How to Protect Your Business for the Future During Startup
You’ve got this idea in your head. It was planted years ago when you opened your first lemonade stand.
Ever since then you’ve been dreaming about opening your own restaurant or auto shop or daycare. In your mind eventually that small company will become a chain of companies that are spread all over the world.
That’s the dream. The problem with dreams is that they tend to fall apart rather rapidly if you are unprepared for the reality of being a business owner.
The Fate of Small Business Startups
All businesses tend to begin the same way. The new owner happily unlocks the doors. Customers trickle in. It’s an exciting experience. Then things start to go wrong. The customers aren’t returning. You can’t make the monthly payments on your loans. An inexperienced fry cook has set the kitchen on fire. By year 5 the business is no more than a memory and a statistic. Really, it shouldn’t be a surprise. According to University of Tennessee Research 55% of new businesses fail by the 5th year. That means new business owners need to work hard to ensure that they are one of the 45% that can make it to the five year mark. Here are a few methods to protect your business.
Location. Location. Location.
You need to be sure that you choose the right location. The business opening at the “wrong place at the wrong time” is one of the management mistakes that can lead to business failure. Thinking of the location as the place you drive to work each morning would be a mistake. The location can often contribute to the success or the failure of a business. You need to be aware of a few important factors before committing to a location.
Desire. This first one is important. You need to be sure that your businesses is fulfilling a need that the people in the area desire. If they do not desire it, you should consider choosing a different location or opening a different type of business.
Competition. While competition is healthy for the economy, it can be fatal for small businesses. If you place your business next to competition, you may never achieve the number of customers required to stay in business. Try to establish yourself in an area where all the adjacent business will complement your own.
Ease of Access. Your business should be easy for suppliers and customers to locate. Try not to establish your business in a hard to find corner of town. If your establishment is too hard to locate, you may not draw in enough customers.
There are of course other aspects of location that you should be concerned about. Make sure the neighborhood is safe, the government zoning regulation allows your business to function in the planned area, and that the location is big enough to compensate for any potential growth.
You and your employees will be the face of the company. It is important that you present the right image to the public. In order to do that you will need to set employment standards that you and your employees must uphold.
Personal Employment Standards. Opening a business is hard work. Many business owners before you have made mistake of underestimating the amount of time your business will require. It is important that you realize that the first few years will be filled with long hours of stressful work as you attempt to get the business off the ground. If you are unwilling to set insanely high personal standards for yourself, you might want to rethink opening a business.
Employee Employment Standards. Especially if you are opening a family business, you may let your employee standards slide. Don’t. They may be family, but that does not mean that poor service skills on their part will not drive away customers just as fast as unrelated employees. Remember that low employee standards could lead to lax or constantly late employees that you will need to compensate for. Remember you are employing them. You have the right to tell them how they must behave while in your shop.
The leading factor of business failure is due to money incompetence. Business owners that have no knowledge of financing, record keeping, pricing, and borrowing are the ones that go out of business before the five-year-mark. If you know that you are incapable of handling the finances of your business, you should consider hiring a college educated accountant.
With or without the help of an accountant, create a budget that details all of the expenses that will be required to open the business. In order to create this budget you may want to look at previous budgets for businesses in your particular business niche. Look into possible costs and expenses that those businesses paid.
Here are a few expenses to add into your budget:
- Construction expenses. While it is obvious that you will probably be paying to rent your building or location, you might not realize that many buildings require renovation before they are ready for businesses to use. Once you locate a building you would like to rent for your business, have a contractor access how much money you will be required to pay to make the building business ready.
- Insurance. While business insurance is not required, business insurance will protect you and your business from unforeseen disasters. Whether it’s an injury on the job, damage to the property, or an equipment breakdown, insurance will ensure that you do not suffer significant financial losses while fixing these problems. Due to the fact that the cost might vary depending on the plan you choose, you should check out Atlanta business insurance for the overall cost. You should not commit to an insurance plan until you are sure that your budget will allow it.
- Repaying Money Borrowed. You may need to borrow money to make your business a reality. You need to be sure that you will have the finances to pay back the loan. In order to keep your business safe, you should attempt to ensure that you will be able to make monthly payments on the loan even if business is not as healthy as you hoped.
While opening a small business can be exhilarating, a poorly planned business can lead to financial loss when the business fails. In order to prevent business failure you need to sure to plan every aspect of your business. With the proper planning, knowledge, dedication, and a bit of luck, you should be able to be one of the businesses that beats the odds.