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article imageOp-Ed: Four rules for starting a small business

By Dusty Wright     Oct 7, 2013 in Business
More than 90 percent of startups fail within five years; that's because entrepreneurs improperly assess the need that they’re trying to fill, failing to find compelling demand for their products or services.
Some mismanage their cash cycle, while others fail to focus on the key deliverable that their customers want. According to data compiled by Statistic Brain, the highest failure rates include small businesses in the following industries: information technology, communications, transportation, utilities, and retail. Those with the highest success rates include finance, insurance, real estate, services, education, health, agriculture, and wholesale.
Here are four guiding principles if you are thinking about starting your own business.
1. Make your obsession your business, according to billionaire entrepreneur Mark Cuban.
If it’s something you love and the marketplace is willing to pay for your product or service, that’s a marriage made in business heaven. You’ll take great pride in delivering high quality work, and your customers – through word-of-mouth – will become your field marketers.
After all, why sell something you don’t believe in?
2. You shouldn’t start a small business unless your personal finance is in order, according to askkarine.com. In her blog “How to Start a Small Business,” Karine advises that, “with life’s responsibilities, it’s hard to make that transition from employed to business owner, but having debts and lack of emergency funds will make that change a potential nightmare.”
A lot of businesses fail because they’re undercapitalized. Orders may come in but stacking inventory takes plenty of financial resources. In a lot of cases, the cash available simply isn’t enough to fulfill orders. In such cases, some entrepreneurs resort to mortgaging their homes and other assets to keep their business (temporarily) afloat.
3. Sweat equity is the best startup capital, according to Cuban. In an interview with Bloomberg, Cuban says entrepreneurs should never start their business on a loan. Small businesses already carry high risk given their rate of failure. Taking out a loan to start a business only adds to that risk by burdening the venture with monthly interest payments which will eat up precious cash.
A startup that offers compelling products and services should be able to secure working capital directly from its customers who make up-front payments.
4. Finally, know your core competencies and hire others to cover your weaknesses. If you lack finance and accounting skills, hire a contractor to compile the ledgers, income statements, and balance sheet. If you’re great in making the product or service, stick to that. Deliver the great products that your customers want. In short, add members to your team who are great at what they do.
Hire a great salesperson to reach out to the marketplace. Sales cures all. Revenue coming in solves most of a startup’s problems, such as payroll and monthly rent payments. If you deliver outstanding products and services, word will spread and the marketplace will come to you.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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