6 Ways to Establish a New Business Successfully from the Get-Go and Avoid Going Broke

6 Ways to Establish a New Business Successfully from the Get-Go and Avoid Going Broke

Starting a business requires more than just having a good idea or product. Based on statistics from the BLS, around 20 percent of new businesses shut down within their initial two years of operation, while 45 percent fail within the first five years. The failure rate jumps to 65 percent in the first decade, leaving only 25 percent of new businesses surviving beyond the 15-year mark.

Be certain you understand and act on the following six steps; they will help ensure the success of your venture from the get-go and avoid becoming one of the failure statistics.

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1.    Research Your Target Market Thoroughly

No factual data is available on how many of the failed companies neglected to research their target market before launching their business. However, studies show the typical reasons for this happening include:

• Lack of funds,
• Time constraints, and
• Inaccurate assumptions about the demand for their product or service.

The result is a whopping $37 billion in wasted ad spend every year from marketing efforts that fail to engage their audience.

To establish your business successfully from the outset, you must identify who your ideal customers are and the best ways to reach them with your offering. Involve a mentor or business adviser familiar with your industry to help steer you in the right direction.

Gather and analyze data about your ideal customers’ demographic profiles, behaviors, and preferences. Segment your list into categories or groups then create personas of each group’s ideal customer against which you can model how you communicate with them.

2.    Analyze your Competitors Carefully

Very few businesses operate alone in a marketplace. Almost everyone has competitors, and it’s important to know who yours are and how their offering compares with yours. It is essential that you have a dramatic product difference, aka “Unique Selling Proposition” or USP. Failing to stand out makes you invisible and doomed to compete only on price because you are a commodity.

By conducting careful analysis, you can learn enough about your competition to understand how they function and where their customers come from. Find out how to:

• Track industry trends,
• Determine what their share of the market is,
• Understand the difference between their prices and yours,
• Benefit from their weaknesses, and
• Provide their customers with an alternative.

Knowing your competition intimately enables you to understand why companies fail and avoid making the same mistakes. On the other hand, knowing what competitors do well helps you determine how to differentiate your products and services to succeed in the market.

3.    Develop a Comprehensive Business Plan

Starting a new business can be an exciting and daunting process, but you’ll be much better prepared if you develop a comprehensive business plan right from the beginning. Sadly, 10 percent of potential business owners don’t intend to do so, and another 10 percent don’t think they need a plan.

Guess what…They’re wrong!

For several solid reasons, every start-up needs a business plan. It helps clarify the company's vision, mission, and goals, which are critical for creating a strong foundation and guiding decision-making. A business plan also helps to identify potential challenges and opportunities, allowing a company to develop strategies to address risks and capitalize on opportunities.

Most venture capitalists and banking institutions want to see a solid, written business plan before they’ll consider investing, so creating one improves your chances of getting the funding you need. A sound business plan also helps you focus on concrete objectives, while proving to outside parties that you’ve thought ahead.

That means a business plan that is built using the methods and processes that create a highly actionable “One Page Business Plan.” It is action oriented, based on reality and research into competitors, markets, regulations; and details your goals, yet is easy to grasp and execute. Though called a one-page plan, it does include more breakdowns by functional area as well as backup documentation. Its great value is that it does not fall into the thinking trap that equates weight with usefulness, aka “The Thud Effect.”

A qualified business coach can help you develop your one-page business plan and avoid the pitfalls new entrepreneurs fall victim to, such as refusing to see the risks in front of them. We call this “being in love with a toad because it’s yours.” And, while it might be a worthy sentiment, it’s not a practical way to begin business.

In addition, a business plan also provides a framework for regularly reviewing and measuring your start-up’s progress, allowing your management team to adjust strategies and make informed decisions based on data and market insights.

4.    Secure Start-Up Finance for the First Year

Thousands of people dream of starting their own businesses. According to U.S. Census Data, 5,044,748 new companies started up in 2022. The common denominator between them is that they need money to start up. Raising finance is critical for getting a new business off the ground and paving the way for longevity and future success.

What’s more, it’s not enough to simply secure capital for initial expenses, such as equipment, inventory, salaries, premises, and marketing collateral. Even if the business is profitable right from the start, it can take several months or even a year to break even, and the initial financing can be critical to surviving this period.

Further, securing start-up financing can help a business establish a good credit history, which is important for future financing needs. A strong credit score can make it easier to get loans and investments in the future and help your business negotiate better terms and rates.

Having sufficient start-up financing can give a business more flexibility, improve cash flow, and reduce the risk of running out of money. This allows your management to focus on building the company, developing products and services, and generating revenue, rather than worrying about financial constraints.

5.    Implement Robust Admin and IT Systems

New companies must implement robust admin and IT systems as early as possible, for several reasons.

• Effective systems help ensure efficient operations, reduce errors, and minimize delays in day-to-day activities. This can save you time and resources and allow your management team to focus on core business activities.
• Healthy internal processes help you to maintain accurate, up-to-date records, which are vital for financial management, compliance, and reporting. This can enable you to avoid legal and financial penalties and ensure that you are prepared for audits and reviews.
• Implementing sound admin practices establishes a culture of organization and accountability. This helps to set a positive tone for future growth and development, and creates a professional image to attract investors, customers, and partners.

Robust IT systems help a start-up manage data and information effectively, maintain cyber security and protect intellectual property assets. Without such systems in place, your new company could find it difficult to scale up smoothly as it grows.

6.    Get the Expertise You Need

For new and experienced company owners in need of a wide range of skills or a second expert evaluation of their idea, securing a business coach provides the opportunity to “rent” the expertise needed to fast-track business success.

Avoid the mistakes others make and spend your time growing the business instead of fixing problems. A good coach, advisor, or mentor works in sports, gymnastics, business, and golf. What about using one in your start-up?

If you want to learn more, email me: jnelson@focalpointcoaching.com