When it comes to business, what you don’t know will cause failure.
According to the U.S. Bureau of Labor Statistics, an estimated 20% of businesses fail within the first year. 30% fail within the second year, half, 50%, will fail within the fifth-year, and almost three-fourths, 70%, fail within the tenth year. While there are a million views as to why businesses fail, it comes down to one problem—lack of business education. To avoid having your business turn belly-up, here are some basic business rules to follow before you open shop.
Thorough Research is a Strong Start to Any Business
As easy as it is to jump feet-first into your business idea, it is crucial that you take the time to develop your product or service as well as your company’s foundation.
While this sounds simple enough, you need to consider:
- Why are you starting this company? Is it just for income or is this your passion?
If you’re passionate about the industry you want to do business in, keep pushing forward! If not, it’s been suggested that you reallocate your focus on something that is of interest.
- Is there a need or a market for what your business is offering?
There is no point in starting a business when there is not a demand for your product or service. While considering the market, be sure to think about where you are located and the possible customers you would have within the area.
- What type of business do you want to develop?
Do you want to have a sole proprietorship, a limited liability company (LLC), general partnership, limited partnership, corporation, etc.?) This is the stage to determine how much responsibility you want to have should something occur within your business.
- Where would your product or service thrive?
As with determining if there is a market for your business, you need to determine the best location for your industry. While you should contemplate a physical location, another area to explore is digital. How will you want your business conducted? Online or a physical store?
- Who is your target audience? Who will purchase your product or service?
Catering a product to the right audience is not only strategic marketing, but it is also smart business. To stay in business, you need repeat customers as well as new that have a need (or want) for your product or service. Determine the demographics of those who would be interested in your business concept and compare it to the location you are looking at conducting your business.
- What competition will you face? How will you diversify your product or service to compete in the competitive market?
The beauty of a mixed economy in the United States is in the ability to protect private property and to allow economic freedom while permitting the government to step in should there be any conflicts. With business-freedom comes business-competition. It is essential to consider how your company will differentiate its product or service in the marketplace. Knowing your target audience will provide insight into what is important to them and then catering to your product or service.
For nearly a century, Junior Achievement (JA) has focused on programming to educate youth in three areas-- entrepreneurship, financial literacy, and work readiness. As a result, JA Alumni are 2 ½ times more likely to start a business compared to the general population. Through the JA Company Program, students learn how to successfully start and maintain a thriving business.
Click here to see the JA Company Program in action!