A new business is typically an endeavor that comes with many challenges. Businesses are usually started by people, entrepreneurs, who have come across a great idea or provide an excellent service. This venture entails many working parts and has many risks/rewards. According to the Small Business Association (SBA) Office of Advocacy’s 2018 Frequently Asked Questions, eighty percent of small business will survive the first year and about half will survive beyond five years. Only about one third of businesses will survive to celebrate their ten year mark.
Taking a mathematical look at this, these numbers are quite discouraging and one must think why this is the case. In our view, there are five key things that have a tendency to get overlooked by new business owners. Those new business owners that focus on these five areas will have a higher level of long term success for their companies.
- Not having a plan comes in at number one and is the largest contributor to company failure. Would you ever think about driving cross country to a specific destination without a roadmap or Waze by your side? I think it would be extremely difficult to hop in the car and start driving West (we are located on the East coast) without any tools to guide your trip. Essentially, starting a business without a plan is the same thing. As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”
- Having a great advisory team in place is paramount to the success of your business. Your advisory team should include a CPA, attorney, banker, insurance advisor and financial advisor. This would be the bare minimum I would start with on your team. As the business grows in size and success there will be a need to add additional professionals to the team. This core group will be sufficient to ensure you get off to the right start, have people in place to turn to for advice and rely on those that have been successful helping people and companies like yours.
- You will want to have goals and metrics to benchmark your success against. These metrics may be very different from one company to the next and will change over time as well. The key is to have a direction in place to keep you on track while running the day-to-day of the business. You will want to make sure that you have SMART goals (Specific Measurable Attainable Relevant Time-Based). Using the SMART process will allow you to then break the goals down into bite size pieces to track your progress and success.
- Being impatient in a new business can be deadly and comes in as one of our biggest mistakes. New business owners have a tendency to think and want things to happen much more quickly than they do, everything takes time. Our optimism and vision will typically allow us to envision the business moving forward far more quickly than it will in reality, and that is fine. Optimism is typically a common trait found embedded in the entrepreneur. This is a new business and it will take time and effort to get the word out there about your product or service. A new business owner will need to be patient and have the ability to wait for their success to arrive.
- Keeping a cash safety net is key to the success of any business. There are always events that can take place while owning a business and they typically cost money. You will want to make sure that you have a sufficient emergency fund for these instances. Many new business owners find themselves with their back against the wall if a financial event takes place and they do not have a sufficient cash reserve. This may cause the owner to get a loan, borrow money from friends and family, utilize credit cards or even give away significant equity in their growing business for an insignificant amount of capital. Making sure that you have a cash reserve will be paramount to your success.
Beginning a new business is a rewarding experience and can be a life changing event. It is imperative to make sure that you are doing everything in your power to ensure your success. We have included what we believe are the top five mistakes of new business owners and this is by no means and exhaustive list. Having a handle on these items will put you in a position to be far more successful than if you had not addressed them. We encourage you to contact us if you are considering beginning a new business or are already in business, but have questions about where you may be overlooking important concerns. We would be more than happy to have a discussion to see if we can be of assistance and help you towards being one of the businesses that passes the ten year mark!
Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.