After launching and managing a business for six years, I can certainly share a thing or two on what to watch for when starting a new business.
As a good business person, I had the business plan, the spreadsheets with three-year projections, the funding, and I even talked to enough people to make me feel that launching a wedding invitation business was going to be an easy road. Well, despite the company being a success, it required a lot more work than what I anticipated. Here are a few pointers to consider if you are about to launch a new business.
Wedding invitations are typically sold by stationers that carry several dozen invitation books for customers to peruse and make their selection. The main problem with this business model is that every single stationer has the same books and the same prices. So how do we compete? We created a custom design studio and a private label that focuses on creativity and customer service. We became a niche player as one of the few custom design studios in South Florida.
Regardless of the type of business that you are trying to launch, you must identify your KPIs, align your processes to them, and manage them daily. As a custom design studio, we identified the following KPIs: number of daily visitors, closing rates, level of customer service, and source of referral. For additional information regarding KPIs, you can read this post: KPI for Small Businesses
Every new business needs advertising, and if your undertaking entails a new concept, you need even more advertising dollars. This is true, regardless of whether you are doing social media, print, radio, or TV. At least 10% to 15% of your initial sales should be allocated to some form of advertising.
As mentioned before, you will have expenses that you didn’t account for or that were not in your original plan. Try to do things yourself as much as you can before outsourcing those activities and adding fixed expenses to the business. For instance, during the first year, I was able to do accounting and taxes until the company reached a level where outsourcing was possible.
It would help if you assumed that your best-case scenario might not happen. Therefore, be ready for lower than expected sales, unexpected expenses, and perhaps costly customer service mistakes. Keep a safety fund of 2 to 3 months of working capital, depending on the size of the business.
While trying to do many tasks yourself at the beginning seems practical, it is impossible to be effective and efficient at everything. Six years ago, marketing was not my strongest point; therefore, in the beginning, we assembled a team of marketing experts to make sure that the marketing plan was sound and solid. Get help for all of the key aspects of your business: advertising, marketing, sales, and finance.
Signing a five-year lease is a bit daunting for any new business. A 3-year lease is optimal for a new business. One of the best decisions we made was to do a one year lease with a premium. At the end of the first year in business, we realized that the space was too big, and we needed to relocate the business. Luckily, the space next door opened up, and in no time, we were operating in a space half the size and half the rent.
There are many reasons why 50% of all businesses fail within the first five years, but there is no reason why you cannot learn from others to avoid being another statistic. The most important lesson to remember is to make sure that your business has a significant level of differentiation from your competitors. If you are opening another Mexican restaurant, you better have the best salsa in town!!. Best of luck