Starting a Successful Business
Starting a business is hard, success is elusive. Although the survival rate for a new business is a reminder that unless all the fundamental processes are used, the risk for failure increases dramatically. According to the U.S. Bureau of Labor Statistics and the Ewing Marion Kauffman Foundation, of the over 600,000 new businesses started each year only 56% survive 3 years and just 29% survive 10 years. Not encouraging odds given the dollars and energy required for a business start-up.
Surveys of business failure attribute the following explanations for a lack of success.
- 78% Lack a well-developed business plan, including insufficient research
- 73% are overly optimistic about achievable sales, the money required and about what needs to be done to be successful
- 70% do not recognize or ignore what they don’t do well and do not seek help from those who do
- 63% have insufficient relevant and applicable business experience
To sum up, the critical factors you must take under serious consideration to insure the success of your business and avoid failure:
- Adequate capital or resources
- Management experience and ability
- Education/experience in the field
- Good work ethic and time management skills
- Ability to ask input of others and make appropriate changes
- Willingness to test your idea
- Develop a business plan
Acquiring capital for a start-up can be a major hurdle for entrepreneurs. Preparing a business plan will require that you to do financial forecasts so that you can determine your capital needs. Knowing how much you will need to actually open the doors to your business and how much you will need until you have a profit and positive cash flow is where you must start. Let me give you a real life example.
When we founded Prolink, Inc. in 1981, we had a hot new product that no one else had on the market. It was the world’s first Golf Course Management Systems using Differential Global Positioning System (GPS) technology. If you have ever played golf at a high-end resort course you most likely have seen our ProLink® mounted under the roof of your golf cart providing you with information regarding the course layout and your distance to the pin.
After we developed our product and obtained a patent, we tested it on several golf courses to determine market attractiveness. Our value proposition was that our system would increase speed of play (by eliminating the need to search for distance markers) and thus increase revenues. Almost every resort golf course owner wanted our product, but they could not afford the initial capital cost of approximately $100,000 to retrofit 80 golf carts, map the course and install a base station. So we developed a business model whereby we would lease the system to the golf course for $2.00/round.
At an average of 50,000 rounds/year we would recoup our investment and begin to show a profit. The good news is that our sales proposition resulted in ten golf course orders in the first several months. The bad news is that we needed $1,000,000 of working capital to begin manufacturing operations.
That is where the business plan came in. Without a business plan we would have not been able to show the Venture Capital firms their projected return on investment and raise such a large sum of money in only a few months. In my next blog, I will talk about the essential elements of a business plan.
We have since sold ProLink and I now devote my efforts in helping entrepreneurs launch their own successful businesses, including developing sales/expense forecasts and business plans to obtain debt and/or equity capital. Growth Strategies International LLC provides technology investment strategies, business development, and project management services for the development and manufacture of new products to achieve profitable and sustainable growth in the international marketplace.
Please feel free to contact me at email@example.com or 607-727-4727 for a free consultation. I want to help you succeed!