So, You’re Starting a Business? What’s Next?

"That might work!!!"

Many small businesses entrepreneurs have great ideas and the energy to reach out and start, but what comes next? Most small businesses owners report issues with finances, difficulties in reaching customers, obtaining workable contracts, operational hurdles like managing cash flow, securing funding, hiring – retaining – and managing employees, and managing risk like regulatory changes, inflation or unanticipated competition… It can be overwhelming.

Here's the bad news: Approximately 20% of small business start-ups fail in the first year. Over time the rate increases with about 50% failing within 5 years and 66% failing within 10 years. The reasons why small businesses fail are many, but if they are examined carefully, those struggles listed above are at the heart of the problem.

On the flip side, there’s good news too: Approximately 60% of our economy and economic growth is attributable to small or closely-held businesses. For the vast majority of multi-millionaires, it was their business or businesses that generated that wealth. Relatively few rose to financial independence solely through employment and or investing. It’s really the small businesses that drive our economy.

What's our focus?

So, how to get there? How to navigate the problems that could “tank” your business?

At the outset, it is imperative to understand the sole driver of a successful business. It’s cash flow. If there isn’t enough revenue, the business fails. End. Dot. Done. In a nutshell, this issue is secured using two specific focuses:

1.      Generate Revenue; and

2.      Minimize Expenses.

Seems simple, right? Well, it’s not so easy as all that. Generating revenue requires a deliverable product or service or combination of these, and it also requires customers. This combination can take on any number of combinations or forms. A renter is a customer and so is a person utilizing your proprietary computer application or a person needing accounting help or lawn care. Getting customers to hire you is one thing and getting paid is another. You will have to figure out how to manage both sides of the equation as well as manage how to maintain your business reputation and customer satisfaction or your sustainability will be in jeopardy.

Keep Track! Plan and Account!

Minimizing expenses also might seem straightforward, but is it? You will require products and services to run your business and meet the expectations of your customers. Managing the remarkable array of service will be a constant struggle. Those business services will include: insurance, banking, payment services, debt service, telecommunications, utilities, website(s), social media, staff or employees, bookkeeping, accounting, legal, advertising, office or warehouse space, transportation, vendors, supplies, etc., etc. It can pile up rapidly, and expansion can stress this area much more than would otherwise be expected.

In reality, it’s a constant balancing act that can easily be disrupted when competition, unrealized risk or other economic factors intervene like inflation or a regulation that directly impacts your business.

On the other hand, if you are taking steps to insulate yourself from these fluctuations and unanticipated ups and downs, you can be successful. Focus on your revenue and reducing your overhead. Build a good team and go forward with a plan. Put in the work. Success comes at a price so be prepared to pay it.

Curry Andrews, Attorney