By Abhi Golhar, host of Real Estate Deal Talk and managing partner of Summit & Crowne.
Coming up with a small business idea can be as simple as identifying a problem in your local area and finding a solution to it. But there's a reason why many small businesses fail in their first year, and there are a lot of things that can contribute to a business's downfall.
I started a software consulting business in college and it failed because my target market rejected my service offerings and pricing completely -- I hadn't thought them through. Here are seven essential things to remember when starting a small business to avoid going under:
Don't over-complicate your concept.
Most businesses start from a simple idea or solution to an everyday problem. Make sure that your idea doesn't end up turning into something too complicated. Simplicity is best. The more elaborate your idea becomes, the more expensive it can get. Overly-complicated solutions to problems are more difficult to both market and to implement. Start small and narrow your focus.
Find out how you can deliver a simple, high-quality product or service, and then go from there. Simplifying your product can help cut down on costs, and also helps with determining your minimum viable product (MVP) should you choose to develop a software solution to scale in the future. This is exactly what I'm doing with a passion startup of mine now: We have proven a gap in the marketplace, gained proof of concept and used our lean business process to identify an MVP for a web-based software solution.
Focus on the market instead of the product.
Many startups and small businesses make the mistake of relying too much on their product to drive sales. What this means is that they fail to take into consideration the market they're getting into.
Small businesses should focus on delivering a product that people are actually willing to buy. You can come up with the most revolutionary product in the world, but you won't get anywhere if there isn't a market for it. Focus on niches. Getting a small market share is better than trying to invest in a market that doesn't exist.
Always overestimate costs.
Give yourself some leeway when it comes to expenses. Chances are, you're going to be overspending a lot. Prepare for the worst and overestimate your business's costs. Give yourself room to work. Don't assume that your expenses will always be in the green. Be prepared for emergencies.
Establish a support team.
You can't run a business on your own. Establish a team to support you from the get-go. These people don't necessarily have to be your business partners. They can be family, peers, friends or mentors. Having someone to fall back on can help you in times of crisis.
Always assess your business idea.
Understanding that a market exists for your product is only the first step. Don't neglect to assess your business idea. Market research is something that you should definitely never skip.
Find out how the industry or niche you're getting into works. Assess the strengths and weaknesses of your competition. Find out what drives the interest of your audience. Look for opportunities that are just waiting to be discovered in your niche. Don't go into things blindly.
Understand the commitment behind starting.
Before you start, determine if you're actually prepared to start a business. Running a brand, no matter how small, takes a ton of dedication. Expect your day-to-day life to change. Not only will you need to put down a significant financial investment, but you'll also need to put down some emotional investment as well.
Be prepared to lose sleep and feel stress. Be prepared to build connections. Remember that as your business grows, you'll need to dedicate more and more time to it. Failing to manage this aspect of running a business properly can damage your relationships with other people.
Generate income as soon as possible.
Cash flow is important, especially for newly-established brands. Income is the lifeblood of every business, even small ones. Your business should start generating cash as soon as it is able. There are a ton of ways to achieve this. Whether it's through pre-orders or deposits, make sure that your brand is generating income as early on as possible.
Starting a small business has never been easier. That said, there are still a ton of factors that can lead to a business crashing. Take note of these tips and work hard to get your small business out there.
Abhi Golhar is host of the daily radio show, Real Estate Deal Talk, and managing partner of Summit & Crowne, a real estate investment firm.