Nearly every individual dreams of starting his or her own business. However, research has it that 20% of the newly started businesses close down in their 1st year, 30% of businesses close down in 2nd year, and 50% of businesses close down after 5th year in business. In fact, only 30% of business owners manage to survive in the 10th year in business.
It is evident that what motivates most people to start up a business is just their desire to start doing something. They have no idea of the amount of the money that is required, the knowledge and experience they need to gain, the competitions they need to overcome, and the extent they have to wait patiently until the business pays off in spades.
Starting a small business can be challenging especially considering the present economic situation across the globe, but it can also be fun especially when you are succeeding in the business. Why most businesses failed is because the owners fail to understand the underlying business success factors. Discover 10 things/factors to consider when starting a business. These factors can either make or mar your business. Again, neglecting to consider any of these factors when starting a small business can result in your business failure. This is because each of these factors has its own implications.
If you are actually ready to start a small business then read on to find out some important factors to consider when starting a business. These tips will help when considering a new business.
Here are 10 important factors to consider when starting a small business:
Knowledge about the Business
Your knowledge of a business is one important factor to consider when starting a business. I have always warned many people against the dangers of starting a business they do not have any knowledge of. You need to have experience in anything you set out to do especially when it involves business and making money.
Knowledge is power! You need to be informed. If you are not informed, you are deformed. The amount of information or knowledge you have about a particular business will determine the extent you will do well in that business. You can always do better in any business you have experience with. So, before starting that your dream small business considers getting experience and knowledge first.
Many businesses failed today because of a lack of knowledge. What you don’t know, you don’t know. Period! You can never give what you don’t have. You can work for someone who is in the same line of business for at least a year to acquire experience.
Passion for the Business
Passion is another important factor to consider when starting a small business. “Passion is what keeps you going when the going gets tough”- Warren Buffett. Doing business is a risk and sometimes, things don’t turn out the way we may have a plan, passion will help in keeping you going.
One of the major reasons why people jump from one business opportunity to another is because at the onset they started a business they are not passionate about. Before starting any business considers starting something you are passionate about.
Your Target Market
Another factor to consider when starting a small business is your target market. Your target market is your potential customers or clients who are going to patronize your business. So, you need to identify customers who are going to patronize your business when you start it. You can identify your potential customers during your market survey.
Established a Market segmentation of those potential customers or target market. The segment should be created based on consumers Income level Demands Interest Location
No matter how good business may seem to be; if you don’t have people who buy your product you are wasting your time. People can applaud your idea, but money in the hand is always better. Therefore, establish your target market before starting any small business.
The success of many businesses lies in the ability to choose the right business location. Choosing the right location for your small business is a matter of determining what is absolutely important to the success of the business while overlooking those that are not too important.
Some of the key factors to consider when choosing a business location are; The traffic around the location especially if your business will involve the selling of a product nearness to market nearness to raw material if it involves production availability of labor your competitors’ security of the location is it an area zone business? your key distributors.
The Economy of a country can have a serious impact on new business. It can either adversely affect a new business or positively affect it, no matter how small the business is. Understanding the role economy plays on the success of a newly emerging business is a vital factor one needs to consider before starting any business.
Many people go into small businesses they have the knowledge of, know their target market, choose the right location, and still fail. Why? Because they fail to consider how their economy will affect their business. So, it is always good to consider the economy before starting any business.
Some Economic factors that usually affect businesses include consumer confidence, employment, interest rates, and inflation. When you start to notice a positive turn in the economy, expect potential new customers. This is because these customers will be experiencing the benefits of better higher-paying jobs and as a result, they tend to start buying things they may have considered more of luxury before.
When you discover that the economy will have a positive impact on the business, you can then comfortably launch the new business.
While you may hear stories of people who started a business with little or no money, you will still hear of others who spend thousands of dollars to begin theirs. So, knowing the amount of capital you needed to start your own small business matters. Get the required capital ready before kicking off. Make sure you have ways to raise funds for small the business if your capital is not enough.
You can always discover the amount of money you required for starting a business during your market survey or feasibility study. A proper market analysis should always be done to avoid underestimation of your startup capital. Underestimation of your startup capital can jeopardize your success of starting a business.
Your Backup financial plan
Every business requires a backup financial plan. When you newly launch a business, the business may take some time to start paying off in spades. At the earlier stage of the business, you may need to put in more than you get. Financial backup helps you maintain and run the business until the business starts paying off in spades.
You should always the money you will fall on when there is a need for financing a component of your new business. Whereby there is no backup financial plan, the business is bound to crumble and it might be hard for you to regain back your feet.
Timing and Time Management
Time is a valuable business asset and it plays some key roles in the success of a business. The time the business is launched and the time allocated to running of the business matters. I hear many new business owners say they didn’t think the business would take as much time as it has in their lives. Some businesses may require more time than others.
Time is crucial to businesses that are seasonal. For a business that involves buying and selling, time is usually needed to handle customers and “public” business operations. Time is also needed in maintenance, taxes, and other items that come with running a business.
Competition is another factor to consider when starting a small business. You can imagine how many small businesses sweat over finding a location where there is no competition so as to enjoy some ‘absolute monopoly’ advantage. However, it does not always work fine that way. Sometimes you need to be close to your competitors so that you can sell to both your customers and to that of your competitors.
A well-established competitive business indicates that plenty of target customers will go round. So, being close to your competitors is always an added advantage if you can utilize the advantage. Profit in the business
These factors to consider when starting a small business will not be complete if I fail to say mention profit. One of the major goals of every business is to maximize profit. After mapping out your overhead expense and the actual cost of producing a product, you should comfortably have a profit.
So, consider taking a rough estimate of your profit before starting any business. Your profit will help to cover some potentially serious problems should they arise unexpectedly.
Doing business can be fun and exciting especially when all necessary factors militating against business success are taken into consideration.
Many business owners have had their businesses collapsed because they fail to put a lot of things in place before starting their businesses. Some of these important things or factors you need to consider before starting a business are what I have discussed above. Put them in consideration before starting your dream business and you will definitely succeed.