Over 627,000 new business ventures open each year. If you are preparing to be one of them, congratulations! Having your own company is something to be proud of.
At the same time, you want to take steps to ensure that your new business venture is successful. Many new business ventures fail before they hit the five-year mark. To avoid being one of them, you need the right preparation.
What do you need to do before you start your new company? Here are several ways to lay a foundation for success in your new business venture.
1. Review Your Financial Situation
Starting a new business venture takes money upfront, but it also requires investment if you want to keep moving forward. If you don’t have a solid financial plan before you begin, you can quickly run out of money and go out of business.
i. Your Credit Rating
First, take a look at your personal credit rating. Your credit score will significantly impact how easy it is for you to secure funding for your operation. If your credit rating isn’t healthy, you’ll want to take steps to repair your credit.
Review your credit reports and ensure that there aren’t any errors. If there are, fix them right away — that can boost your score significantly. Then, take a look at how much debt you are using, compared to your credit limits. Can you pay some accounts off to reduce your debt utilization?
Finally, make it a priority to make payments on time. Timely payments will help boost your credit score and reduce your debt balances.
ii. Consider Your Savings
Starting a new business venture may mean you’ll have little to no income for a period of time. In the beginning, all of the proceeds will go into paying business expenses and building your assets. Even if you plan on an income, the revenue can be uneven for a year or more.
As a result, it is important to make sure you have enough savings before launching your new business venture. You’ll need to pay your bills and keep your personal life in order while your new business finds solid footing.
Many people start a new business venture on the side of their full-time job, sometimes for several years, before they move into full-time entrepreneurship. This can be a great way to maintain financial stability while your company grows.
When you have your personal finances in good shape, you’ll be in a much better position to succeed as a business owner.
2. Decide on Your Business Structure
As you research new business venture ideas, think about what type of business structure you want. Are you looking at a partnership with another founder, or are you a solo entrepreneur? Will you need employees right away, or are you able to run the company alone?
You’ll also need to think about whether you’ll offer products or services. Products require manufacturing and partnerships with suppliers, while services can be provided with relatively little overhead.
When you create your company, be sure to talk to an accountant about the best legal structure — LLC, corporation, or something else — to protect your business and your personal finances.
3. Create a Strong Business Plan
South Park had a great episode that involved how not to create a business plan. In “Gnomes,” a three-phase business plan includes “Collect underpants,” then “?”, then, “Profit.”
While the cartoon is obviously satire, the point remains that many new business owners don’t put enough thought into how they are going to turn their business concept into profit. Simply making something, or offering a service, isn’t enough to win customers.
It is essential to have a written business plan that helps you think through the various steps in your business process. New business ventures with a plan grow 30 percent faster than those without one and are 129 percent more likely to grow beyond the initial startup phase.
Creating a business plan involves stating clearly who you serve and how, as well as putting forward your business goals. You’ll summarize your target market and identify steps in your customer’s journey from awareness to purchase.
You’ll also look into your competitors and describe how you plan to compete in your industry. Your marketing plan will be included, as will your business’s financial documents. Finally, you’ll explain your organizational structure and your funding needs.
This detailed plan will show you if your business is ready to launch or if your ideas need refining. You’ll be much clearer on how much capital you need and whether your business will do well against established competitors.
A strong business plan will also help you pitch your business to banks and investors if you need to raise money for your company.
4. Develop Your Management Skills
As a business owner, you might start out doing most tasks yourself, but that shouldn’t last long. The key is to hire people to work on their strengths while you manage the operation.
If you are going to succeed, you’ll need to develop your management skills. Some of this can be done before launch, but you’ll also need humility and patience to learn on the job. There are two types of management to focus on — people and projects.
For project management, you can study the tools and methods used in today’s companies. You’ll learn how to select a project team, layout objectives, and monitor results. This will help you as your company develops new products and services over time. Your project management skills will also help you keep your team on track during day-to-day operations.
The other aspect of management involves leading people. According to a recent survey of a global sample of 15,242 business managers, the ten most cited management skills include the following critical competencies:
- Building good working relationships with people at all levels.
- Prioritizing tasks effectively for yourself and your team.
- Considering many factors in decision-making.
- Knowing the key principles of good communication.
- Understanding the needs of different stakeholders and communicating with them appropriately.
- Bringing people together to solve problems.
- Developing new ideas to solve customers’ problems.
- Cultivating relationships with customers.
- Building trust within your team.
- Using emotional intelligence.
Developing these skills requires practice, but you can start today. No matter where you are or what kind of work you do, displaying leadership and excellent communication skills such as emotional intelligence, close listening, and diplomatic problem solving will improve your professional network and help you grow.
Are You Ready to Start a New Business Venture?
There is no way to start a new business venture without taking a risk, but you can do a lot of work upfront to improve your chances of success. When you understand your personal financial situation, you’ll be better prepared for the ups and downs of the journey.
Deciding on the proper business structure and creating a robust business plan will help you determine when you are ready to launch. It can also help you apply for funding and win the investment you need to grow.
Finally, you’ll want to ensure that your management skills are strong. From project management to managing people, having those skills in place will help you be a better leader and a more successful entrepreneur.
Are you ready to launch? If not, consider working on these foundational strategies today. When your company is successful, you’ll be glad you did!
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Ainsley Lawrence is a writer who loves to talk about good health, balanced life, and better living through technology. She is frequently lost in a good book.