December 5, 2020

7 Fundamentals of Starting Your Own Business

Starting a new business is a huge and scary step in life. Someone who decides to go it alone already has the odds stacked against them. According to Fundera, half of all small businesses fail after five years in operation. It might seem as though you’re taking a chance and the odds are against you, but this isn’t entirely true. You can stack the odds in your favor.

We’re not talking about corruption. Rather, a business owner can look at the realities surrounding their situation and improve it. A small business owner needs to consider things from several angles before making decisions. The choices that you implement today can have far-reaching consequences to your company years later.

Building a business starts with fundamentals. If you keep to the path and follow strong fundamentals, your chances of success will be higher. But what are those fundamental core values that you need to abide by? Different industries may have their own nuances, but a few characteristics are common to all successful businesses. In this article, I attempt to demonstrate the crucial steps to help you get started with your company and stack the odds so you have a better chance to survive.

1. Be methodical and calculate your risks.

As most small business owners will advise you, starting a business is taking a risk. A paper, “From Predators to Icons,” published by Cornell University states that successful entrepreneurs don’t take huge risks. Instead, they look at their choices and make logical, calculated decisions that will benefit them. The world is full of myths about business owners who set their entire life on a single, massive risk that worked out, but it’s seldom that way in reality.

The most successful business owners take their time and observe before making their decisions. Nothing about their movement is rash or uncertain. They weigh all their available choices logically and make measured decisions to gain them the most advantage. The businesses that stand the best chances of surviving into the future are those that don’t risk it all on a single “big score.” They play the long game and manage risk frugally.

2. Effective planning is critical.

By now, you’re probably tired of hearing about business plans, but having one helps you visualize your goals. A new business without a business plan is like a ship without a navigator. You don’t know where you’re going, so you’re not sure what’ll happen when you get there.

The most successful entrepreneurs know how to describe their success in terms that they understand. Don’t underestimate the power of putting your thoughts down on paper. It’s not mystical or magical, but it gives you focus and helps keep you grounded. The best small business owners spend a lot of time planning and analyzing. They look at trends and reports and tease nuanced interpretations out of the numbers that help them determine where they want to be and how to get there from where they are now.

3. Get the right people on board.

Successful small business owners are those that manage to make a profit from their companies. However, their success isn’t because they’re smart. As the Foundation for Economic Education mentions, there’s a closer correlation between personality and being rich than between intelligence and financial success. Successful entrepreneurs don’t just have good ideas. They hire people who can make those ideas into reality.

The people the business needs include promising and skillful sales representatives, marketing professionals and other areas that your particular company covers. A small business doesn’t have the luxury of wasting time hiring the wrong people. They need people who share a passion for the business and the industry as a whole.

4. Pinpoint your value proposition.

What is it that your business does for people? Whether you’re selling a product or a service, or merely offering consultancy, you’ll need to know why people want to buy your product. Without this information, you’ll be in the dark about what they want. From a sales and marketing perspective, this could be a disaster just waiting to unfold.

Your value proposition defines your business to the customer. You don’t sell a product to a person on the street by expounding its virtues. You first have to make them realize why they need that product. Maybe your service is more efficient than the competitors? Perhaps you offer something that’s 100% biodegradable and environmentally friendly? Defining your product’s uniqueness helps you find a market and make your company more attractive to your target audience. As a result, your product becomes easier to market.

5. Sort out financing early on.

Without a stable financing system, a business is likely to die. If you planned adequately (see Step 2), part of that planning process would have been figuring out your funding options. Are you going to work on a crowdfunding system? Are you in a state like Florida where starting a new Florida business is cheaper than other parts of the U.S.? Each of these approaches is different and requires the right foundation to succeed.

Will you pitch prospective investors? Investors and partners need you to outline the company’s road map. If you managed to do your planning, you have a general sketch of the business’s development stages. This detailed plan will help those investors and partners understand your vision for the company and encourage them to put money into your business.

6. Look for help.

Help can be both financial and consultancy. Connect with other members of your local chamber of commerce and find small business owners that succeeded in their industries. Learn from them and try to establish a rapport so they can advise you on your own decisions. Their demonstrated success is a good sign that they know what they’re doing.

Financially, you’ll be able to get help from incubators or accelerators that fund small business ideas. Once again, your detailed plan in Step 2 will be crucial to your success in securing these funds. Federal, regional and municipal governments also help out small business people, so they may also be worth asking about.

7. Play the long game.

Successful entrepreneurs shouldn’t focus on tomorrow. They need to look further down the road. The decisions you make in your first six months will define the business and its operation for years. Some industries have purchasing cycles that last several years. Knowing where you want the company to be in six months helps you fuel your enterprise.

Successful businesses rely on three legs: secured funding, smart innovation and a long-term vision. While you can develop these in any order you choose, you need to get them sorted out before your company is six months old.

All the development and growth of a business hinges on the success of these three pillars. Smart entrepreneurs know that these core elements can make or break their businesses. As such, much of their deliberation focuses on these factors.

If you want your business to succeed, you need to examine what you’re doing critically. Which legs are missing? How are you going to address that absence? Knowing how to fix the problem is only the first step. Implementing change takes a lot more effort.

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