5 Things to Remember When Starting a Small Business

If you’ve never owned and operated a small business, you’ll quickly come to appreciate how much of a learning curve it is. Learn you will, but you can increase the chance that your business will succeed by being prepared in advance. There are five things to remember when starting a small business. Get those under control early, and you’ll shorten that learning curve and reach profitability faster.

1. Know Your Product or Service

One of the major reasons why new business ventures fail is because the owner is taking on a product or service that he or she knows little about. This can even happen if you buy an existing business. If you’re not an expert in that product or service, your business can easily fail while you’re still in the launch phase.

Pick a product or service that you know well, particularly one that you’re already doing in your current occupation. That will be your best chance of success.

But if you are moving into a business field that is completely new for you, you must learn all that you can before you even formally launch the business. That can involve studying available information, taking courses or getting necessary certifications.

It can also mean spending some time working in a business that’s already in that line. That will give you a first-hand look at both the challenges that you’ll see and the solutions that you’ll need, to succeed in that business.

2. Know Your Competition

One of the inherent challenges in starting any new business is that you will be competing against established entities. You’ll have to study the market carefully, and learn who both the successes and the also-rans are. By doing that, you can incorporate the strategies of your successful competitors into your own business, while avoiding the mistakes that are being made by others.

Never underestimate your competitors either. Since they are already in business, they will have a built-in advantage over you. You’re going to have to run faster and jump higher – figuratively speaking – if you want to stand out and carve out your niche in the market.

There are two primary ways that all businesses compete, and they’re even more important for an upstart.

The first is to compete on price. You can often draw customers and clients just by being lower-priced than your competition. You’ll have to determine if you can make a success of your business by being on the lower end of the price scale. It may even be a necessary evil while you are trying to get your business established.

The second way to compete is through quality. That means delivering a product or service that’s better than what the competition offers.

That can take a lot of forms. For example, you can offer the same service that everyone else is, but with something extra. In that way, your product or service would have to do whatever it does better, faster, or more efficiently than your competition. You will also have to be fully capable of conveying the message that your product is better. That of course, gets back to knowing your product or service.

3. Have Your Capital Sources Lined Up

Starting a new business venture is not something that is easy to do on a shoestring. There will be costs involved, whether it’s for the purchase of equipment or office space, launching a marketing plan, paying employees, contractors and vendors, purchasing inventory, or even to pay your living expenses during the first year of operations.

There are different ways that you can do this, but you need to have your sources lined up in advance.

The first most obvious source of capital is your liquid assets. This can include money that you have in checking and savings accounts, certificates of deposit, investment accounts, stocks, mutual funds, or even retirement plans.

If you need more capital, you may have to tap credit sources. If your financial situation is strong enough, you should also look into business loans. The sooner in the business process that you develop a business relationship with a bank, the greater the likelihood of success for your business.

Even if the business loan is small, your credit standing with the bank can grow as your business grows. That will enable you to have a ready source of capital for future expansion.

4. Open a Business Bank Account

It’s generally not possible to run a business out of a personal checking account. Not only do personal accounts not offer needed business services, but it also won’t look professional to your customers, vendors and business partners.

At a minimum, you should start a business checking account before you open your business. That will also help you to keep your business-related expenses segregated and organized. And that will make financial statement preparation and income tax filing much easier.

It’s also very likely that you will need a commercial account to process credit card payments. Very few businesses operate on cash anymore, and accepting checks comes with a lot of risks. Accepting credit card payments is fast, easy, and very low risk. Also, it attracts a larger number of customers, since most people routinely pay by credit card.

5. Have a Marketing Plan in Place

Boiled down to its most basic form, this is about getting the message out. And the message is that you are open for business and that you have a valuable product or service to offer.

This gets back to knowing both your product or service and your competition. In that way, you should be able to easily isolate the advantages that your business offers while exploiting the weaknesses of your competitors, again differentiate yourself.

It’ll take a good marketing plan to do that. And in the early going, you’ll want to do that as inexpensively as possible. In today’s world, that means developing a high-quality website, as well as creating an effective presence on the social media. A website these days serves two key purposes: it validates you as a legitimate business and it provides useful information for clients or prospects. With the ease of finding information in this digital world, customers typically do 65% pf their research before calling you or walking in the door, and your website is a key component of that.

Next, you’ll need to drive traffic to your site, which may include social media and various components of paid advertising. If you’re not familiar with web marketing, you may need to get professional help in this area. That’s another important reason why you’ll need to have your capital sources lined up, as discussed above. Marketing costs money!

You may also need to be prepared to have special offers. That could mean offering your higher quality product or service at a discount price during the early going. You could also offer your product or service in a package, such as buy two, get one free, or something similar. Once again, the idea is to draw attention and interest toward your business.

There’s no magic bullet here. Study what your more successful competitors are doing with marketing, and then implement your plan with your unique spin.

More traditional methods of advertising, like newspaper ads, radio and TV commercials, or billboards can be expensive. And they don’t always work either. You’ll have to decide what types of marketing will be most effective for your type of business and then strike a balance between cost and customer reach.

There’s a long learning curve for anyone opening any business. But if you concentrate on these five areas, you can launch your business on a fast-track.

 

Monroe Bank & Trust does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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