According to The Small Business Association (SBA), only half of small start-up businesses in the US make it past the first five years of trading, making it a very challenging time for business owners. If you take the following steps however, you stand every chance of success and profitability during this testing period.
Take a business education course
Those who have some form of business education such as an MBA from Hult International Business School when they first start a business generally have a greater awareness of business priorities and how to attract investment. By taking a business degree, you will learn the following skills that will ensure the greatest chances of producing revenue.
Communication: On a business degree course you will master how to communicate your unique selling point to different audiences. You will focus on different types of marketing campaigns and how they affect consumer behaviour and response. During your course you will also learn how to present and give effective business presentations, lead meetings and draw up important business documents in a clear and concise manner.
Consumer sales: You will need a good understanding of this to enhance your business’ profitability. A business degree will enable you to investigate and learn different effective sales techniques that ideally suit the product or service you are selling. You’ll also have a clearer concept of how to gain potential leads, boosting your chances of making sales.
Financing: If your business is going to clear the five-year hurdle, you’ll need to master how to use your financial resources carefully to ensure that your accounts stay in a healthy shape. Being cost-effective will ensure that you stay on track with your financial projections.
Additional knowledge: There will be other subjects that you may not have learned had you started your business without taking a business education course. Examples include international business and global trade issues, how to be an entrepreneur, and marketing. Taking a business degree will give you a clear insight into how to set up your business from scratch and plan ahead for the future as it develops. It will also give you the opportunity to establish a strong network of business contacts that you might not have gained otherwise.
Carefully assess your market
Some entrepreneurs mistakenly think that customers will just go out and buy their products as soon as they are available on the market. Unfortunately, this isn’t always the case, and consumers become hard to win over. To avoid making this mistake, conduct thorough research of the market you intend to go into with your business. Create a product that has consumer demand, and validate your idea by investigating whether people will buy it. Conduct surveys and create research focus groups, use crowdfunding methods of finance and find investors for your new business before you make that all-important product and begin selling it.
Another mistake made by entrepreneurs is trying to continually oust the competition within the market they are aiming to trade. Realistically, competition in business is a good thing, and the act of successfully removing competitors is a rare occurrence. To make your small business more profitable in a competitive market, find ways to work with your competitors to increase your own brand awareness. Make friends rather than enemies within your sector. Stay focused on improving customer experience at all times rather than stealing customers from competitors – this will ensure that you stay focused and productive with a greater chance of success.
Be realistic on pricing
Consumers are very sensitive to pricing. Understand the nature of what customers want from a product. Some cheaper items may be favorable, but will the quality be seen as lacking? Will a luxury item with a hefty price tag put consumers off if it’s a brand they hardly know? Or will your company create the next new luxury must-have that people are very eager to buy? In order to keep your small business profitable, you will need to charge a price that feels like good value, whilst covering your costs and allowing a little extra to invest in additional development, customer experience and future market research. Getting this balancing act right is one of the most crucial routes to keeping your small business afloat.
Keep expenses low
Keeping your own business expenses at a manageable level will also maximize your chances of making a profit. Many entrepreneurs aim to keep their costs as low as possible until money from sales starts to flow in. Hire freelancers where you can to save money, avoid purchasing premises until you know you can realistically afford the rental and running costs and other overheads, and do not waste money on things that you ‘might’ need.
When it comes to giving yourself a paycheck, this can be one of the most difficult aspects of owning a start-up business. Be realistic and remember that most if not all of the money you make in the first five years should be reinvested back into your company. If you make this a priority, your chances of success will be greater.