Did you know that one out of three new businesses fail within the first two years? According to the Small Business Administration, over 56 percent of all small business owners go under within the first four years.
Regardless of your current economic status, starting a business from the ground up takes perseverance. However, there are things you can do to prevent losing both time and money on a failed business venture.
Create a Business Plan
A dream becomes a goal when you write it down, and a goal becomes a plan when you create a strategy. Above all else, you need a solid business plan. This document should outline the path you plan on taking to bring in revenue. If you’re not sure where to start, the SBA has a slew of resources for budding entrepreneurs developing a business plan.
In the beginning, most startups struggle with cash flow. It’s important to maintain a balance between covering expenses and seeing return on investments. When a new company starts to experience extended periods of negative cash flow, the effects are comparable to when an individual runs out of money.
They borrow from Paul to pay Peter but then need to find the cash to pay Paul back. It becomes a vicious cycle of negative cash flow, which eventually leads to failure. Companies are most fragile within the first two years, so it’s imperative to limit expenses while boosting revenue.
Perfect Your Skills
As with most things in life, if you try to do it all, you usually end up doing nothing. Regardless of your niche, you need to zero in on one thing and perfect it before doing much more. Spreading yourself too thin only leads to disorganization, missed opportunities and ultimately failure of your business.
For example, if you offer a wide variety of industrial products, but started out with and are known for your industrial boilers, focus on improving that area of your business first. Once your company is strong enough to support other products, slowly expand your coverage area. Move forward cautiously. This way, you can continue with your growth intelligently on your own terms instead of being a slave to the ebb and flow of success that is par for the course.
Avoid High Debt
Credit cards and loans may seem like a good idea, but for a small company just starting out, having to repay high-interest debt needs to be avoided. If your cash flow is being spent on repaying debt instead of expanding your customer base, you’re not going to be able to keep up with your competition, let alone make a profit.
Starting your business isn’t easy, however, it is possible. Understand that there will be obstacles but with a little faith and a lot of determination, there is nothing you can’t overcome. Just remember that other business owners have gone through exactly the same thing. Learn from their experience as you strive for success.