Thinking of starting or buying a business? It is not easy but what’s more difficult is making your business a successful one.
As reported by the Bureau of Labor Statistics, 50% of small businesses fail in the first four years. So what really contributes to increasing chances of entrepreneurial success?
Read on below to see our formulas for a successful small business. We hope these can help you and your business, or at least re-think your overall strategy.
Formula #1: The “Early Bird”
As an early entrant to a market, you may enjoy fast-growing revenues and profits for years or even decades without strong established competitors.
If you are creative and full of new ideas, this might be the formula that works for you. If you are alone in the market you can name your price and create long lasting profitability.
Make sure you price your product or service properly. Build in at least a 10% net profit margin and make sure you charge enough to pay yourself and your taxes.
Formula #2: Satisfy a Strong Market Demand
The higher the number of people who want your product, the better. Provide your product or service at a competitive price.
If you can create a product or service that is in high demand but low supply, you can drive up the market price and create a sustaining revenue stream. If others are successful in the industry, you may be as well. Do your market research first to gauge demand, and don't forget to run your financial projections at the market price to ensure a strong margin is achievable. Build in at least a 10% net profit margin and make sure you charge enough to pay yourself and your taxes.
Formula #3: Give Customers what They want
Communicate with your customers always - Ask them for feedback and make appropriate changes. This is not once but repeatedly.
Business that have success early, often lose sight of shifting needs of their customers. Keep a pulse on your customer's needs so you can stay ahead of any shifts in demands or changes in the market.
You can also find ways to expand your product offering by understanding what commonalities your customers have. Chances are if a handful of your customers would be interested in the product or service, other current customers will as well because they likely have common interests.
Marketing to and retaining current customers is much cheaper than acquiring new customers.
Formula #4: Move Ahead Carefully
Often when someone starts a business, they fund it solely with debt. Debt is not bad but it needs to be controlled and intentional. If you can, avoid relying on financing, borrowing, loans from friends and so on, and instead rely on your profitability for reinvestment in the business, you will grow in a more sustainable way.
Never let your net profit margin dip below 10%. This is your new breakeven. Test every move before you plunge into your business. Always make sure you charge enough to pay yourself and your taxes too!
Formula #5: Pick Your People Carefully
Lack of motivation, expertise or common vision can all contribute to a start-up’s undoing if you do not choose the right team to work with.
Culture within an organization is more important now than ever before. If you desire to attract A-players, culture, pay, and benefits is what these people are demanding. It is an employees market and you need to put the best version of your business forward.
People don't leave jobs they usually leave bad managers. Make sure your team isn't driving A-players away. Statistics show a new employee is an investment of on average $30,000. It is very costly to have turnover.
All in all, you can succeed if you simply work a little smarter and a little harder than your competitors.