Start up Lessons Learned

If you read the Small Business Administration’s statistics, starting a business is a 50-50 proposition.  In five years you may be loving life and living the dream of entrepreneurship or you may be slugging it in a cubicle somewhere working for the “man” and wondering what went wrong.  With those kinds of odds, you may be better off playing black or red at the roulette table in Vegas (or Tunica for those afraid of flying and Carrot Top.)

However, what I have learned in helping over 120 businesses get started in over six years at the Tennessee Small Business Development Center (TSBDC), is that there is a very specific list of reasons that cause this failure.  And they are avoidable.

Below are four things that entrepreneurs may lack when they start a business:

Lack of experience

If you’ve ever heard, do what you love and you won’t work a day in your life, you may assume that entrepreneurs love selling, bookkeeping, and employee headaches.   That’s not always the case.  In many cases they are necessary evils to do what you love.  And you can’t ignore them.

If you don’t have experience with each of these areas, consider finding a mentor, read articles, books, journals, and take classes for financial and accounting practices, management, and/or marketing.

Lack of capital (money)

Everyone assumes that their business will make a profit immediately.  What they discover is that “immediately” may be a year or so. So before making a purchase, review your capital needs first. 

Borrow some long-term money (if necessary and possible) and put the funds into a liquid (cash) account.

Lack of planning

On average, people spend more time planning a vacation or wedding than they do for running their small business.  The business should last a lot longer than a seven day vacation or a one night wedding.

Create goals for your business and a plan to reach those goals through marketing, management, and financial planning. Obtain an annual business check-up.  Meet with an accountant, banker, or TSBDC counselor to review financial statements and get advice on how to improve performance.

Lack of marketing

“Man, this is the coolest business around and everyone will just love it.”  Cool.  But you still need a consistent marketing approach. 

First set up a real marketing budget. It should be at least .5% - 8% of your monthly expenditures.  Also, identify your target market and a good marketing mix to attract that target market.  Track where your sales come from, such as internet, coupons, chamber contacts, etc.

Although small business ownership has its challenges, it can be very rewarding and allow someone, an opportunity to turn their dream into a reality.