Did you know that 50% of small businesses fail in the first year and that 95% fail within the first 5 years? You may be thinking, “But opening a comic book store with an espresso bar that also serves tacos has been my lifelong dream!” It’s great that you have identified your passion or perhaps a collaboration of your passions. However, that doesn’t always mean that it will be profitable. How can you be sure that your dream becomes the successful business you’re striving for? Here are just a few examples of what you need to do different than the failing 95%.
Know the Industry
The type of business you open can have a profound effect on whether you fail or succeed. Avoid endeavors that have little promise of being profitable. For example, if ten different Mexican restaurants have opened and closed in the same neighborhood, then it’s likely that the next Mexican restaurant will also close. Unfortunately, no matter how much you love something or how good you are at it, it doesn’t mean it’s in demand or that your community has the same enthusiasm about it. That is why it’s so important to research the demand of your proposed product. People won’t buy what they don’t want. This shows that knowing your customers is of equal importance.
Too much overhead too soon is a recipe for failure. Don’t overgeneralize. Keep is simple. Pick something that you’re good at and that sells and start there. If you start out too big you will wear yourself out. You may even be hasty about hiring a manager that may or may not have the skills needed, simply because you can’t keep up on everything by yourself. The truth is, you will need help but you need to be picky about who you hire and when. Of course, slowly and steadily your business will grow and it will be time to make these changes. At the start it’s best to stay simple.
Are You Ready?
Make sure before starting any business that you’ve done your research. You should also have the cash you will need to survive on for the first few months that you won’t be making a profit. The important thing is to be a doer and not just a dreamer. Apply these tips and in five years you’ll be in that fortunate 5%.