This is Part 1 of a series about starting a business.
The age of working a 9-to-5 job five days a week for 40 years is coming to an end as more people trade steady employment for the unknowns of business ownership. Entrepreneurship may be highly romanticized in movies and the media, but in reality, business ownership is incredibly difficult and has an alarmingly small chance of long-term success, with 20% of businesses failing within the first year, 50% within five years, and 66% within 10 years, according to the Small Business Administration.
While success in business does require a certain amount of luck, following a few basic steps can greatly increase your chance of long-term success.
Step 1: Create a business plan
Your business plan is the foundation on which you will build your business. Start with your long-term vision and work backward to the basics—who, what, where, when, why, and how:
• Who are the business’ key managers?
• What does the business do?
• Where will your business be located and/or what is your service area?
• When will you launch?
• Why should customers use your business over those that are similar?
• How will you differentiate your business from its competitors?
The answers to these questions will help you figure out your business’ value proposition—the core idea that is both the reason for existing and the key principle guiding all decision-making.
In fewer than 20 years, visionary Jeff Bezos has grown a small online bookstore into Amazon, one of the largest companies in the world, by sticking to his value proposition of ruthless customer-centrism. When consumers shifted from brick-and-mortar shopping to e-commerce, Amazon became the largest online retailer in the world. When customers wanted instant gratification, Amazon launched two-day shipping. Every step of the way, Amazon has given customers what they want, sometimes before they know they want it.
While not every startup will grow into an industry leader, differentiating your business from its competitors and focusing on your unique value proposition will set you apart in your target market and help you win customers.
Step 2: Talk to as many people as you can
Every entrepreneur thinks they have a winning idea, but the fact remains that the majority of businesses fail. Talk with as many people as possible about your idea and listen to their feedback. The more you learn about the unique drives, desires, and needs of your target consumer, the better you can tailor your business to them.
Furthermore, know what you don’t know and then search out people who can balance out your weaknesses. Reach out to your local Small Business Development Center or SCORE mentor for a free business counseling session. These experts and fellow business leaders will point you in the right direction, serve as sounding boards, and be brutally honest about the viability of your idea. By surrounding yourself with people who have more business experience, you will avoid the common pitfalls that could derail your success.
In Part 2 of this series, we will explore how to fund your business startup.
Ansley Fender is a personal finance coach and freelance writer. She is the owner of Fender Financial Services, a bookkeeping firm for nonprofit organizations and small businesses.