Building a business from the ground up is not easy. There’s a whole culture surrounding startups these days and you’ll often hear about the “lean startup” or how you only need to work 2 hours on your business and still make money. The reality is, you’re very likely going to be working a lot more than two hours a week for a very long time, and even then you aren’t guaranteed success.
One of the hardest lessons in life is that you can do everything right and still fail. Nowhere is this more evident than in the failure rates of small businesses in the United States. Approximately 20% will fail before their first year, more than a third will fail before two years, half will fail by year 5, and 70% will fail by year 10.
Sometimes the circumstances are truly out of your control, but there are still a lot of things you can do to fail-proof your business before you even get started.
Make A Business Plan
Failing to plan is the same as planning to fail, as the old saying goes. And, apparently, it’s one of the most common reasons why businesses fail.
You shouldn’t just be picking out office furniture and paint colors during the planning phase. In fact, those things should come later.
Primarily, you need to plan what kind of business will do well, where it will thrive and who would be the best people to help you run it. Among the things you should consider carefully are the following points:
Location: Are you in a location where there is an abundance of talent, relatively low business taxes, enough infrastructure for your needs and room for business growth?
Competition: Can you withstand the competition or are you in a sector that is highly competitive when it comes to market share?
Team: Are you choosing the right people for the job or just taking anyone with a resume and a pulse?
Cash Flow Management: Can you deal with the ups and downs of cash flow when customers don’t pay you and you still have to pay rent?
Flexibility: Are you able to turn on a dime if you catch a hint of a shifting market?
The above is where most businesses fail and thinking about how to mitigate these problems at the outset is the first step in building a business that lasts.
See Also: How Awareness In Business Can Predict Your Future Success
Know Your Strengths, But Also Know The Strengths Of Your Community Or Sector
Four of the top five worst places to start a business in the United States are in California, Stockton, Modesto, San Bernadino and Santa Rosa and it’s because of the high poverty rate and low education in the areas.
If you are in any one of these places, you have to carefully plan your business strategy.
Location is important, but so is industry. Healthcare is one of the most successful types of businesses to start while construction and transportation are some of the worst.
Does your town have good infrastructure? It’s going to be hard to start a tech business if you’re somewhere that still uses dial up. Shipping things out? Hope you have access to a major shipping company hub, like UPS Worldport in Louisville, Kentucky.
Having access to top talent is another concern when you are starting a business. If you are starting a business in a place that doesn’t have a university, you’re likely to starve for talent as your company grows. If you’re setting up shop in a place with high poverty, chances are the folks who need jobs the most aren’t going to have the education needed.
Take a look around as you are planning your business and determine what industry would fit your location. Don’t be afraid to move if you can’t get what you need in your current community.
See Also: 4 Key Ideas To Help Your Passion-fuelled Business Take Off Fast!
Businesses Fail Frequently, But Yours Doesn’t Have To
A little extra planning can go a long way when starting a business. Learn more about why businesses fail from this infographic and then do a serious audit of your business plan or current business.
Have you built something that can last or something that will barely survive the next major market shift? Is your team up to snuff? You owe it to your business to ask the hard questions.
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Author: Brian Wallace
Brian Wallace is the Founder and President of NowSourcing, an industry leading infographic design agency based in Louisville, KY and Cincinnati, OH which works with companies that range from startups to Fortune 500s. Brian also runs #LinkedInLocal events nationwide, and hosts the Next Action Podcast. Brian has been named a Google Small Business Advisor for 2016-present and joined the SXSW Advisory Board in 2019.
