QUESTIONS AND ANSWERS
By Mark McKeller

Q. Of those I know who have started their own businesses, most are struggling or have failed. How can I improve my odds of being successful? 

A. Starting and owning a successful business can be an extremely rewarding experience. With proper preparation and execution, almost anyone can succeed at a business that suits their talents. Even though, most market studies show that a majority of new businesses fail within the first five years of operation. There is little doubt that the road to entrepreneurial success can be a rough one; however, consideration of a few points can make a huge difference in your chance of beating the odds.

Inadequate capitalization is a common cause of failure among home business owners. Be realistic about your expectations. Determine your needs for the worst case scenario, then double the figure. Commonly it can take eighteen to twenty-four months for a new business to begin to return enough income to support you. If you are short of money, your progress toward success may be stopped mid-stream. You may want to delay starting your business, keep your day job and start saving, or work the business part time in the beginning until you can phase out the job.

Make sure you understand completely how to market your product or service. Who needs it and how will you get it to them? When and how often will they buy it? How and when do you get paid? Are there industry standards for the sales and distribution of your product or service? If you are buying a franchise or a business opportunity get marketing information from the parent company and apply it to your own situation. Make sure you understand all the costs involved, and what results to expect. Be conservative in your expectations, and plan to live with the worst case scenario.

Many potentially viable businesses fail because their owners do not know how to manage a business. Having a great idea for a business and knowing how to operate it are not the same. Can you write projections, understand costs, keep records, do a profit and loss statement? Can you manage people? Do you understand how to legally structure your business? One Small Business Administration group that can help is the Service Core of Retired Executives (SCORE), available in many communities. The program offers free guidance and counseling by retired business owners and managers. Many home business owners I know have gotten good advice from SCORE. In the beginning you will not have much money for other professional advisors; however, your success may depend on knowing when to pay for assistance. You may want to spend some money on legal counsel or tax advice early on, to avoid problems later. If you are struggling in your marketing or sales efforts, spending a little on consultation may pay much more than it costs. Learning simple marketing and sales concepts can make a world of difference to a first time business owner.

Make sure you have a well-designed plan of action for your business. Most businesses I have seen fail did so because of either no plan or poor execution of a plan. If you are juggling a job and a business, it can be difficult to have the discipline to work the business regularly. Setting realistic goals for daily activity can help. If you buy a franchise, the franchisor should be able to provide you with proven business systems for your plan. These systems should come from those who have successfully operated the franchise before, and therefore are good data for developing your plan. Review your plan at least once a month. Many people spend considerable time on plan development, but do not track their actual performance against the plan. You must review and adjust your plan to understand where you are going and how you will arrive. The best way to ensure long term survival is to achieve it one day at a time.