to adapt what you do to counter the threat they pose to you. You might want to target a market that your rivals haven't, for example, or you might want to make changes to your product or service to create your own niche. Check out our 5-step guide to beating your business rivals, because when it comes to failure, you might well end up having to close your business if you haven't taken steps to stay ahead of them.
#3: Use financial wisdom
A shortage of cash is the reason why many businesses fail, so you need to take steps at the beginning of your business to get you off to a good start. This includes looking for a business loan with low interest or looking for ways to start your business without the need to take out a business loan in the first place. There are some ideas here. You should also consider the items you need to start your business, and rather than buying everything brand new at the outset; you might want to purchase some items that are second-hand or refurbished to help you save money. You can always spend more when you start to make a profit. And you should research accountants in your area. While you might not want to fork out the expense of hiring somebody to help you with your finances, know that this is one area where the cost is worth it. A good accountant will help you with your financial forecasting, give you advice on taxes, and will steer you away from any bad financial decisions. By taking these steps, you should be in a healthy financial situation at the start of your business, and provided you heed our advice below, you might not have to suffer many money worries in the first year of your business.
#4: Sort out your marketing plan
You aren't going to make a profit if you don't market your business, so at a very early stage, you need to create a marketing plan. There are plenty of ideas in the linked article on how to do this, so have a read and then consider what you might do for your business. Know too that you don't have to spend a fortune on marketing. While you might splash out on a larger marketing campaign down the line, with flashy newspaper ads and public events that will draw attention to your business, you might want to focus on low-cost ways to market your business when you're just starting out. This way, you will have the opportunity to save money, and considering our next point, that can only be a good thing for your business.
#5: Create an emergency fund
Going back to the subject of finances again, know that creating an emergency fund is vital. You never know when you might need the money, as any number of things could happen to scupper your financial situation. Your equipment might break down, for example, or you might hit a dry spell within your business. If you don't have the money to see you through, then your business might take one step closer to failure. Check out the linked article on building an emergency fund, and then take the steps necessary to put something in place. You will be glad that you did should that money come in handy down the line.
Finally
Business failure does not have to be your reality. By taking the steps we have suggested here, you should increase your chances of survivability. Let us know what you think, and if you have any other suggestions, please share your ideas with us.
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