Few things are more exciting than launching your own business. It can be immensely rewarding and lucrative. So, it should come as no surprise that you’re not alone in trying to become your own boss. The United States was home to 30.7 million businesses in 2019.
However, entrepreneurship can be extremely challenging. The failure rate for new businesses is quite high, even with sound market research to back you up.
To improve your chances for success, certain areas need to take priority right from the get-go. By prioritizing these vital areas, you will be better positioned to make a lasting impact in your market.
Here are three things to keep in mind when you decide to start your own business.
1. A Source Of Funding
It shouldn’t come as much of a surprise that financial challenges are a major contributor to startup failure. According to research from CB Insights, 29% of startup failures are attributed to running out of cash, while an additional 8% cite not being able to obtain financing or interest from investors.
Many startup founders draw from their own personal savings to start their businesses. This can be particularly effective if your company doesn’t require much initial overhead. If you don’t have enough money to get started however, you’ll likely need to seek help from friends and family, a venture capital firm, angel investors or banks.
Be aware that some industries are more likely to obtain certain types of funding than others. For example, research has found that 36.2% of all venture capital investments go to software, while 17.3% go toward biotechnology. A mere 2.1% goes toward networking and equipment. Know what your potential funder is interested in so you can pitch appropriately.
In an interview with The New York Times, Suzanne Norris of Victress Capital notes, “Women tend to be more realistic, conservative, and authentic about what they are asking for when it comes to funding. Men think bigger and more boldly about their idea and conviction of where they’re going. Women undersell themselves and tend to downplay those things. When you’re betting on the person, you want to believe it’s big and it’s bold. Be boastful.”
2. Scalable Business Model
You must create a viable, scalable business model before you start your company. Your business model is your plan for turning a profit. It’s what you will do to gain customers and keep operating costs low. It evaluates competitors and the overall market to identify where you can make an impact.
Dr. Dan Schneider, a healthcare professional, entrepreneur and business consultant says, “A strong business model should be as specific as possible. You must identify buyer personas, establish and record the basic processes that keep your company running, develop your value proposition and find a way to generate demand for your products or services. You should also determine how you will scale in the future. All of this should be outlined in your initial business model.”
Detailed planning will guide you in daily decision-making and also make your business far more attractive to potential investors. It will help you identify strengths and weaknesses in your company, which could allow you to identify and address potential pitfalls you might otherwise overlook.
Business models should always be focused on the future. Make sure your plan is viable for both immediate and long-term growth so it can continue to serve your business well as you expand.
3. Watch Out For Burn Out
With so many critical business activities demanding your attention during the early days of a startup, it isn’t surprising that entrepreneurs get on the fast track to burn out.
In an interview with Business Optimizer, Spanx founder Sara Blakely warns, “I just layered the full-time job of being a mom on top of another full-time job at Spanx and then wondered why I was so exhausted. I started to notice changes in my health and couldn’t think as clearly. I feel like this happens to a lot of women. We just assume we will figure it out. There is no manual, and no way to truly prepare.”
In fact, extra work hours don’t actually help you be more productive. A recent Stanford study found that productivity drops off significantly after putting in 50 hours in a single week. After you hit 55 hours, you typically don’t accomplish anything significant.
The added stress that comes from putting so much focus on work also increases the risk of burnout. Whether the result of a lack of sleep or emotional stress, burnout is a very real threat that can steal your passion for your business and harm your overall well-being.
In reality, knowing when to take time away from your business will give you greater mental clarity and perform better when you are at work on your startup.
By focusing on the basic needs of your business (and your personal well-being), you will be far better positioned to set your startup up for success. As you master the essentials for getting your business up and running, you can ensure a greater likelihood of lasting revenue growth so you can live out the entrepreneurial dream.