There’s nothing more American than starting a business. It’s the kind of decision that creates value and has the potential to change your family tree forever. But starting a business and building a successful business are two different things.
Research reveals that 20 percent of small businesses fail in the first year. Approximately 30 percent flop by year two. By the five-year mark, only half of small businesses are still around. And ultimately, 7 of 10 businesses close up shop before their tenth anniversaries.
The business world is cutthroat – even for small operations. If you want to increase your chances of success, you need a plan. Here are some of the secrets seasoned business owners use to get ahead:
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Listen to Your Customers
Most entrepreneurs come up with an idea, start a business, and then try to find the right people to purchase their products. But this isn’t always the best methodology.
A more efficient and cost-effective model is to find a group of people, listen to what they want/need, and then build a business around this pain point. This allows you to focus your time and energy on adding value, not chasing down leads.
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Prepare a Long Runway
It’s going to take a lot longer than you think to make your business profitable. If you’re anticipating four months to profitability, assume that it’ll take at least a year. If you’re guessing it’ll take 18 months, go ahead and plan for at least two years. The longer your runway, the less likely it is that you’ll give up prematurely.
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Leverage Networks
When you’re small, you miss out on many of the advantages and perks that larger organizations have built into their models. However, certain networks can allow you to replicate this size through strategic partnerships.
Take a Group Purchasing Organization (GPO) as an example. It operates much like a Costco or Sam’s Club – allowing you to join in with other businesses to strengthen your buying power so that you can purchase products and services at lower “bulk” pricing.
Referral networks are also helpful. They give you the opportunity to network with other business owners and generate referral business.
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Secure a Line of Credit Now
Every small business owner needs a line of credit – and it’s best to secure one before you actually need it. This ensures you’re always ready and able to seize an opportunity. It can also help you down the road.
As Bank of America explains, “Maintaining a line of credit in good standing may help build your business credit rating and position you for better loan terms if you seek future financing. Many small business experts suggest that first-time applicants should start a modest line of credit and pay off the debt quickly as a way of building a credit profile.”
The best thing about a line of credit is that you don’t have to use it. It’s simply there when you need it. If nothing else, it provides peace of mind.
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Hire Talented People
A good idea will only take you so far. Talk to any successful small business owner about how they’ve achieved their results and they’ll be quick to point to the importance of people.
If there’s one thing you don’t want to cheap out on, it’s human capital. The right people have the ability to take a good idea and turn it into a great one, while the wrong people can quickly run a great idea into the ground.
Scrutinize each hire and don’t be afraid to pay for the right talent. A good hire will cost you, but it’ll produce a significant return on investment.
Find Fulfillment in the Grind
No matter how many fluffy articles you read promising to help you hack your way to massive results, the truth of the matter is that there are no shortcuts. If you want to build a legitimate business with a solid foundation and sustainable results, it’s going to take time. Rather than trying to circumvent the hurdles and speed bumps, learn what it takes to go over them. It might require more time (and a few extra bruises), but both you and the business will be better for it.
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