Ever wonder why they say 9 out of 10 new small businesses fail? Well, it’s because there are many potential traps every new business can run into. How do you avoid these traps? One of the best ways is to have a plan and not to get overwhelmed. If you ever seemed overcome in running your small business, just know that you are not alone. Just remember to occasionally take a step back and prioritize your tasks so that you are always taking care of the most important things first. So, in order to help you keep focused before you ever start your small business, today I wanted to share 5 things to do before you even open your doors.
Know your customer – Ask yourself, who is really going to buy what your selling? If you start a pizzeria in your town, who is going to come? Is it going to be a teen hangout or a place for families at dinner? Are you going to be on Main Street or in the new shopping district on the edge of town? Your location, menu, lighting and everything should be centered around your customer. That’s why it is vitally important to find out who your customer is going to be and make sure to be in a place they want to be. It's essential for survival in small business!
Estimate your burn rate – Your burn rate is how much money you need to spend on the business over any amount of time. Going back to the pizzeria example, you need to know how many employees you need, how much you are going to pay each employee per month, how much rent and utilities will be, and how much depreciation will be on the assets of your small business.
Calculate your break-even point – Your break-even point is the point in time at which your small business no longer has a negative net worth. In essence, that means your company is actually worth more than the sum of all its’ tangible assets. Knowing your estimated break-even point will help you determine how much capital investment you will need up front and if you will need additional rounds of funding later. (I'll write another small business article on this in the future.)
Get a great team – Any small business needs an experienced, eager team supporting it. If you were born with natural entrepreneurship skills, then you know that you should surround yourself with those you aspire to be like. All of your team may not be employees; you could have investors who help plan things from a high-level view or even mentors who know your industry.
Have a plan – Having a plan is one of the most important things you could do for your small business. Something magical happens when we take something from our minds and put it down on paper-it becomes real. Even though your plan will change, write it down so that you can remember and update it as needed. Include things like goals and strategies for reaching your goals. A plan is your first step to proper small business management.
Know your customer – Ask yourself, who is really going to buy what your selling? If you start a pizzeria in your town, who is going to come? Is it going to be a teen hangout or a place for families at dinner? Are you going to be on Main Street or in the new shopping district on the edge of town? Your location, menu, lighting and everything should be centered around your customer. That’s why it is vitally important to find out who your customer is going to be and make sure to be in a place they want to be. It's essential for survival in small business!
Estimate your burn rate – Your burn rate is how much money you need to spend on the business over any amount of time. Going back to the pizzeria example, you need to know how many employees you need, how much you are going to pay each employee per month, how much rent and utilities will be, and how much depreciation will be on the assets of your small business.
Calculate your break-even point – Your break-even point is the point in time at which your small business no longer has a negative net worth. In essence, that means your company is actually worth more than the sum of all its’ tangible assets. Knowing your estimated break-even point will help you determine how much capital investment you will need up front and if you will need additional rounds of funding later. (I'll write another small business article on this in the future.)
Get a great team – Any small business needs an experienced, eager team supporting it. If you were born with natural entrepreneurship skills, then you know that you should surround yourself with those you aspire to be like. All of your team may not be employees; you could have investors who help plan things from a high-level view or even mentors who know your industry.
Have a plan – Having a plan is one of the most important things you could do for your small business. Something magical happens when we take something from our minds and put it down on paper-it becomes real. Even though your plan will change, write it down so that you can remember and update it as needed. Include things like goals and strategies for reaching your goals. A plan is your first step to proper small business management.
All of these points are simple guidelines to help you visualize how your small business will grow. It’s not as important that all of the estimates that you make be right as it is that you have them and you update them so that you can continue to progress.
I hope you have enjoyed this and will check back frequently for more small business articles. Please check out our additional links and articles in this small business resource center!
(Image: Some rights reserved, dave_mcmt.)
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