Running a small business takes a lot of work, especially when you’re starting with more passion than business experience. As you turn what you love into a viable business, it’s easy to get lost in the chaos of launching or growing your business. However, there are important things to know so you can have business owner success.
In this overview, you’ll find questions to consider and answers to guide you at any stage of your business.
What you need to know for small business owner success
To successfully run your business, consider these questions to create a business that fuels your passion and charts a path to profitability.
What to consider during pre-launch:
1. How does your product or service fit into your market?
Whatever your product or service is, it has to be new or different enough – and needed or wanted – so that people are motivated to purchase it. However, a business will rarely be the first of its kind, so don’t be afraid of existing competitors – but be clear about how yours is special. Here are a couple of examples to guide you:
- You may make great pizza, but if your area is saturated with pizzerias, it will be harder to break into the market, so you need to identify what sets you apart.
- You may have creative ideas for a spa, but are your services different enough to lure spa-goers away from their current favorite venues?
2. What support is available?
If you’re starting a business from scratch, seek expert guidance from Small Business Development Centers (SBDCs), SCORE, and other small business development organizations that exist to help entrepreneurs plan, launch, and grow their businesses. SBDC and SCORE consulting services are free, and their advice is so crucial that reputable lenders may require business owners to seek their counsel before securing a startup business loan.
3. What do you need for funding?
Before you launch, you need to have a solid understanding of your business’s potential revenue and expenses, as well as the amount of time it might take to generate enough revenue to pay your expenses. This helps lenders fully understand how your business will make money and pay the debt to start the business. You can work out these scenarios by creating a business plan and financial projections – your SBDC or SCORE team can be a great source for guidance.
In addition to these documents, a lender will want to see a personal financial statement and a credit history that shows your income and expenses (like mortgage, car, and credit card payments) and, potentially, the last 2-3 years of personal tax returns.
Be careful of predatory lenders that promise quick capital in a matter of hours or a day or two. Responsible financing can take several weeks or even a few months, especially for startups. And always check the details of a lender’s offer of financing, including the interest rate, any loan fees, and payment frequency during the repayment term.
Before a reputable lender approves you, they’ll want to ensure your business’s proposed cash flow is sufficient to repay the loan.
4. What type of business entity is best?
It’s essential to register your business in the county or state where you intend to run your business. For a business entity other than a sole proprietorship or simple partnership, you may also need an operating agreement that lays out the key personnel and their roles in the business.
What to consider during years 1-3:
5. Is your business profitable?
In the early years after launch and throughout your business’s life, one of the most important questions is this: Is your business making enough money to sustain operations?
The true answer can be complex. For example, your business could be making enough money to sustain operations, but you might find that your products are priced above your competition, which may impact your sales volume.
You may need to research your competitors’ pricing structure to price your products or services appropriately, or you may want to find ways to reduce your costs. You may also sell higher-quality goods or services, where you don’t want to lower your price but should highlight the differences through your marketing.
As a business owner, you should ask yourself, “How much does it cost to run my business?” Review your financial data regularly – quarterly, at least, and monthly, if possible – to develop a strategy to get you on track to stronger and more predictable profitability.
6. What skills do I need?
You should have general business management skills before opening your own business – or have a partner or key senior staff member who can do this (although every business owner should understand the fundamentals of running their business).
7. Do you need more staff?
It’s important to have the right people in the right roles for long-term success. If you have expertise in the numbers side but not the goods-and-services aspects, you’ll need to partner with someone who can oversee those areas. It’s also important to know that if a person has a 20% or higher stake in the business, they’ll also need to take on the financial liability for business debt with you.
You’ll need to determine whether bringing on additional staff or outsourcing some aspects of your operations is the better move for your business.
8. What are the next steps?
The SBDC and SCORE support new entrepreneurs in thinking about situations you may not yet consider, such as longer-term plans for growth. SBDCs and SCORE are important partners throughout the life of your business, so questions like if and how to expand can be built into your earliest plans.
Keep your relationship with them going through periodic check-in meetings – asking for and receiving guidance from people who are more experienced than you are is one of the best things you can do for business owner success.
Pursuit has small business loans, services, and resources to help
Business ownership isn’t always easy, but it can also be one of the most rewarding things you can do in life. One of the keys to business owner success is asking yourself the right questions from the start – and another is getting financing for your business that supports your launch today and your long-term strength.
With loans from $10,000 to $5.5 million, we have financing for working capital, equipment, the purchase or construction of commercial real estate, to refinance business debt, and more for businesses in New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, and Washington. And our Business Advisory Services are available to eligible Pursuit borrowers to help you succeed.
Contact us today to learn more.