In the beginning stages of starting your own business there are many challenges that may surface. Nine out of 10 start-up companies eventually close their doors. With this fact in mind, it is important to set your business up for success from the beginning. By understanding common mistakes, anticipating challenges and utilizing the tips below, you can be one step closer to being a part of the successful 10%!
A Solid Business Plan
There is a large gap between having an idea and understanding what it will take to start a company. Your business idea should be founded on three major elements: your passion, your skill, and industry demand. After your idea develops out of these elements, the next step is to create a business plan. Some entrepreneurs skip this step, and jump into the action phase. This can result in poor planning for acquiring resources, understanding competition and more.
Tip: A business plan is the blueprint to your company and will help you achieve a strong base on which to grow your business. Although a plan is a great start, keep in mind that it is a living document and will change as new goals are set. A few major elements of your business plan should include an executive summary, a description of your business and of your products or services, a sales and marketing plan, an operations plan, and a financial summary. In order to write an effective plan you will need to fully understand the industry, competitors and your business goals. Help set up your business for success by doing research first and continuing to spend time reviewing and revising a functional business plan.
Know Your Numbers
Opening a new business costs much more than running an established business. If you underestimate costs you may run out of money or not be able to invest in growth opportunities when they present themselves. Some entrepreneurs also fail to recognize the importance of putting the proper legal structure in place for the industry they’re entering and the cost associated with that structure. Failure to do so can results in unexpected fines and costly delays.
Tip: Reaching out to other entrepreneurs can be a great resource when estimating costs. You can also reach out to potential suppliers or a business consultant. By properly calculating these expenses, and preparing a realistic budget, you can gauge the amount of capital you’ll need. This should include everything from licensing fees and production costs to real estate and employee salary estimates. Meeting or calling an accountant is also imperative to understanding the financial and legal structure your new business will need from the very beginning and through each stage of growth and development.
When it comes to owning and operating your own business, there are an abundance of items on your agenda that require your undivided attention. A common mistake some entrepreneurs make is thinking they can do it all. Understanding your strengths and weaknesses is part of being a successful business owner. Use your business plan and your budget to ensure the right people are in place to launch your company. Also consider a partner. Having a co-founder has been shown to increase the odds of sustaining a successful business.
Tip: Putting the right people in place that are best for the job is key when building your business. When starting a company, think about the main elements for success, and then acquire people who are experts in their field. Along with having the right employees for the job, it is also important to understand time restrictions. If you try to do everything, you won’t allow for time in the area where you can excel.
At Great Lakes Accounting, we understand the needs of entrepreneurs and small business owners. Call today to speak to a certified public accountant or schedule an appointment!