The United States is in the midst of a surge in small business establishments. About 1.7 million people applied to start a new business in 2022, according to an analysis by the Economic Innovation Group's U.S. Census Bureau. This is an increase of more than 28% compared to pre-pandemic levels in 2019.
The number of new business applications, including businesses that are unlikely to employ other people, was 5.1 million.
Two years ago, I published a book with Seth Levine. new builders, which focuses on the next generation of American executives. They are more likely to be women and people of color, and more likely to own businesses in the service sector, retail, and restaurants. Today's small business owners are overcoming their biggest obstacles: lack of access to capital and an uneven competitive environment dominated by large corporations. But today it has become cheaper to start a business. The main reason is that you can test your ideas online for thousands of dollars on his platform. And there are new sources of funding and aid available to help.
Here are seven lessons. new builders and other small business owners learn how to succeed once they get off the ground.
It's okay to start small, but have a vision to grow bigger.
Perhaps your company needs to grow by revenue. Less than 15% of businesses can start their business with bank loans or venture capital. This means you need to start small and price your products at a high enough level so that any money left over can be reinvested into your business. By definition, this means starting small and perhaps using your savings to start your business. However, have a vision for what your company will look like as it grows. If you think that in 3 to 5 years you will be at the helm of a company with multiple locations, for example, 5 employees or 10 employees, the possibility of creating a plan to get there. will be higher.
Don't focus all your efforts on one idea. Also, don't put everything into your business.
There's a pervasive myth in the business world that success is tied to persistence, or “giving it your all.” You need to be persistent, but a more valuable quality is the ability to change direction. If the idea doesn't work, move on. One of the business owners we interviewed was Fred Sachs, an entrepreneur from Alexandria, Virginia, who started two successful companies, a hardware company and a lumber company, and in his later years supplied restaurants and bakeries. They were producing organic flour.
“Sometimes you have to create a solution to a particular problem, and other times you need to innovate to get around a particular hurdle,” Sachs said. “And if we're not going to address the problem, we're going to be left behind. We have to keep changing.”
One tip if you need to pivot within your business or with new ideas: If you're about to commit suicide from overwork. “If you're working more than 8, 10, or 12 hours and still feel like you need more time to get the job done, something isn't working and it's time to take a step back and reevaluate.” Isaac Collins, who owns three Yogurtini franchises in Kansas City, told me in an email. “If you focus on being efficient and not just busy, you will spend much less time working.”
don't borrow money personally
Your first idea might be to get a bank loan. However, obtaining a business bank loan is surprisingly difficult. This is because banks are unlikely to approve loans to businesses until they can show they have sufficient revenue to make the payments (community development financial institutions, which are nonprofits, may find it a little easier). be) ).
Entrepreneurs sometimes borrow against personal assets. But in today's rapidly changing economy, taking out mortgage or credit card debt exposes you to significant financial risk. Don't borrow money to start your business. Before borrowing, check whether your company is a going concern with customers, revenue, and profits. Test your idea, bootstrap it, and look for other funding sources.
Check out free information
For a fee, influencers and other types of marketers offer insights and training classes. But first, take a look at the information available for free.
SCORE (Service Corps of Retired Executives) is one great resource.
Verizon and the Women's Business Centers Association offer a free program to help small business owners learn more about digital tools.
Also, look at the resources available at your local university.
Rebecca Brady, founder of Buffalo, New York-based Top Seeds Inc., started her cracker company after attending Buffalo State University's Small Business Development Center to learn the basics of how to start a food business. She invested her $5,000 of her own money, rented space in her shared kitchen, and began selling at her farmers' market. This year, just after her fourth year, she is aiming for her $4.5 million in earnings. Her advice?
“Don't waste your energy looking at what your competitors are doing or looking back. Keep your eyes on the goal in front of you and focus on who you want to be.”
The most important guide is the customer
When you're tempted to hang on to your great idea, remember that entrepreneurship is often a service industry. You are there to make the lives of your clients and customers easier and better. If they aren't buying what you're selling, it's time to change.
“You may think you're the boss, but the real bosses are your employees and your customers. If you strive to serve each of them as well as possible, you'll stay ahead of the curve and set yourself apart from your competitors. We can stay ahead of the curve,” Collins said.
And as a result, Collins says: Focus on learning about specific industries and specific businesses. That might mean finding a coach or mentor with a similar focus, or taking a skills class. “Motivation and general business knowledge alone are limited. Learning specific skills to solve the problems you currently face is the best way to go.”
Don't waste your money on marketing
In the early stages of your business, one of the best uses of your time and money will be testing the market as you fine-tune your product or service. But don't confuse market testing with the marketing that comes later.
Find the cheapest way possible to get your products or services in front of potential customers. If you're using big tech platforms like Amazon, Etsy, or Instagram to test your products, remember that they usually charge hidden fees and tend to increase prices without warning. . You can also consider other options to reach potential customers. Many of the leading technology platforms are facing new competition from smaller, niche or locally owned versions.
rear Once you develop a profitable business model, you can invest money in marketing.
Become a bookkeeping professional
• Open a bank account in the company's name rather than your own name.
• Hire a bookkeeper. Unless you like and are talented at keeping track of your finances, you're better off finding a bookkeeper or using the online version for a few hundred dollars a month. You may not be able to do it right away, but please do it as soon as possible. It will also be useful when paying taxes.
• Spend at least one day (or week) a month on paperwork. Reconfirm bank accounts, pay bills, issue invoices, and more.
Is there a local version of DoorDash in your area? Or is there a retail platform selling goods and services in your city?
Similarly, companies that provide services such as accounting platforms and finance to small and medium-sized businesses
Find out what financing options are available
The cheapest and best way to get started is with your own savings, friends, and family funds. Community Development Financial Institutions (Find financial institutions in your area here. Nonprofit financial institutions can also provide small loans and working capital. Bank loans are available for businesses that are already up and running. , used when revenues and profits can be shown.The most likely to be approved is probably Nike founder Phil Knight's biography of Nike founder Phil Knight's entrepreneurial journey, Shoe Dog. In it, he details the benefits of being able to walk across the street and talk to someone face-to-face: Ask your banker for credit.
Many other entrepreneurs have similar stories to tell.
Venture capital only funds fast-growing companies, typically those whose business models show millions of dollars in revenue in the first five years. On top of that, venture capital is usually only available to the well-connected. Don't waste your time unless you have an “in” or technology-driven business model.
If you want to develop a venture-backable model, look to accelerators like TechStars, Camelback Ventures, Y Combinator, and Ad Astra Ventures to help you prepare your pitch to venture capitalists. EforAll is an incubator that helps entrepreneurs connect with banks and other financial institutions.