5 Things to Consider Before Starting up a New Business

Thinking about failure when starting up a new business is said to be bad omen, but it is also common sense to consider why people fail in their entrepreneurship venture in order to be prepared for what is ahead, as well as, to avoid similar fate.

Statistics published by the Small Business administration (SBA) shows that seven out of ten of new businesses survive up to two years and up to 51% survive up to five years, a huge leap from previous research results which suggest that up to 50% of new businesses fail in their first 12 months and up to 95% fail within five years.

Albeit a better success rate from previous years, chances of failing as a new business is still relatively high, hence the need for full research and preparation before the plunge into the challenging area that is owning and managing a business. There are important factors to consider and address to ensure the success of a new venture.

Reasons for starting up a business. Different people have different reasons for wanting to go down the entrepreneurial route, such as to make more money, to free up more time for family, or to be in control. Though these are good reasons, they may not be motivational enough to get new business owners through the many challenges that come with the territory. Emotional motives such as being passionate about a particular cause and having strong believes are often key factors that keep business owners from simply ‘throwing in the towel’.

Being physically fit, backed up with determination drive, patience and a positive attitude are also qualities that are present in entrepreneurs who have succeeded.

Sufficient capital.  Underestimating the amount of capital needed to effectively pick up a business from the ground is another factor that has caused much new businesses deeply. It is important that the expectation of incoming revenue from sales are kept realistic as many new business owners have been blind sighted by the excitement and underestimate how much is really needed to operate a business. Cost of starting up a business, as well as running the business must be fully calculated before any action is taken.

Poor decisions or miss-management. Many reports of failed businesses have listed ‘poor management’ as a contributing factor.  Often, new business owners lack the experience, knowledge and expertise in certain keys areas of running a business such as finance, selling, production, people management etc. it is crucial to seek help in areas where knowledge and experience is limited in order to avoid failure.

It is tempting to ignore certain areas where knowledge level is low, but doing so can pull down the business slowly.

Business plan. Starting up a new business is a challenging and complex task that requires a lot of planning. Anyone who has had to organise any major event will understand that without thorough, strategic and methodical planning, fused action is simply setting up to fail. Creating a business plan is a prerequisite that must not be ignored. Starting with the business concept, a new business owner must work out plans on how the concept will set up, operated and delivered. The practicality of the business concept is also a key factor to consider. Is the idea realistic enough is there a need for my business and do I have a place in the market; are questions that should be asked.

Geographical location. Physical location of an entreprenuerial business plays a role in its level of success. Even a well-managed business will struggle if the location is not ideal. Before lurching to start off the business, a business owner should consider the following; the location of the target customers, accessibility, location of competitors, historical details and possible local incentive programs for new businesses.