Almost half of all small businesses fail within the first two years! The number one reason for business failure is inadequate planning, and the second reason is due to lack of funding.
So before you rack up serious amounts of debt financing your business, you need to know if your business is going to do more than survive -- you should know if it will be able to thrive! Below you will find three topics you should consider as you begin to build your business.
(1) The idea.
Every great and successful business starts with an idea. This idea should provide a solution for a significant problem or address a need or a want within your target market. The most successful businesses either fix real or perceived problems, or they simply make your customers happy. If your business idea will improve someone’s life or way of living then you’ve got a great idea on your hands.
(2) The market.
Lack of market demand is the reason that 42% of small businesses fail, according to CB Insights. Therefore, you must make sure that there is a market that either wants or needs whatever it is you’re offering. Your chances of survival are better if there is already a market for your product or service in your area. It’s easier to fill a need than to create a new market from scratch. You should also consider whether your market can afford to buy your products or services. It won’t matter what you’re selling if the folks in your service area can’t afford to make a purchase from you. In addition, you should consider whether your target market will find value in what you’re offering. In other words, they may have the money to pay you, but if they don’t think your products or services are worth it then you won’t make the sale.
(3) The resources.
When it comes to bringing your idea to life, do you have all of the necessary resources available? Among other things, this includes knowledge, skillset, finances and labor. Do you know how to run a business? Do you know how to create the product or source affordable supplies? Do you have the money to keep the business alive before it turns a profit? “Statistics show that 29% of new businesses reportedly failed because of a lack of finances.” These are all things to consider when starting a business.
You should create a solid business plan as you research whether you have a viable business idea. A well researched business plan will address each of the previously listed items in much greater detail. However, I would encourage you to create a business plan and reference it as your business grows. Don’t just throw it into a cabinet and forget about it once you’ve received funding or moved into your first location. Your business plan should be a living, breathing guide that will help you stay on course and reach your business goals.
Also, if you don’t have the financial resources to fund your business idea, you will need to secure funding from either a financial institution or from your network of supporters. As I mentioned earlier, 29% of new businesses fail because of lack of funding. Therefore, in order to survive as a new business you should focus on having enough capital to fund the business until it is fully funded by customer orders and sales.
If finding financing is a problem, either because you don't have enough credit or equity, take time to look into other resources that may be available within your community such as with the Chamber of Commerce. For a list of financing options, review the “Finance Options for Bakery Businesses” post that I shared earlier in the year.
Conclusion
Finally, consider working with a mentor. Most entrepreneurs have great skills and abilities, but no one person does everything well. You know your strengths and weaknesses. So, connect with a mentor that can help you in your weaker areas. Learn from their experiences and allow them to guide you through the ups and downs of entrepreneurship. Don’t feel like you have to do this all on your own.
Cyd N. Mitchell
Business Blogger, Retail Bakers of America
Cydni N. Mitchell (aka Cyd) is a Bakery Consultant and the Sweet Business Coach behind Sweet Fest®. Based in Atlanta, GA, Sweet Fest® is an online company that supports the business needs of the Sweet Community in the areas of professional development, marketing, branding and web design.
By trade, Cyd is an accountant & financial analyst with a Masters from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. She is the Founder of the Sugar Coin Academy, an online business academy for business owners in the baking and sweets industry, and she is also the organizer of The Ultimate Sugar Show, Georgia’s Largest Annual Baking and Sweets Expo in Atlanta. She is also the Business Blogger for the Retail Bakers of America.
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