Starting a business is a huge decision and one that is definitely not made lightly. It requires a lot of research and planning. Now, don’t let the numbers bring you down, yes, the current statistics regarding startup success rate isn’t fantastic considering that a bit more than 50 percent of small businesses fail in the first four years, with the leading cause being incompetence. But this is definitely easily avoided with good planning and quality risk management.
In this article, we will cover several key challenges that you are bound to face during your business launching process, and we will provide you with the right knowledge to overcome them on your way to having a successful business.
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Even if you have a great business idea and concept, if you don’t have the right information when it comes to market research you might encounter a saturated environment that does not require the services your business is offering, and this will lead to fighting for customers which an SMB is not up for if it needs to against big brand names and well-developed businesses. The only way to fight your way to the top in an overly saturated market is to have something innovative and revolutionary to offer your target customer base. Still, it would be smart to see which industries have a high and which one a low startup success rate.
For example, beverage manufacturing has only a 0.8 percent net profit margin (NPM) which, in comparison to 18.4 percent NPM in accounting, tax preparation, bookkeeping, and payroll services, is substantially low. Having this type of insight into the statistics can help you be ready for what’s ahead when launching a business.
Having a clear business structure and goals
So now that you have done market research and found a place for your business in it it is time to develop the business structure to the smallest of details, so that you have a clear idea how you want to run your business.
First of all, you’ll need to decide whether you want it to be a partnership, a trust or a company. Each of these bears certain legal matters that you need to be aware of. The structure you choose will determine how your company will function in the future. With the globalization being what it is you can also have the freedom of opening your business anywhere in the world depending on your market research.
For example, for a lot of companies Hong Kong is one of the most alluring business markets, and more and more entrepreneurs are deciding to set up shop there. Now, you also need to have a clear idea on what your company goals are, and how can day shape the future success of your business endeavour. In time you will want to draw in investors, and you will need to have something to show for. After you have launched your company, you should consider obtaining ESG reporting in Hong Kong, so that you can see what your future investors will see and that way you can iron out any issues that come up and have your company in great shape.
Ah yes, the ever dreaded funding. So you have obtained all the necessary funding for your company to get off the ground. If you are like the 82% of small business owners you have used your personal savings and borrow money from family and friends, thus making the need to succeed that much bigger. But have you considered the operational cost for the first six months? Most startups don’t start earning money straight away so you need to have a buffer fund that will keep your business running until the finances start pouring in.
This is one of the biggest mistakes a lot of first-time entrepreneurs make. They prepare enough finances for launching their business but not for the day to day costs of doing business. So before you open the doors, you need to ensure you have done all the financial planning and predictions for the first two quarters of the upcoming fiscal year. Not to mention that you need at least a five-year financial projections considering that the average time to liquidity of an equity investment in a startup is now about five years.
These are the three key challenges of launching your own business. There are, of course, many many smaller ones that you are bound to face but having clearly defined short-term and long-term goals, along with well-laid-out financial plans. And even if you do everything ideally, there is still the possibility of the unexpected, for which a great entrepreneur always has a contingency plan for.