According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year. For those that survive their first year, about 50% of small businesses fail in their fifth year and 70% fail in their tenth year. For startups, it's even worse: studies show that 90% of startups fail overall.
It almost seems absurd to go out and start a business. But the reward of succeeding far exceeds the risk of failure. In the Land of Opportunity, home to free enterprise, anyone with a dream and drive can succeed in business. With the odds stacked up against entrepreneurs, startup founders, and small business owners, here are some key factors that increase the likelihood of your business succeeding.
Analyze the Market
Before writing a business plan, applying for a loan, investing money, spending on legal fees, creating a logo, designing a website, and the litany of other tasks that go into starting a business, it’s crucial to ask this one question: “What makes my idea different?”. According to a study of 101 startups, the lack of a market need stood as the most common reason startups failed – totaling 42 percent of all startups in the study. If your business is going to survive and defy the averages, you’ll have to both have a sustainable market of customers and the ability to beat out competitors. First, research the potential customer base – discerning how many people or businesses comprise your total addressable market (TAM), how much money do they have to spend on your product or services, and what are their likes and dislikes will help you decide if there’s a large enough market for your business to succeed. Then, take a look at competitors – discern their strengths and weaknesses, branding and messaging, and if possible, pricing. This will help you determine what your company can do differently to attract customers. Your company needs to do something materially different from its competitors to attract customers and succeed.
Write a Business Plan
If you discerned that your TAM is significant and sustainable, and that your product or service is unique from competitors, the next step is to write a business plan. This is your blueprint, your constitution – the manifesto that every aspect of your business will stem from. Writing a business plan prevents your running into an issue 3 months down the line and having no idea how to handle it. By planning every facet of your business, from budgets to payroll to marketing, there’s no secret hole that failure can creep into. In addition, creating a business plan forces you to think through things you might have never considered otherwise, and think more critically about factors you already have considered. Create your business plan, and you’ll have a sound structure to launch your business off of.
Set Up Policies & Procedures
When starting a business, you’re hoping to do more than just survive – you want to scale your business. Setting up policies and procedures afford your company to scale smoothly. Let’s say your business plan calls for the immediate hiring of 2 salespeople, and the hiring of 2 more salespeople 6 months after launch. As revenue generators, your salespeople should get up to speed as fast as possible, so that they can start producing as fast as possible. Creating a standard employee onboarding and training procedure increases the likelihood of that happening. As a lean startup or small business, the good news is that you are still agile and can adjust your policies and procedures as needed, on a dime. But having a template in place will fast-track your growth and avoid potential inefficiencies.
Get Funding, Make a Budget, & Manage Finances
In a capitalist society, capital is inherently a key factor. Capital to a business is like water to a human or fuel to a jet – without it, it cannot function. Capital keeps workers employed, maintains your office lease, and pays for your internet bill. The first part is acquiring funding, whether it’s though raising capital from investors or applying for an SBA loan. When pitching investors or talking to a banker, make sure that it’s enough capital to sustain your business until your projected sales produce enough cash to fulfill payroll and other operating expenses. Once you bring capital into your business, you deploy it. The livelihood of your business depends on the tact and meticulousness in which you deploy that capital. Creating a budget, sticking to it, and keeping a keen eye on your finances ensures that your business uses its capital effectively and strategically. When creating a budget, it should be aligned with your business goals and support the achievement of those goals.
Build a Team
If you’re a driven entrepreneur, you can probably do everything and anything you set your mind to. Although your leadership and execution will play a key role in your company’s success, building a strong team around you will play just as much of a key role – if not an even bigger role. Steve Jobs, the great innovator, had a few partners back when he started engineering in his California garage. In 2008, Apple had 32,000 employees. As of 2018, it employs more than 132,000 people and continues to prosper after his passing. The drive for innovation that Jobs instilled, in conjunction with hiring quality employees that align with Apple’s ideals, afford the company to grow and prosper. Early on, your company might employ just 1-10 people, and each one of them proves dire to your success. Hiring one good salesperson can double your company’s revenue, for example.
Sell, Sell, Sell
Eventually, your investor capital or business loan is going to run out, and you’ll have to pay the bills with funds from revenue. To produce revenue, you’ll need to sell. No matter how many “No’s” your /sales team gets, keep persisting. If people keep saying “No”, take note of why and adjust your sales approach if needed. For those that say “yes”, take note of why and replicate that with future prospects.
Embrace Being a Manager & Remain Teachable
Above all else, embrace being a manager and remain teachable. Managing the team you build will prove crucial to getting more done with less resources. Humility allows you to delegate tasks and responsibilities to others – you can’t do everything on your own, and learning to delegate to the right people is a key management skill. Ego has been defeating humans as long as we’ve existed. Refusing to accept that you might be wrong, that your business is not perfect, or that you can ignore your customers’ suggestions can lead to your company’s failures. Every entrepreneurship, businessed-minded, or success-motivating voice and media out there talks about how successful people read a lot. That’s because when people read, they learn. When they learn, they become better. Remain teachable so that you can adjust yourself along the rollercoaster ride of starting a business.