It’s the Golden Age of Startups. Technological advances have made it possible for anyone, no matter what age or background, to turn their innovative ideas into a company.
Raising capital has also become easier for small businesses in recent years. In fact, Flickr founder Stewart Butterfield is quoted as saying, “This is the best time to raise money ever. It might be the best time for any kind of business in any industry to raise money for all of history, like since the time of the ancient Egyptians.”
Even with all the possibilities and available capital, starting and running a business is still a risky venture. Take a look at the numbers; it’s estimated that between 80 to 90 percent of startups fail. With such a high failure rate, what sets apart the businesses that make it from the ones that crumble?
Below are four possibilities for startup success:
Startup Tip #1–They come up with a plan that changes quickly when necessary.
It doesn’t matter if you’re a first-time entrepreneur or an experienced one. Every business needs a clear and realistic plan. The SBA advises using a plan that includes “accurate and realistic financials and market research to back up your predictions.” Plan on being able to confidently communicate key sound bites from your plan on the fly, particularly how you will generate profits and how that will flow into your investor’s pockets.
Once you make your plan, don’t forget about it. Keep a close eye on your market, competitors, and customers’ feedback. Then, pivot your plan accordingly to meet those needs. Don’t forget that your ability to execute and adapt quickly when needed is crucial to survival in the business world, so plan, plan, plan–but also, be prepared to change those plans.
Additionally, “planning” also includes finding the right investor if your business needs the capital. For those who do need capital, carefully research the different investment options available and keep your business plan in mind when choosing the right funding. An investor can have a massive impact on the future direction of your business, so the right financial partner is essential to a healthy business in the long-run.
Lastly, never forget to plan for the “what ifs” in life. This includes a disaster-recovery plan or thinking through worst-case scenarios and finding solutions before you need them.
Startup Tip #2–They don’t launch until they’re ready.
Never feel the pressure to launch sooner than you’re ready, as this is one of the most common pitfalls in business. Instead, make sure all of your products and services are thoroughly tested before you’re up and running. This includes testing every feature and fixing every bug that you find before it gets to your customers.
Additionally, implement all internal software beforehand so that you don’t miss out on any opportunities from the beginning. For instance, how will you interact with customers? Do you have proper CRM software to keep track of interactions and gain better access to customer data? Seventy-one percent of small business owners and executives surveyed for the 2015 State of Small Business Report admitted that they don’t use any kind of CRM software. This means sales can get stuck, and lost, in the pipelines.
Furthermore, have you implemented proper tools to protect customer data? If your customers are sharing sensitive information with you, make sure you don’t lose their trust by failing to protect their data. Unfortunately, in today’s digital world, businesses are more vulnerable to cyber crimes than ever before.
A McAfee survey found that 60 percent of cyber crimes are directed at small businesses, yet only 9 percent of small businesses have mobile security, less than half have any kind of email security, and only half protect their Internet data.
Startup Tip #3–They stay on top of their cash flow.
Are you as profitable as possible? In other words, are you maintaining a strong financial image of your company to show investors?
A lot of this comes down to properly managing accounts receivable, such as discussing invoicing early on and handling payments efficiently. When these priorities are missed, businesses find themselves with problems related to “flat sales” and wondering where all the cash has gone. Despite its importance to a business, managing cash flow remains one of the top accounting problems reported by small business owners.
Only 40 percent of small business owners feel they are extremely or very knowledgeable when it comes to accounting and finance, and 32 percent fail to set aside enough money to pay their income taxes at the end of the year.
When it comes to staying on top of cash flow, properly managing inventory is also a key player. Most small businesses have poor inventory management, which is one of the top reasons why small businesses fail, according to the SBA. In fact, the State of Small Business Report indicated 46 percent of small businesses don’t even track inventory or they continue to use a manual process.
What’s the crime in failing to properly manage goods? These businesses will quickly find that carrying excess goods can lead to negative numbers on their cash flow statements, and not having enough goods to meet customer demand risks ruining a company’s reputation.
If you find that you can’t forecast your sales accurately, consider hiring a third party to implement a proper system.
Startup Tip #4–They encourage and support their team outside the office.
No one can have it all, all the time. Smart business owners remember this and remind their team that they need to have a balanced life. As a business grows, it might feel necessary to work every waking hour in the day, but successful entrepreneurs encourage their employees to work smarter, not harder.
In today’s fiercely competitive world where small businesses in the U.S. make up the world’s second largest economy and are responsible for 7 million out of the 10.9 million added private sector jobs, it’s important that entrepreneurs, and their teams, are fully alert and on their best game if they want to be the one to two startups out of every 10 that succeeds.
The post Beating the Odds: Finding Startup Success When 90% of New Businesses Fail appeared first on AllBusiness.com
The post Beating the Odds: Finding Startup Success When 90% of New Businesses Fail appeared first on AllBusiness.com.
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