It’s not because you don’t have great ideas for a product or service. It’s not because you don’t have the drive or the dedication. And, it has nothing to do with your personality—chances are if you want to be a small business owner, you already have a strong and vibrant personality.
Aren’t drive and dedication, a good product or service and a great personality the building blocks of any business? Sure, they are all great elements to bring to your business but these are not the elements that will make you fail.
Let’s take a look at the five reasons you’ll fail and why:
Working Capital – You must have cash to invest into your business. Even further, you must have excess cash in the event you have slow revenues but still have expenses. Without working capital and solid financials, you won’t be able to get bank or government loans, nor will you be able to find investors or partners. Ideas are great but they don’t come with a money tree. You need to develop an opening balance sheet and then look at your assets, liabilities, and equity before you even attempt to fully begin your business.
Inventory Control – I have always said inventory can make or break a business. If you have too much on hand, that’s a large asset that is not making you money. Perform an ABC Analysis on your current inventory. Get rid of obsolescent inventory—even if you only get cents on the dollar. Learn how poor inventory control will eat up your working capital—fast.
Skipping the Advertising – The old saying, you must spend money to make money is true. If no one knows you even exist, you will be holding a going out of business sale in your first year. Learn to use some free advertising such as creating a blog and posting to it regularly. Google is taking over the world so consider using their Blogger feature. Put your face on YouTube! Both are easy to use. Once you can, set an advertising budget for online, print, TV and radio and stick to it.
The Ice Cream Fund – When cash starts rolling in it’s tempting to use business revenues to pay personal expenses or buy that dream toy you want like a boat, automobile or well, how to say this without insulting anyone—a mistress, or a mister for that matter! Not only is it illegal to use business cash for personal expenses—you’ll dry up the cash well quickly meaning you’ll have no money to pay expenses.
Schmooze Your Banker – When you choose the banking institution you want, make sure you meet the president of the bank. Invite them to lunch and get their email and personal cell phone number. Keep them up-to-date on your business happenings. Invite them to company events and fundraisers you sponsor. Why is your bank president so important? If you find yourself having a rainy day and payroll is tomorrow, bank presidents do have the authority to help you cover payroll as long as you have a solid plan on reimbursement—usually within two-three days. Without this relationship, your employees are walking home without a paycheck.
Becoming an entrepreneur is the American Dream and many are successful. Those who are not, are usually guilty of one or a combination of the above. Learn more about what young entrepreneurs need to know before you begin a business venture.
Need some start-up business advice? Drop me a comment, I’m here to help!
Image Credit: Stuart Miles/FreeDigitalPhotos.net