Nationally, a majority of new businesses fail within the first two years of launch.
If you conduct a generic business registration search on the county or state website, the records will show active and inactive businesses. You will find a much larger number of inactive businesses — companies that were once active but are no longer so.
Registering a startup is among the easiest tasks when launching a business. The hardest part is maintaining a business. Operating a business itself is a challenge. The longer you are in business, the more experience and operating skills you develop. And that helps in making the right management decisions.
Entrepreneurial success facts: Most people say that you have to be passionate and determined to make things happen. Most owners of now- inactive businesses started their ventures with passion but needed something more than the passion to maintain sustainability.
Some of the most important entrepreneurial skills are self-discipline, strategic planning, an orientation toward action and — more importantly — adaptability.
An idea sparks passion. Passion builds motivation. Motivation leads to developing action plans. Well-executed action plans lead to incremental successes. These achievements stoke further motivation and the momentum continues to build.
Progress continues to elevate the energy. The combination of these ingredients enhances the foundation of a successful entrepreneurial mind.
However, note that without a formal business plan, no operating expenses and no strategic marketing strategies, the same foundation can go sour. This also means that you gradually lose the momentum and fail.
Successful entrepreneurs often pace their business progression and create phases of success by identifying their business niche, constantly analyzing their market, then executing their business plans strategically.
Let’s assume that the owner or entrepreneur wrote a formal business plan and acquired adequate business startup capital. The next step is operation, which includes management, overhead and marketing.
Management: Making bad decisions can become expensive for small-business owners and can reduce the odds of achieving goals. Therefore, it’s important to assure that the business isn’t being operated like a hobby. You need to hire managers who are qualified professionals.
Overhead: Small businesses often have limited operating budgets. Mistakes in operation can quickly drain funds to where the chances of recovery are few.
Prepare financial projections months in advance and establish clear priorities for overhead and spending options. Be cautious about unnecessary committed monthly expenses and don’t make bold spending decisions with the assumption that you can easily write off the expenses.
High overheads can decrease overall operating budget, which may result in owners increasing the price of products or services to boost profits and maintain sustainability. Constant pricing increases for your products and services to maintain expenses can give competitors a better competitive edge.
Marketing: This is the most crucial component of every business and is often overlooked by potential business owners with the assumption that this can be dealt with after the business launches. The fact is that the success rate of a business depends on marketing and sales.
Unique products and services alone do not generate revenue. Ask yourself, “Why would a customer buy from me and not from my competitors? How can I successfully market my products and services so potential customers know I exist? What is my target market and how can I reach them?” If you can’t answer these questions, you are setting up to fail.
As part of strategic marketing, customer satisfaction should also be the focus of every business. This helps the business achieve customer loyalty and word-of-mouth referrals.
Every big business today once started small. Ideas are often born from the mind of a visionary.
The idea should then be nourished with research and planning, nurtured until it coalesces into a well-executed operation, and then gradually developed into a successful profitable business.
Raj Tumber specializes in strategic business development. He has worked with Fortune 500 companies and developed strategic business and management skills. He is also a certified business mentor with SCORE, an organization that helps small business formation and growth. Reach him at rajtumber.com.