Successful Small Business Entrepuners
INTRODUCTION TO SMALL BUSINESS STARTUP SUCCESS
How you startup your small business often determines your success or failure as a Small Business Owner in Wilmington, NC. Before you start, find out if running a small business is for you by studying our blog post “14 Characteristics of a Successful Small Business Owner” – click here.
Then, learn “Why Do Small Businesses Fail” so that you can avoid those pitfalls at startup – click here. In addition, review the section “Small Business Failure” on our Road Map to Small Business Success – click here.
There should be no misunderstanding that starting and running a successful small business requires patience, proper planning, hard work and perseverance. To set a sound foundation for small business startup success, small business owners need to examine the topics outlined below.
SMALL BUSINESS STARTUP PLANNING
Small business startup planning is time-consuming but indispensable to ensure business viability and longevity. Small business entrepreneurs should take the time to create a vision and startup plan to avoid future mistakes that might prove impossible to overcome.
Long-term small business success for startups is not a matter of luck or chance, but results from continuous business planning.
Formulating Your Small Business Idea
For some small business entrepreneurs formulating a business idea and imagining the opportunities comes naturally. But you need to be certain that the small business idea is a proper fit for your personality. In addition, you must be excited and passionate about your business idea to make it work.
Small business entrepreneurs are often so emotional about their business ideas that they can lose objectivity. Your small business idea must either be new and fulfill a need; or fill a void in the market; or solve a common everyday problem. Alternatively, your small business idea will allow you to deliver exiting products/services to the market faster and cheaper than the competition.
Generate (brainstorm) and write down your business ideas by thinking out of the box and not checking them. Review your list and select the best idea. Start online to research and evaluate your small business idea. Google similar products and services and the businesses that offer them. This quick examination of what is available, and competition helps you decide to continue research on your current business idea or change course.
Refine your small business idea base based on your research and adjust your business concept as required. If you as small business entrepreneur realize that the idea will not work, then choose another from your list and start over. Test your idea by conducting preliminary market research to see if there is a demand for your products/services. Thereafter identify your target market and determine whether people will pay for it and how much they may pay.
We recommend you nail down your business idea before starting with more in-dept strategic planning.
Plan Strategically at Startup
It is crucial that small business entrepreneurs plan strategically at startup. Within the strategic planning process, you decide the direction of your small business, broadly define goals/objectives, and set priorities. In addition, you save these goals and objectives into actions plans and align available resources to execute them. Visit our blog post “The Strategic Planning Process for Small Business Owners” – click here.
During the strategic planning process, you also develop small business statements such as vision, mission, and value statements. Also study our blog post “Basic Strategic Planning and Key Statements for Small Businesses” – click here.
Do Market Research
Market research for small businesses involves the systematic collection, analysis and interpretation of data and information on consumers, competitors, and the effectiveness of marketing initiatives. Read our blog post “Market Research for Small Businesses” – click here.
The target market of your small business is the pool of potential customers that will buy your products or services. It is the people/businesses who are a good fit (interested in and satisfied by) for your products or services. As a small business owner, you need to realize that you cannot satisfy all the needs of everyone but be everything to your most important customers.
The most successful small businesses have products or services that separate them from the competition. This affects your competitive landscape significantly and allows you to bring unique value to potential customers.
Small Business Analysis and Planning Tools
Several small business analysis and planning mechanisms are suitable at startup to evaluate you your business idea and viability. In addition, doing a PESTEL and SWOT analysis provide valuable information for your business plan.
The PESTEL framework deals with Political, Economic, Social, Technological, Environmental, and Legal factors within the external environment of your small business. These factors serve as a basis for analysis and influence the probability of your small businesses being successful and profitable. Read our blog post “PESTEL/PESTLE Analysis for Small Businesses” – click here.
A SWOT (strengths, weaknesses, opportunities, and threats) analysis forces you to ask questions that may be uncomfortable. But it provides the answers you need to decide if your startup will be successful. Visit our blog post “SWOT Analysis – A Useful Small Business Analysis and Planning Tool” – click here.
Prepare a Startup Business Plan
A startup business plan is a blueprint and roadmap that will guide you as a small business owner from the start-up phase through establishment and business growth. A startup business plan puts your small business in the strongest likely position to succeed in starting your business. In other words, a startup business plan reduces the chance that your business will fail, like so many others do. Read our blog post “7 Reasons Why a Business Plan is Important for Small Businesses” – click here.
What is the purpose and goals of your startup? What products and/or services you will provide? Who are you selling to? Who are competing with you? How would you manage and organize your small business? How will market and sell your products and/or services? What are your financial projections? All these questions and more are answered in a well-written business plan. Read our blog post “Outline of Business Plan for Small Businesses” – click here.
SMALL BUSINESS STARTUP FUNDING AND FINANCIALS
Determine Startup Funding Requirements and Evaluate Funding Sources
Determine Startup Funding Requirements
Depending on the type of small business, starting a small business does not necessarily require a lot of money. However, it is vital that you narrow down your startup costs since many startups fail because they run out of money before turning a profit. Startup capital must be able to cover startup costs and running costs until the business is profitable. It is a good idea to overestimate the startup capital you need since things will go wrong when running your small business.
Determining the funding to startup a small business requires a financial plan comprising an operating budget and a capital Budget. The operating budget concentrates on the day-to-day running of the small business and covers the initial startup costs. In addition, the working budget must cover the operating expenses from launch for at least a one-year period. Startup operating costs include raw material, supplies, salary, utility, legal, interests, licensing, and many other costs. A capital budget is used to plan major, long-term, cash-intensive projects like building new facilities and purchasing major equipment.
Evaluate Funding Sources for Startup
Many business startup funding options are available to small business owners. Read our blog “The 15 Funding Options for Small Businesses in Wilmington NC” – click here. It covers small business funding sources such as personal funding; friends and family; loans and line of credit (LOC); U.S. Small Business Administration (SBA); crowdfunding; grants; community development financial institutions (CDFIs); angel investors; venture capital; strategic partnerships; equipment financing and leasing; credit cards; and more.
Perform a Break-Even Analysis at Startup
What is a Break-Even Analysis?
A break-even analysis tells you when your sales revenue will cover the total cost of running your small business. In other words, how much you will need to sell before your startup can sustain itself. Small business owners can do a break-even analysis at any time, but it is most effective at startup or before you launch a new product/service. You can do a break-even analysis for a particular product/service or for the entire business.
A break-even analysis is an essential element of startup planning that helps small business owners decide whether your product or service idea make long-term sense. It can also be used to calculate the amount of funding you require for startup. In addition, potential investors want not only to know the return to expect on their investments, but also the point when they will realize this return. That is why a break-even analysis and is an essential part of any good business plan.
What is the Break-Even Point and How to Calculate the BEP?
The break-even point (BEP) is when your total sales revenue is equal to your total costs (fixed and variable costs). Meaning there is no loss or gain for your small business. If you earn revenue after the BEP your business is making a profit. Below the BEP your small business is operating at a loss.
The break-even point can be calculated as the number of units you will have to sell (units per month), or how much you will need to sell in dollars (dollars per month), to cover total costs.
Consider the following formulae:
- Contribution margin per unit = sales price per unit – variable cost per unit
- Break-even volume in units = fixed costs ÷ contribution margin per unit
- Break-even point in dollars = sales price per unit × break-even point in units
A service small business can calculate the breakeven point in the same way as manufacturers or retailers. So breakeven point for a service-related small business (spa) is how many service items (massages) it needs to sell so that the marginal profits on the service item (massage) is enough to cover your fixed costs.
Small businesses should aim to break even within the first year after launching your business. If the break-even analysis shows that it will take longer than a year, you need to develop your operating budget. Revisit your pricing and costs to increase margins and cut down the time to break even.
Financial Considerations at Small Business Startup
After you have secured initial financing, keep the financial management of your business a priority. Always stay on top of your finances, since it is the foundation for small business success. Every year thousands of potentially successful businesses fail because of poor financial management. Read our blog post “Business Failure Checklist for Small Business Owners” – click here and more specifically “Small business failure checklist topic 5: Financial problems.”
Establish Small Business Startup Financial Goals
The small business owner needs to set specific financial goals to achieve over a definite period. Financial goals at startup include goals to break even, increase sales, profitability, and share-owner’s return.
Profitability is the most basic financial goal of every small business and involves earning more revenue than you spend on operating expenses. Your financial goals and operating/capital budgets are interdependent. So, managing these budgets on a monthly, weekly, or even daily basis will help you achieve your financial goals.
Manage Your Cash Flow
Cash flow management is your small business’s ability to maintain sufficient operating capital to cover expenses. It is critical that small business owners do not overspend when starting a business. Everything you buy eats into your profits, and keeping expenses down is the key to longevity. Track and monitor income and spending to make sure you are staying on track. Sales, vendor/customer agreements, unexpected expenses, and more affect the cash flow of your small business. Therefore, your startup may need to get business operating financing such as a business line of credit.
Startup with an Accounting System
One of the most critical systems for a small business startup is an accounting system. The accounting system provides you the ability to generate basic financial reports such as cash-flow statements, income statements, balance sheets, and statements of owners’ equity. You can set up your accounting system yourself or hire an accountant or bookkeeper to do it.
One of the best accounting software programs for a small business in 2021 is QuickBooks Online. Intuit QuickBooks Online offers built-in tools to help small business owners to set up budgets and offers comprehensive financial reports and tax help. QuickBooks Online Payroll includes an auto payroll option that enables you to run payroll with no additional entries. Other software to look at is Xero, FreshBooks, QuickBooks Self-Employed, and Wave.
CHOOSE SMALL BUSINESS LOCATION & GET READY TO LAUNCH
Choose the Startup Location for Your Small Business
Finding the ideal location to start a small business successfully is very important to small business entrepreneurs. Many small business startups often settle for an economical location to cut down expenditure. However, being in a poor location has proof to be catastrophic for many small businesses.
Some business locations may also be more beneficial to your type of small business and the customers you are seeking to reach. You as small business entrepreneur must answer many relevant questions before deciding on a location, as reviewed in our blog post “13 Key Questions to Answer before Selecting a Small Business Location” – click here. This blog post provides a comprehensive checklist to help small business owners to find the ideal business location.
Build Your Small Business Team
Running a successful small business team requires leadership as pointed out in our blog post “The 6 Key Leadership Behaviors of Successful Small Business Owners” – click here. You need to determine your personnel needs, what team members (positions) you need, and how they will work together.
Starting a small business is challenging and why many entrepreneurs prefer to start their small business with a partner(s). These small business partners should contribute the skills and talents which you lack. In addition, it makes running a small business more exciting, less lonely, and two heads are better than one. But, read our blog post “5 Golden Rules to be a Good Small Business Partner” first before selecting business partner(s) – click here.
If you choose you to hire employees, read our “Road Map to Small Business Success” section on “Small Business Employee Recruitment” – click here. Avoid the human resource mistakes small business owners make by reading our blog post “6 Small Business HR Issues to Address Today” – click here.
Instead of hiring employees, you can outsource the work to independent contractors. If necessary, use an attorney to get your independent contractor agreement in place. Then search for and close a contract with the selected independent contractor(s).
A necessary part of your team is a small business mentor or coach (could be family or friends) that serves as your go-to resource for guidance, inspiration, and reassurance. Read the small business owner mentoring sections in our blog post “Small Business Owner Development” – click here.
Choose Vendors for Your Small Business Startup
A great vendor is a trusted business partner, not just a supplier. Having the wrong vendors disrupt small business processes and reduce business efficiencies, costing you both time and money. Not only is vendor nonperformance expensive, it can harm the reputation of your small business. You need to find reliable and flexibility vendors that are responsive; provide value for money; deliver quality products/services; within the timelines they promise. In selecting vendors for your startup, you should evaluate these criteria. Also check their online reviews, references, customer service, ethics, and professionalism. The simplest way to find vendors is to search online and visit their websites.
Create and Build Up Your Brand when Starting A Small Business
Before your small business starts selling, create and build up your brand. Try to establish a following of people (potential customers) that are interested in your products/services before launch. You need to decide on your unique selling proposition (USP). What is the one thing that makes your business better than the competition? This guides your branding and marketing decisions. Also, start to implement your “Marketing Plan” as discussed above and referenced in our blog post “Outline of a Business Plan for Small Businesses” – click here.
Develop a Logo for Your Small Business
A logo is a major part of your brand identity and should be consistent across all advertising platforms. Your logo differentiates you startup for the competition; help people easily identify your products/services; and cultivates brand loyalty.
Establish an Online Presence
Establishing a digital presence should be one of your top priorities at startup. Investing in building an online presence early is one of the smartest choices for any small business owner today. Read our blog post “Why You Need A Digital Presence for Your Small Business in 2021” – click here. An online presence is how your small business appears online as dealt with in our blog post “What is Your Digital Presence and Digital Initiatives?” – click here. These digital initiatives are addressed in your marketing plan and include a website, blogs, search engine optimization, social media, email marketing, and more.
Have a Website at Startup
Your small business needs a website before launching your startup. Most of your potential customers are active on the internet. Your website is more than an online brochure, it is an excellent way to interact with website visitors. Read our blog post on the “13 Good Reasons Why Your Small Business Need a Website” – click here.
Spread the Word About Your Startup Using Social Media
Spread the news about your new business using social media platforms such as LinkedIn, Facebook, Twitter, YouTube, and Google+. As a promotional tool, you can offer coupons and discounts to followers once you launch. The best social media platforms to use will depend on your target audience and should be part of your Marketing Plan.
In addition, to establishing an online presence, you can use other means to promote your launch such as radio, cable television, print media, brochures, flyers, business cards, trade shows, and networking.
Business-Customer Relationships At Startup
Small business customer relationship management (CRM) is a combination of business strategies, processes, and tools to build long-term relationships with customers. The objectives of customer relationship management are to sell more effectively; improve customer service; manage and improve customer relationships; and increase customer satisfaction. The complexity of CRM and the tools you will need, depends on your type of small business. A simple email marketing campaign is part CRM and could be effective at startup to inform potential customers of your new business and launch date.
Depending on your needs, CRM software is available to help you with sales forecasting, lead management, pipeline management, contact management, CRM analytics, workflow automation, quotes/proposal, sales personnel activity/performance management, social media monitoring, and more. Some of the best CRM Software for Small Business Owners include HubSpot CRM, Constant Contact, Drip (eCommerce), Salesforce, Zoho, and Freshsales.
To be continued.