Starting a business, no matter how small takes courage. Many people go into entrepreneurship for various reasons, some of which include being your own boss, freedom from a structured 9-5 job, making more money, pursuing a passion, or solving a pressing need. Regardless of the reason, no business is without risks.
In 2018, Forbes reported that about 80% of small businesses cross the one-year mark contrary to popular opinion. However, up to 51% of small businesses fail in their second year. One of the main reasons for this failure is that entrepreneurs do not take the time to thoroughly research the market.
While the idea of starting a business may seem tantalizing, it is important to stay objective by considering the following:
- Possess the Skills and Qualifications
It is simply not enough to have a great business idea. Ideas are usually different from reality. Before starting a business, ensure that you possess the required skills and qualifications to perform the fundamental work. For example, if you love fashion and choose to go into fashion design and tailoring as a business, ensure that you know how to design and sew clothes. This reduces your dependency on your employees and saves you money. A business stands a higher chance of succeeding when the owner is skilled in the operations involved.
- Test Your Business Assumptions
Acting on wrong assumptions is one of the fastest ways to cripple a business even before launching. Smart entrepreneurs know the value of conducting thorough market research during the initial stages of business development. Many businesses fail because there is no market need even though the business ideas are good.
- The Motivation for Starting the Business
While there are many reasons why people start a business, it is important to know what your true motivation is for starting the business. The pursuit of profit is the most common motivation. While there is nothing wrong with that, such business owners tend to give up easily when business is slow and profits are down. On the other hand, solution-driven entrepreneurs always stay motivated and end up making a lot more money than they anticipated.
- Hire or Partner Carefully
To successfully build a business, entrepreneurs need the support of the right team whether as employees or as partners. Avoid hiring friends and family unless they are the most qualified candidates for the job. Sometimes employees or partners can sabotage your business unknowingly or for selfish-reasons. To protect your business from any such surprises, consider acquiring a business insurance policy. Various covers to consider include public liability, employer’s liability, professional indemnity, and contents insurance. With the right policy package, you can rest assured your business is covered legally. Using a business insurance wizard can help you choose a policy to suit your individual circumstances.
The 5th most important consideration is funding. There are 3 ways to fund a business; using your savings, taking a loan, or bringing investors on board. Regardless of how much you believe in your start-up, avoid tapping into your savings to fund it. Instead, consider taking a low-interest loan or getting an investor who is resourceful (beyond money) and willing to accept only a little piece of the business.
Whether you are a novice entrepreneur or a veteran, always consider these 5 most important things when starting a business. Acquire the skills, conduct market research, recruit carefully and choose your source of funding wisely.