Whether you are a recent college graduate, a middle-aged person seeking a new career opportunity, or a recently retired senior looking for your next adventure, it’s a great time to start your own small business. This is thanks in large part to the recovery of the economy, the availability of capital, and the number of helpful and supportive small business organizations out there. The biggest challenge for most people is deciding what type of business to start and how to begin.
Some stats on small businesses
According to Dun & Bradstreet, businesses with fewer than 20 employees have only a 37% chance of surviving for four years and only a 9% chance of surviving for 10 years. Restaurants only have a 20% chance of surviving 2 years. Of these failed businesses, only 10% of them close involuntarily due to bankruptcy—the remaining 90% close because the business was not successful, did not provide the level of income desired, or was too much work for the owner.
Microbusinesses (firms with 1 to 9 employees) are the most common kind of company in the United States, but they account for a relatively small share of employment. America’s 3.7 million microbusinesses made up 75.3% of all private-sector employers in 2013, and they provided 10.8 percent of private-sector jobs.
As a new potential business owner, you have the advantage of getting it right the first time with the four Ms common to all businesses, regardless of size: Model, Management, Marketing, and Money.
To help determine what kind of business would be best for you, ask yourself these questions:
Q: Do you have a hobby or personal interest that could be turned into a home-based business?
Many new businesses are based on an entrepreneur’s personal interests or situation. For example, there are a number of new home-based businesses around gluten-free foods, many of which were started by entrepreneurs who themselves are gluten sensitive. Etsy is a site for entrepreneurs who enjoy making things and have started craft-type businesses. And did you realize that eBay was started because of the founder’s passion for collecting Pez candy dispensers?
Q: Do you believe in a product or service that you might like to sell?
Passion is contagious. If you are passionate about your products or services as compared to just wanting to “sell” a product or service, that passion will come through to the customer.
Q: Who or what do you care about the most?
Many people are involved in nonprofit organizations that serve certain segments of the population, and many product and service offerings come from the nonprofit industry. For instance, a lot of the recently established commercial home healthcare services serving the rapidly growing “senior at home” industry started with the concept of Meals on Wheels America. Or if you like animals and volunteer at the local SPCA, consider the “doggie hotel” pet care industry, a rapidly growing segment providing higher-quality care for vacationing pet owners.
Q: What’s on your resume that is sellable?
Look first to what you have done in the past and consider the “adjacency” to that career as a new business. For example, if you were a cook in a restaurant or a frustrated home chef, consider food truck microfranchising (which is the premise of the recent film Chef).
Although there are millions of sole proprietor entrepreneurs out there, at some point, in order to grow your business, you will have to hire employees. You cannot be the founder, CEO, CFO, salesperson, and marketer forever.
As good as you think you might be at everything, there are people out there who can bring their specialized expertise to your business to help it grow. Choose your employees carefully and focus on building a positive company culture that instills a sense of commitment in your staff and retains them.
Marketing is critical for any new business. Unless you have a killer location, how will customers know you exist? Focus on a marketing niche and a specific type of customer. Consider new ways of growing the business, such as using social network marketing to draw traffic to your website and raise brand awareness (start with the biggest ones first: Facebook, LinkedIn, and Twitter). This form of marketing is essentially free and can help you to market your business for very little cost.
Small businesses are a very diverse group (ranging from zero to 499 employees), and as a result their financing needs vary greatly. But to start any business, you will need to raise capital, manage that cash, and budget for costs.
The most common sources of startup dollars come from the personal savings of the founder and/or their relatives. In general, startups tend to depend on both the founder’s own funds along with bank credit (in about equal measure).
Two studies give quite different answers to the question of how much startup capital a business needs: The Wells Fargo Small Business Index study found that the average small business owner uses about $10,000 as startup capital. The Kauffman Firm Survey, which consists mostly of high-tech firms, found that startup capital averages $80,000 a year, and it consists of debt and equity. However, about one-third of new non-employer firms and 12% of employer firms use no startup capital at all, according to the Small Business Administration.
New business opportunities are being created every day as a result of consumer trends and demands, technological advances, and economic changes. No matter what age you are, there has never been a better time to start a business than right now.
This article was written by Michael Evans from Forbes and was legally licensed through the NewsCred publisher network.