The prospect of starting a new venture can be quite exciting. Opportunities seem boundless when your big idea is in its infancy, and it’s hard to stop yourself from rushing in headfirst with all that in front of you. Yet, you must.
Passion may be a wonderful (and necessary thing) for starting a business, but there’s a lot more legwork to do if you want your business to actually succeed. Nine out of ten start-ups fail. Yes, it’s a rather disheartening figure. The good news is that there are steps you can take that provide a leg up in beating that steep curve.
First things first though, before we let you in on what you need to make your venture succeed, let’s get a clearer image of the business you have in mind.
Questions To Ask Before Starting Your Own Business
Statistics sourced from CB Insights
With only 40% of new, small businesses turning a profit, it is important to go into your venture with enthusiasm, yes, but you need the knowledge to back it up, too. After all, 30% of those small businesses continue to lose money and prove unsustainable in the long run. But don’t fret just yet!
It takes a lot to overcome the difficulties of launching a new business, yes, but the rewards can be so infinitely worth it. Plus, it doesn’t take a lifetime to learn what it takes to build your business from the ground up the right way. For starters, here are five things you need to consider to properly strategize for any new business venture. (Preferably before you actually start it.)
Legal Supports
The most straightforward way to avoid any problems with your new business is to ensure that you have the right legal structure right out of the gate. The first step is deciding what type of legal entity best fits your business and needs. Whether your business should take the form of an LLC, S-Corp, C-Corp, etc. will impact your tax considerations substantially.
Whatever you do, do not start your business as a “sole proprietorship.” Doing so could put your personal assets at risk for the liabilities and debts of your business.
It’s best to get legal advice early on in the planning stage before the possibility of your business actually becoming an investable and scalable entity greatly rises. Look into federal and local laws and regulations beforehand and be sure you are 100% compliant.
If you start out with a legal structure that does not reflect the needs of your business, investors will see your venture as a hefty risk and won’t invest in it. Often without additional outside investment, ventures run out of money and are forced to close down, so don’t delay on this step. Get it set up correctly right away with goals and responsibilities clearly stated and legally enforceable.
You will also need to set up an employer identification number (EIN) for your business. You can get an EIN online through the IRS website. For a more in-depth breakdown of legal considerations, take a look at this list for start-ups from a law firm’s perspective.
Financial Considerations
82% of business failure is laid at the feet of cash flow problems.
As mentioned above, some of this failure stems from a lack of proper legal arrangements making new ventures look like a liability to potential investors. But that definitely isn’t the only cash-flow issue that can arise when a venture is launched without careful planning.
Without a well laid out financial plan and a research-based budget, the potential costs of launching your business may far exceed your original estimations. Do your homework to ensure that your start-up capital is enough to get your business off the ground before you can turn a profit.
Sources for Generating Capital as a New Business
You will also need to set up a bookkeeping and accounting system in order to track your finances. Without these systems it is impossible to accurately understand your business’s cash flow and ensure financial viability—not to mention tracking everything for tax-filing. Thankfully, there are several online software solutions to this end, such as QuickBooks, Zoho, FreshBooks, and Xero.
Marketing Must-Haves
One of the biggest challenges with a new venture is turning your proposed solution into a repeatable business model. To do this, you need to know your market and your target audience. You will need to assess—and regularly reassess—how the market is responding to your work.
Don’t rely on a one-and-done market research scheme or make uninformed decisions relying on leaps of faith. Get feedback from your early users and adjust your strategies over time as you become more familiar with what works—and what doesn’t. Marketing is an incredibly diverse field depending on the nature of your business, but the one thing that holds true for everyone is that you must understand your audience and respond accordingly.
“User experience is everything. It always has been, but it’s undervalued and underinvested in. If you don’t know user-centered design, study it. Hire people who know it. Obsess over it. Live and breathe it. Get your whole company on board.”
–Evan Williams, Co-Founder, Twitter
Necessary Business Protections
There are several layers of consideration under the protections category: contracts, insurance, data protection, background checks. If you have an in-person business, there may be even more!
For one thing, you will you need to give serious thought to the protection of your intellectual property (IP), which may include patents, copyrights, trademarks, service marks, trade secrets, confidentiality agreements, terms of service, and privacy policies. You will also need to ensure that your business is covered by all other types of appropriate insurance, which may differ depending on the nature of your work.
Questions to Ask When Deciding on Small Business Insurance
Which types of insurance apply to your business will depend on a lot of individual factors, and you don’t want to cut corners here. Not instilling the proper protections in the beginning can eat up a lot of time, money, and patience later on, so do your future self a favor.
11 Types of Business Insurance
Additional Resources
When considering resources for a given venture, people often only think of the money they have to throw into it. Though this definitely is a very necessary resource, it isn’t the only one that needs to be considered. These resources may include investors and starting capital, as well as the additional people involved and even the potential location for your big idea.
69% of U.S. entrepreneurs start their businesses at home to curb costs.
Another very important resource to keep in mind are your current or potential employees. In order to minimize expenses, you will probably want to start with a small team. If you’re not ready to take on full-time employees, a good option for filling in—especially for certain specialized skills—consider using freelancers or consultants. A fair amount of the work we do at KSR involves helping small businesses tackle their unique challenges by drawing from our a vast array of specializations combined in one unified team. We even manage independent contractors ourselves, so our clients can access the unique specializations they need without the administrative efforts involved in managing them. That said, if your business is up to the task you can seek out independent freelancers to manage yourself on websites like Freelancer.com, Guru.com, and Upwork.com.
To learn more about how KSR could help bring your idea to life, contact us today.
Another resource consideration is whether you will go forth with your venture alone or throw your hat in with another to co-found the business. Founding a venture with another person actually has a rather drastic effect on your chances of success with a 30% potential increase in money raised, 300% times the user growth, and a much smaller likelihood of premature scaling. Speaking from the perspective of a co-founded company, it can be really helpful to have someone to bounce ideas off of. Plus, it keeps you from getting too lonesome!
Throughout all of the unpredictable peaks and valleys in the landscape of a new business venture, you will never be able to account for every single problem. Your original plan might need to shift. Your company could require a pivot. The whole business might fail. But if you have a good team and a solid understanding of the process (and pitfalls) of a new venture, you can move forward regardless of the challenges.
The most important thing to remember is that your greatest resources will always be the connections you foster and the relationships forged along the way. Push through, carry on, and keep in mind that though you may not succeed in every venture, you certainly won’t if you never even try.
