There is an endless amount of resources out there about starting a business, telling budding entrepreneurs what plans they need to make and forms they need to sign. While starting a business comes with its own unique set of challenges, almost anyone with the necessary drive and purpose can do it successfully. With just a little bit of planning and effort, it’s relatively easy to get a business off of the ground.
Learning how to run a business successfully, however, isn’t quite so simple. According to the Small Business Administration, only 80% of new businesses make it to their second year of operations. The 20% that fail likely do so for any of the wide variety of things that could go wrong while you’re running your business, from not understanding what your employees need to neglecting your property. Census data shows that about 50% of businesses close their doors after the first five years.
So how can you avoid becoming a part of these statistics of failures? Read on to discover the most important things you need to know in order to run a business, but that new business owners often forget.
Understand the marketplace and your KPIs
Ideally, you will have already done plenty of research before launching your business in order to fully understand the marketplace in which you are now working. However, if you feel that you’re lacking important understanding about your marketplace, don’t hesitate to do in-depth research now.
Performing detailed market research is essential for getting concrete data on your target audience, the existing competition in the industry, market trends, expected growth and demand, and much more. With this information at your disposal, you can make more informed business decisions and goals.
If you don’t know how to start market research, think about the four Ps: product, price, promotion, and place. To run a business successfully, you need to be clear on what the four Ps are for your business. You can determine each one with the research you do and they can, in turn, inform further research.
With these factors determined, you will also be able to define clear KPIs, or key performance indicators. These are measurable values that demonstrate how well a business is achieving its key objectives. Essentially, they are smaller goals on the way to your company’s overarching goals. Without the appropriate KPIs, you won’t be able to tell when your business is doing well or poorly. And that means that you won’t know whether you need to change your processes or keep them going.
As you’re thinking about your business goals and performing research for your business, remember to think about your personal goals as well. If you don’t know what you need to do or how to check in with yourself regularly and you start floundering in your personal life, you won’t be able to help your business if it starts floundering. Create goals and plans to ensure that your own mental health is in a good place. For some people, the plan may be to find a therapist they can speak with every week and for others, it could be taking a half-day every week to relax and de-stress. Whatever methods work for you, be sure that you keep up with them.
Manage your cash
Out of all of those businesses that fail within their first few years, the primary reason they do so is because of a lack of cash. It’s important to note that a lack of cash is different from a lack of profits. Your business may be making good sales and have the potential to see significant profits, but none of it will matter if you don’t effectively plan your cash flow and understand what aspects of your business are requiring the most cash.
As you learn how to run a business, you need to learn how to manage your cash. Consider these questions when you’re thinking about how your business operations are affecting how much money you have in the bank:
- Do you have loans you need to pay back?
- Do you buy inventory?
- How much inventory do you need to have on hand?
- Do you collect payments from clients?
- How long does it take clients to pay you?
- Do you depend on supplies that vary in price with the market, such as fuel?
This is just a snippet of the series of levers in your business that will impact how much cash you have. It is essential to understand each of these levers, or else you may be one of the many businesses that fail due to cash flow issues.
If analyzing expenses and gains isn’t an area in which you succeed, hire a financial professional to help you. You wouldn’t write up a complicated will without the help of an experienced estate planning attorney, so why would you think you can effectively manage your business’s finances without an expert accountant? Hiring a professional will cost a bit at first, but their expertise will help you save money, and hopefully make more of it, in the long-run.
Hire the right employees
Even if you are well-versed in finances and feel that you can manage your cash without a professional accountant, you’re not going to be quite so experienced in every aspect of your business. That’s why you need to focus on building an excellent team. With your budget and the market’s demands in mind, try to surround yourself with experts in everything that you are not.
The right employees won’t just be robots who follow your every command and speak when they are spoken to. That’s a sure way to drive your business into the ground, with you at the wheel. You need to be able to ask for input and feedback from your employees and they need to be able to give it. You will also need to be able to involve your team in decisions that will impact them directly as well as indirectly. With a diversified and free-flowing collection of opinions, ideas, and perspectives, you will be more likely to actually grow your business.
As you’re hiring your employees, think about the culture you want to build in your business. If you’re interviewing a candidate who has all of the right skills and qualifications but answers every question with an “all about me” attitude, they probably won’t be the right fit for your culture. You may still be tempted to hire them because of their impressive resume, but you’ll likely find that the cultural mismatch will soon result in you letting them go or them leaving.
A major mistake entrepreneurs make when trying to run a business is doing too much. Many business owners try to do it all on their own because they don’t have the funds or the demand to maintain a full-sized staff for a particular skill-set. However, the default alternative to this situation isn’t taking on those responsibilities yourself, especially if it is not your area of expertise. Instead, outsource to experts like freelancers, contractors, and consultants. This will lighten the load on yourself and your full-time employees while getting people who know what they’re doing to do the job.
Offer benefits for your team
One of the most important things you need to do to run a business and build a strong team is offering benefits for your staff. Benefits packages are key to making your team feel motivated, incentivized, and well-taken care of. With this sense of security, they’ll be able to do their jobs as effectively as possible.
In order to offer employee benefits, you’ll need to factor the cost of them into your budget for hiring. If you hire more people than you can effectively cover with your budget, you’re going to quickly run into cash flow issues. Once you have a clear idea of your budget, research what benefits are required on a federal, state, and local level for your business. These required benefits will likely include:
- Workers’ compensation
- Compliance with the Family and Medical Leave Act
- Unemployment taxes and insurance
- Time off for jury duty, voting, and active military service
- Disability insurance
Once you know how much the required benefits are going to cost you, you can decide on the elective benefits you’d like to offer. Keep in mind that these benefits are what keeps employers competitive and they can get you the best possible candidates. One of the most important elective benefits is health insurance. Employees often rely on getting health insurance through their employers so much so that it will be the deciding factor between two positions for them. Not only does health insurance allow employees to regularly see medical professionals, but it gives them the assurance that they can receive and afford emergency treatment at an urgent care center or in an emergency room.
Other additional benefits employers offer when they start to run a business include retirement savings, paid vacation and holidays, life care planning, and gym memberships. If you don’t know what the standard benefits are for a business in your industry, look at what your competitors offer. Not only will that give you a better idea of what is expected when you start to run a business, but you can try to top your competitors’ benefits to get the best employees in the industry.
Create a comfortable space
As you continue to focus on making sure that you have a strong and happy team of employees, remember that the physical space of your business is a part of that. Whether you and your employees spend most of your time in a store helping customers or you’re in a private office working with just each other, your surroundings are important. Just as a serene, comfortable environment can help boost the mood and productivity of your team, an unkempt and depressing space can negatively influence your employees’ work experience.
A key part of creating an enjoyable workspace is to have plenty of natural light. People are energized by light, especially when it comes from the sun rather than a light bulb. If you’re shopping around for office space, try to prioritize having windows all around the space. You can then invest in blinds and shades to block the sun or maintain the privacy of your business when you need to.
If you’re just starting to run a business, you’ll likely construct your space with your team right beside you. As you set up desks and product displays, be sure to get your employees involved in the process. They’re going to be working here every day as well and if they feel like they’re a part of the process, they’ll be more invested in their work. Allowing employees to choose the spot for their own desks or cubicles will also better ensure that they are happy with their workspace. This doesn’t mean you need to give a private office with a custom closet to every employee who asks for one, but you have to put your problem-solving hat on to help every employee find satisfaction in their workspace.
Remember to pay attention to the practical needs of your business’s space too. If you see that roof shingles are starting to peel off of the roof, call a commercial roofing company to do some repairs. If the sink in the customer bathroom has a steady leak, call a plumber to fix it. By addressing maintenance problems right way, you’ll keep the space looking nice for your employees and customers and you can stop the tiny issues from becoming costly problems down the road.
Addressing maintenance issues right away is also important for the safety of your employees and customers. If there is an issue with the electrical wiring in your building, you may be at risk of losing power during a storm. Without power, people in your building could hurt themselves in the dark or freeze in the cold winter without heat. The faulty wiring could even be a fire hazard. While the local utility company can likely get your power running again by using a portable isolation transformer as they work to fix the wiring, you don’t want to ever leave your employees in the dark. Fixing the wiring before it goes out and causes all of these issues is a much better way to ensure the safety and productivity of your team.
Trying to run a business isn’t easy. It requires drive and passion as well as resources and know-how. If you can create the right cocktail of these ingredients, however, you’ll be able to run a business that brings you and your employees joy as well as success.