Small businesses die daily, with most failing within the first 5 years, regardless of the circumstances. Some firms suffer a fatal heart attack; the owner is liable for an accident on his site, and assets are liquidated when the insurance company refuses to pay. Other firms shuffle along for several years, ignoring new technology and changing market conditions. Customers quietly switch to the fancy, tech-savvy competitor and death by old age creeps in. Death from loneliness is particularly poignant; the owner is weary and wants to retire, but nobody wants the business, including family members. The owner shuts down and the legacy vanishes into yesterday. However, when a business opens without the answers to the five questions below, the owner is a murderer. With reasonable answers to these queries, more firms might have a chance of survival.
1 Who is going to operate the business, and does he or she have the skills to be an entrepreneur?
Entrepreneurs take risks in exchange for freedom to make their own decisions and chart their own course. Success depends on the owner’s education and experience, commitment, human capital, and vision. Education and experience provide problem-solving tools to mitigate the damages of an unexpected economic shift, or the entrance of a threatening competitor in the market. Social capital, or personal support network, can offer assistance when the owner is away, or provide an introduction to a prospect for a future business opportunity. Success requires a strong work ethic and a fight-to-win attitude.
2 What kind of business and what is the business model?
A business model must reflect the strengths and weaknesses of the owner. Hairdressers thrive on creativity and customer service. A carryout offers a brief encounter at the cash register and requires an owner that can juggle many tasks at once. The business models are dissimilar; hairdressers make money from lengthy services and products from patrons that expect perfection, whereas carryout owners make profit on every item in the store, with a goal of a quick transaction from a large bag of expensive goodies. Starting an enterprise requires long hours and hard labor; an owner with passion, resilience, knowledge, and respect for the model enhances sustainability.
3.Why are you starting a business?
Desperation and innovation are opposites when starting a business. If desperation appears from unemployment, the ideal entrepreneurial tool kit may not be available. Self-employment is a reliable go-to-action when personal survival is the goal; a business plan is not necessary to paint houses in the spring and summer, or sell cookies on the weekends. If the goal is to open a restaurant to reap financial rewards from a popular family recipe, there will be a great deal of time and preparation needed before the ribbon cutting ceremony.
4 When will the business open?
What are the chances of survival during a recession, or when the owner is still working full time? What about seasonal risks when starting an enterprise? Timing is critical and seldom are the conditions perfect for launching a business. When the market is ripe, the owner may not have the resources to begin. A comprehensive business plan includes the path to financial stability, and identifies the resources, challenges, and remedies before the launch. Starting before systems are created, social capital is on board, funding secured, and marketing commences presents risks to the operation and the brand.
5 Where will you operate the business?
Certain kinds of home-based businesses require zoning approval. If you operate online, few assets are needed except a desk, chair, utilities, and a computer. Some businesses depend on foot traffic or ample parking. Other enterprises thrive next door to competitors. Each situation is different and analysis helps to pinpoint the ideal location, features, and amenities.