Owning your own business is one of the American Dreams. We have seen it over and over. Small town stores become chain stores that span the globe. That transformation from small town store to major chain could bring you and your family wealth and prestige. Unfortunately, before you experience that wealth and prestige, your company will need to remain financially stable while it grows. Mistakes could transform your dreams into nightmares.
Opening Up a Small Business—Fighting Against Statistics
Opening your own business is a gamble. Potential business owners should know that the majority of businesses fail within 10 years. By the 5 year mark, 55% of businesses are no longer in operation. Business failure in our financial environment is a reality that every business owner should accept as a possibility. Once you accept failure as a possibility, you can begin to proactively work to make your business financially stable from the beginning.
Before starting your business, you should carefully plan out your budget. Around half of all small business failures are due to financial incompetence. This makes creating a mock budget that covers all your expected expenses vital. All of the different pieces that go into a budget are complicated. If you have no knowledge of finance, record-keeping or pricing, you will need to complete extensive research before you open the business. Once your business is running, you should continue to track your expenses.
You can use online tools like Budget Tracker to make keeping track of your expenses easier. Budget Tracker is a free online service that:
- Allows you to create a budget.
- Keeps track of all your bank accounts and money transactions in one place.
- Has a business management section that allows you to track your business deductions, your venders, and clients.
- Allows you to access the website from your computer, phone, or iPad.
Budget Items You Might Forget:
- Location repair before opening.
- Money you will need to support yourself and your family.
- Money you will need to repay your loans if you will need to take any out to open your business.
Below I will cover two items that will most likely be included in your budget: insurance and marketing funds.
You may want to plan business insurance into your budget. There are many insurance agencies across the United States. For a few examples, State Farm, Allstate, Progressive, and Nationwide will all offer plans that will ensure that your business will be protected from unforeseen accidents. Business insurance will ensure that you will not experience significant financial loss that may not have been planned into your budget. The policy that you choose will be based on the type of business you will open and the amount of money you can afford to put towards your insurance each month. Below is a list of general and then specialized insurance options that you might want to include in your insurance plans.
General Insurance for All Businesses
- Income protection insurance will help you keep your business financially stable while your business is closed for a short period of time due to unexpected events like fire, wind storms, vandalism, and equipment damages.
- Equipment breakdown insurance will pay to replace or repair broken equipment.
Insurance Coverage per Industry:
Auto Service: Liability insurance will pay fees incurred if employee sues you after a personal injury.
Restaurant Owner: General liability insurance will pay fees incurred if a customer sues after incurring injuries after an employee, product, or service has injured the customer on your property. Utility services insurance and spoilage will cover the loss of your inventory if your utility services have been interrupted.
Retail Stores: Look at general liability insurance, utility services insurance, and commercial auto insurance, which will help pay for losses when employees are in an accident while driving a company vehicle. Crime and employee dishonesty insurance protects you from losses due to theft from customers and employees.
Marketing and Advertisements
As a business owner, you should endeavor to make the most out of the money you can reserve for a marketing campaign. 11% of new business fail because the marketing budget was not used effectively.
Marketing is vital to businesses. Effective marketing informs the populous of the new business and persuades customers to purchase items or services from the company. Marketing is important for your company because small businesses must compete with the low prices and reputations of chain stores. If you do not convince customers that you offer a valuable service, your business may never make it past the five-year mark. If you do not have the knowledge to kick off an advertising campaign, you should hire someone that has experiences with advertising campaigns.
Potential Marketing Strategies:
- Put newspaper ads in your local paper.
- See if your local news station will cover your store.
- Create a website for your business with very relevant and informative content that is updated regularly.
- Make use of social media sites like Facebook, Twitter, and Linked-In to get your name out there.
- Make use of promotional contests with desirable prizes. Keep careful track of the money that you are spending on the prizes.
Opening a business is as hard as it is fulfilling. As a future business owner you will need to take many precautions to ensure that your business will be lucrative. While a solid marketing strategy and insurance plan will not ensure that your business will have enough funds to operate, it will at least give you and your business a fighting chance.