Financing Failures: Why so Many Startups Can’t Survive

Have you ever dreamed of starting your own business? Every year thousands of people fulfill their dream of becoming an entrepreneur only to encounter unforeseen obstacles that cause their venture to fail. In fact, 90% of startups fail within their first year. Learn why it’s so hard to start and sustain a successful business and how you avoid some of the common pitfalls like financing failures.

Product or Service Isn’t Wanted

A survey conducted among failed startup founders said that the lack of market or need for their product, was the main reason for their failed business. Basically they didn’t have a product or service enough people wanted or need. Check for flaws in your demand with these areas.

  • Weak Value Proposition

A value proposition is a statement that says why people should buy your product. For example, people buy Aspirin because they know it will get rid of aches and pains. Your product needs to have a clear value proposition in order for people to know why they should buy your product.

  • Wrong Time

No matter how great your idea is, your business must be relevant to today’s consumers. If your business is ahead or behind the times, it’ll be very hard to gain traction. Are there already a thousand stores just like yours in the neighborhood? Get in at the right time and your business will take off.

Not Enough Money

Money management is critical for any business, but especially in a startup. The key to proper financial management is having the right equipment when you start. In order for your business to function, you need certain essential equipment. Do not decide to invest in the necessary items after you have open up shop. That’s like flying a plane that’s only 95% ready. You should also keep enough cash on hand for day-to-day operations. A business cannot be sustainable if you don’t have enough daily cash. If you know it will take off in time, a loan might be a good way to get on your feet. Talk to investors as well to see what options you might have for outside funding.

Not the Right People

In order to have a successful business, you need to build it with the right people. However, just because someone is skilled at their craft, does not mean they are great management partners. Business is a tough environment and your team needs to be composed of people with key skills, leadership ability, and similar vision. Find people who will work with you to achieve your vision. You should also be willing and able to compensate them. Even if you picked the best, they will easily fall away or desert you if they can’t see the rewards. Use a good system and a Pay Stub Calculator to make sure everyone is compensated accurately.

You team will need to generate good business ideas, test them, and thoroughly carry out your business strategies. If you have a great management team you will probably be able to avoid the other two causes of failed startups.

Plan Now

Before you decide to open your own business, create a well thought out business plan. As Benjamin Franklin said, “If you fail to plan, you plan to fail”. Study why businesses fail and plan how you can overcome these challenges. Once you have a solid plan, get what you need, and start your dream business!

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Seven Ways to Save on Your New Business Building

Buying a new business building can be a costly and time consuming process. But there are a few proven ways to reduce both the short term and long term costs. Use these seven ways to save on your new business building and make sure you’re heading in the right direction financially.

Work with a Real Estate Professional
The building you purchase and the subsequent location will have lasting consequences for your business. Choose your building according to both your present and projected future needs. A real estate professional will have better access to a wider range of properties and will also advocate for your needs and dislikes. As a result, a real estate agent can be the negotiator you need, and use their professional skills to get you a better deal.

Choose Wisely
Your new business building will require the employment of many different contractors. While a finished building may only require a few touch up projects, be sure to carefully select your contractor. Avoid accepting the first bid, or rushing through the process. Thoroughly check references for contractors through asking their previous clients for reviews. Choosing the right contractor will be financially beneficial in the long run because you will most likely have need of their services in the future.

Project Management Software
Buying and fixing up a building for your business will be a long term project with many complex tasks. Using project management software will allow you to stay within the budget, while making sure deadlines are met. Project management allows you to stay focused while reaching your business goals. Use a good organizational or software system to keep track of bills, project progress, and future tasks.

Understand the Math
It is important to understand the financial costs of buying a business building. There are also real property costs, such as real estate taxes and settlement costs. Your constructing assets will be part of your cost basis, which may include labor, materials, contractor payments, and inspection fees. Be sure to work with a certified accountant to maximize your savings. Learn more about the financial costs of buying a building from the IRS.

Permits and Licensure
Consider establishing a limited liability company (LLC) as the owner of the building. This will provide legal protection through limiting your personal liability and protecting your personal assets from potential lawsuits. Buying a building through an LLC also guarantees privacy, as LCC records are not public property records. Finally, be sure to obtain the correct local, county, and state licenses and permits for your business and industry.

Save Energy
The good news is, there are plenty of ways to save energy through making adjustments to lighting, office equipment, and the HVAC system. For example, use compact fluorescent lamps (CFLs) and replace any incandescent ‘exit’ signs with LED ‘exit’ signs. Be sure to install motion sensitive lights in areas that are occasionally occupied, such as break areas or conference rooms. Purchase EPA approved, Energy Star equipment, and plug load controllers that can shut down inactive electronic equipment. Laptops use over 80 percent less energy than desk computers, and you can keep your HVAC system in top shape through regular, preventative maintenance.

Lawn Care
Using a professional landscaping service will save you time, which in turn will save you money. A BBB business reviewed lawn care service company will have commercial-grade equipment and tools which will save a lot of money in the long run, since lawn maintenance requires a variety of supplies and equipment, such as fertilizer, leaf blowers and lawn mowers. Landscapers will have the expertise and know how to properly care for plants and trees. And most services like Pro-Lawns aren’t just hired for the pleasant seasons, but also come in handy during winter for snow removal in St. Louis or wherever your business is located.

As a business getting into a new building, you can save a lot of money through using competent real estate agent and contracting professionals, utilizing project management software, understanding finances and licensure, and can cut costs through energy efficiency and by using a lawn care service. Use these tips to help you get started saving more on your next building.

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