During the first quarter of 2022, over 300,000 new businesses were started. Statistics show that around 20 percent of new businesses fail within the first year. Many of these failures are due to lack of preparation. Having a plan and working that plan can help improve your chances of starting a business and being successful.
Thoroughly researching the industry you wish to enter, understanding the market, barriers to entry, and your competition is a great place to start. Certainly, most people looking to start a business will do so in an industry where they already have significant skills and experience. They feel that they have something different to offer but before they jump into a new business enterprise, they should also understand the market further. Things may appear one way as you work within a company but when you look at the market from an external perspective, it may not be as appealing. Barriers to entry such as capital investments and regulation should also factor into your research. Then, of course, there is the issue of the competition. Do you really know your competition? Do you have a competitive advantage over them? How will you manage and market that to put you on the path to success?
Your Product or Service
Once you have thought these items through, you then need to figure out how you will be able to produce the product or provide the service that you will be selling. Who will be working for you? Will you be taking on partners who possess skills that complement yours or perhaps you don’t have yourself? Selecting the right people can fill in any gap in skills.
Then you will need to consider any equipment that you will need. There will be office equipment, factory machinery (if you are manufacturing a product), perhaps a vehicle. How much will this equipment cost and how will you pay for it?
Finances and Accounting Systems
Be sure to prepare a preliminary budget so that you can have an idea as to what your cash needs will be and when you expect them to appear. You don’t want to be surprised by an unexpected cash outlay.
You will also need to select accounting software such as QuickBooks Online, Xero, or Wave to name just a few. Running a business involves getting paid by your customers, paying vendors, obtaining insurance policies and a slew of other items. Getting your accounting software set up properly, customizing your Chart of Accounts, adding your Products and Services, customizing invoices, and setting up convenient ways for your customers to pay all needs to be given careful consideration. Monitoring your accounts receivable is crucial to ensuring a consistent flow of cash into your business and monitoring accounts payable will keep you on good terms with suppliers. If you don’t have a background in accounting, consider taking an online course such as the one we offer, Bookkeeping Fundamentals.
Is Your Business Idea Feasible?
Once you have given careful consideration and taken into account all of the costs involved in starting and operating your business for the first several months you need to decide how you will fund your new business. This will require you to either bootstrap your business or seek a loan. The more prepared you are, the better your chances of securing a loan. Don’t leave anything to chance. Take the time to research as much as you can so that you can show potential lenders that you have considered the risks and you have detailed plans on how you will manage those risks and still earn a decent profit.
I encourage you to seek out legal and accounting professionals that can help you answer some of these questions. It is better to find out now if your business idea is feasible than to wait until after you have put the “Open” sign in the window to find out maybe this isn’t the right decision.
Starting a business is a great feeling but you need to do your research to help ensure your success. Working on the areas discussed here can help you decide whether your new business is feasible before you shell out a lot of money. Remember, spending a bit of money asking experts is usually money well spent. Good luck to you.
If you are in need of help getting your bookkeeping set up, Cape May Counting House can help. Please click here for more information about our services.