7 Tips to Avoid Failure When Starting a New Business

Under pressure from the steeply rising inflation, many people are forced to come up with new ways to make ends meet. Adding a side hustle, especially starting a (side) business, could potentially meet that need.?

However, if you are new to business ownership, chances of you succeeding are, statistically at least, not particularly good. According to recent data , “as of 2021, 20% [of start-ups] failed in the first year, 50% within five years, and 65% within 10 years.” Still, you can absolutely make it work! But the key to making your startup a success is to be prepared for your new venture in every way possible.

With that in mind, here are some tips to minimize your risk of failing:

1. Pick your Market and Niche wisely?

A new business will challenge you in many different ways. This is why it is extremely important that you pick a business activity that you not only love with all your heart but that you are also good at! Do not get involved with anything you know little or nothing about. Yes, you CAN learn pretty much any craft, but that learning process will be very costly. Also keep in mind that mastering the skills of owning and operating a business–any business–is in and of itself a steep learning curve.

2. Choose your Physical Location carefully

If your business operates out of a physical location and you depend on foot traffic to get customers, be sure you choose a location where people can find you easily.?

Don’t fall for low-cost locations in problematic city neighborhoods, and be sure your business will be allowed effective commercial signage to be visible.?The larger the allowable sign dimensions the better.

Also, many people believe that the best neighborhoods to start a business are those with few or no direct competitors. But are those neighborhoods really “blue ocean” territory, or are there good reasons why competitors haven’t gone there yet, and why you, too, should stay out??

3. Online Business

In many ways, an online business can be an ideal first business, esp. since it may not require lots of start-up funding. But if that’s your path, do not rely on the assumption, “if you build it, they will come.”?

When Ray Kinsella hears the whisper "if you build it, he will come" in the 1989 movie Field of Dreams, an entire team of baseball players shows up to play a game. But please note: they are all dead. Your online business, too, will be ghosted unless you have a clear understanding of how you will drive traffic (visitors) to your website.

4. Dealing with Your Landlord

My personal experience with landlords has been mostly positive over the years. But I still do not sign any commercial leases unless they have been reviewed by my attorney and I fully understand what I am signing. There is a lot to learn about landlord’s vs. your own responsibilities as a tenant.

On the positive side, many landlords provide significant incentives to sign up new tenants. This can range from several months of free rent to substantial financial help with any facility build-out costs. To find out what your landlord is willing to do for you, just ask the question!

5. Be prepared financially

Have enough money–ideally, 12 months of anticipated operating expenses–in the bank before you get started. Many new (and sometimes even seasoned) business owners underestimate their operational funding needs–the cash required to keep the business running. This does not include any one-time purchases such as equipment and furniture but any monies needed to keep the doors open (rent, utilities, etc.) on an ongoing basis. The problem with running out of operating funds is obvious. What may not be quite as evident is that banks will likely not be your fallback if you run dry. It’s difficult to get commercial loans from the banks to begin with, and they are for the most part not interested in keeping a failing business alive. Don’t count on the banks to bail you out. Save yourself before you even get in trouble. Proper budgeting is key but so is understanding your additional funding sources should you ever need to tap into them.

6. Educate yourself

Read business books, watch videos, listen to podcasts, and do whatever you can to prepare yourself for the realities of owning your own business. The more you know, the better prepared you will be. Save yourself as many trial and error situations as possible because they can be very costly. I’ve been in business for 15 years now, and I still make an effort to learn and improve myself every single day.??

7. Get a Business Coach–early on

If you are looking for shortcuts in your learning process, the best advice I can offer is to hire a good business coach–early on. If I have a single regret about my own journey, it is that I wasted many years as a new business owner, trying to prove to the world that I am smart, don’t need any professional help, and can figure it all out myself. I realized just how misguided that was when I finally started working with good coaches. Don’t do what I did. Set your pride aside, and instead let someone show you how to make money ASAP!?

What other advice do you have to help someone succeed with a new business?

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