Around 20% of new businesses fail within the first two years after launching, 45% during the first five years, and 65% during the first 10 years, Investopedia reveals. Surprisingly, just 25% of new businesses survive longer than 15 years. If you’re planning on launching your own business, having an idea you’re passionate about is a great start, but you’ll need to first be sure it’s possible to turn it into a success story. By taking care to check if your business idea is viable, you can be confident your launch will be successful.
- Do the math
Running a successful business relies on having a steady pool of recurring customers. So, start by researching how many customers your business needs to be successful. For example, if you’re planning to launch a computer repair business, you may need around 50 jobs a month to generate a profit. You’ll also need to work out if you have access to enough potential customers. So, consider what your target customer looks like – their location, gender, age range, and income. You can then research population statistics online to get a sense of your local area. So, for the computer repair business, you’d need to check whether it’s feasible to find 50 local customers a month – is the demand there?
You can also look at how many businesses similar to your idea are operating locally. Have these businesses been going for long? If yes, this indicates there’s an established market waiting for you. Otherwise, you’ll need to look for other things that show your business can still succeed despite the lack of thriving competitors (perhaps customer needs have changed over time, for example).
- Attend a professional event
Look up professional associations relevant to your business and attend one of their events. Here, you’ll find a plethora of accurate information on business expenses, prices, and average sales. You can also learn about any upfront costs you’ll need to pay (such as, license and legal structure fees), and, from there, work out how long it’ll take you to start making a profit. When it comes to legal structures, a LLC (limited liability company) is one of the most commonly used. LLCs offer a host of benefits, namely the owner isn’t held personally liable for the actions of the company – that means your personal assets are protected from creditors and lawsuits filed against the company. LLC filing fees can range anywhere from $40-$500, and average out at $132. You can also do research into the best state to register LLC, however, in most cases, it’s best to form an LLC in your home state – this is usually the most cost-effective and simplest move.
Also, keep in mind, if you’re in a rural area, you may have to travel further to reach your nearest professional association chapter or a national conference. As such, you’ll have to factor the resulting expenses into your start-up cost estimates. If your budget can’t stretch this far, you may be able to join online communities and access this same information without having to pay.
- Talk with industry experts
Talking to industry experts is a valuable way to gain advice and perspective essentially from people who represent what you aspire to be. Since local competitors may, however, not be so eager to help newcomers, you may therefore have better luck asking professionals outside of your geographic proximity. Make a list of questions to ask the business owners. For example, you can ask about average expenses and profits, as well as what they like best and least about the industry. You can also ask about what they wish they knew before launching. Armed with these insights, you can avoid making their mistakes and copy their best practices.
Moreover, you can also try talking with former business owners who’re no longer in the industry, and therefore no longer your competition. Ask them to explain why they left the industry – they may tell you about not-so-desirable market conditions you were previously unaware of (keep in mind, since these people have left the business, they may be less likely to be positive about it). Similarly, you can also contact your local chamber of commerce for general insights into the current state of business.
You’ll also find it beneficial to chat with your target customers – ask them what they like best about the product or service you’re thinking about moving into. How can it be improved? In fact, customers may be more open with you than your competitors, and can therefore share a vital different outlook on your market.
Determining whether or not your business idea is viable is essential before launching. By doing the math, attending professional events, and chatting with industry experts, you can be sure to set yourself up for business success.
For more articles, visit OD Blog.