Thinking about starting a small business? Join the club – 97 percent of US employer firms are small businesses, a total of 27.9 million.1 What’s more, over 500,000 new businesses will open this month in the US.
While everyone starts with a dream and the best of intentions, 250,000 of these businesses will be toast in five years. An uncertain economy plays a role, for sure, and some businesses just tend to tank more than others. Then there are the businesses that are exposed to structural shifts, like travel agencies and office supply stores.
But opportunity abounds in growth areas like shared services, healthcare, construction, food and hospitality, technical consulting, and senior care. So, do your homework and hedge your bets by finding a suitable growth area (shared services, for example) and the type of business that has a higher chance of success (accounting and payroll management, for example). Then, once you’ve decided on the right business for you, these five steps can help you to realize your entrepreneurial dream.
ASSESS YOUR FINANCIAL PERSONALITY
Your attitudes toward life, money, and financial decision-making will influence your entrepreneurial success. Small business owners in America tend to be Ambitious Spenders, according to our research. They struggle with work/life balance, and while most hate to delay gratification, they still prioritize saving to grow their business and estate. Sound like you? Or are you more of a Day-to-Day Decision-Maker? Take our quiz to see what makes you tick financially so you can leverage your strengths and manage your stress-points.
PRIORITIZE CASH FLOW
Over 80 percent of small businesses fail because of negative cash flow. They don’t have enough money coming in at the right time to meet their financial obligations. Making healthy cash flow a top priority will help your business weather the ups and down. Put together a forecast of anticipated payables and receivables so you’re not blind-sided, set up and enforce realistic payment terms for customers, and work with suppliers to get favorable pricing and discounts.
PROTECT AGAINST COMMON RISKS
You can forecast cash flow, but you can’t forecast disaster. Small businesses need big protection. Consider different types of disability income and life insurance policies to help safeguard your business if you were unable to work due to illness or injury, or if a key employee passed away suddenly. Property insurance may be important, depending on your business. And liability insurance will help protect you from lawsuits.
GROW THE RIGHT CULTURE
Culture isn’t just for yogurt. Successful small-business owners build a collaborative workplace environment in which employees unite behind a shared mission, values, and behaviors. Learn how to delegate effectively to others within your business and build strong personal relationships with employees, vendors and customers. It’s all about creating a positive network, inside and outside the business, that enables everyone to perform at their best.
SEEK ADVICE FROM PROFESSIONALS
Owners of high growth small businesses are more likely to rely on advice from professionals and informal business support groups than do owners of companies with declining revenue, according to our research.2 In particular, successful entrepreneurs continuously work on developing their skills around strategic planning, money management, and hiring.
Starting a new business is exciting — and a huge commitment of your time and money. To discover more ways to make your dream a reality, talk with a financial representative.
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