The Small Business Administration estimates that over half a million small and micro businesses are launched each year. At the same time, nearly as many close their doors for good. Experts agree that turning a great idea into a profitable reality begins with informed business owners. Capital One and Consumer Action advise potential business owners to put these practical tips to work for them – before they go to work.
1. Anticipate Your Business Needs. A great idea isn’t always enough. The most successful micro businesses are founded on research. Aspiring business owners should first turn to the host of micro business research tools available to asses their overall business needs and potential. Researching an idea or product’s market potential, competition, and available sales/marketing channels can mean the difference between first year success and failure.
2. Develop a Sound Business Plan. Have business goals and plans outlined from the start. A well-rounded business plan includes an overview of the business purpose plus information about your products or services. It also outlines your company’s structure and organization – such as a sole proprietorship (one-person business) or partnership. Be certain any business plan contains these important financial documents: a profit and loss statement; a balance sheet; and a cash flow forecast.
3. Secure Funding. There are a number of ways to fund a micro business. Many business owners use their own funds, form partnerships, and apply for small business loans and lines of credit. The U.S. Small Business Association sponsors a number of programs and services to help micro businesses succeed.
4. Manage Costs and Keep Excellent Records. The key to a successful business is sound financial planning, especially when it comes to start-up costs. Start-up funding should cover operating expenses for at least one year. When estimating business costs, consider individual salary needs; start-up costs (associated with equipment, installation, remodeling, etc.); direct costs; overhead; and recurring costs. Managing costs also requires accurate bookkeeping of receipts and records of every sale, payment and expenditure.
5. Evaluate Business Needs on a Regular Basis. Savvy business owners constantly re-evaluate the overall business value, including profits, losses and management decisions. Evaluating business operations on a regular basis and making changes will foster continued success.