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To run a successful small business today, you typically need more than a million-dollar idea. You’ll also likely need to have excellent planning and organizational skills, financial know-how, marketing savvy, along with a good sense of what you can do yourself and what you may need to delegate. To help make sure your business venture not only survives but thrives, read on. What follows are common mistakes many entrepreneurs make, along with 9 smart steps that can help put your small business on the road to financial success.Why Small Businesses Tend to Fail
While there are myriad reasons why a business might fail, these are among the most common.Financial Problems
A major culprit behind small business failure is a lack of funding or working capital. This can result from underestimating how much money is needed to start and operate the business and/or overestimating how much revenue will be generated by sales of products or services.Either (or, worse, both) can lead to funding shortfalls that can quickly put a small business out of operation. Recommended: 9 Accounting Basics Every Small Business Owner Should Know Ignoring Legal Requirements
Running a small business often has certain requirements like applying for business licenses or permits, getting certifications, or adhering to other local, state, or federal regulations.Business owners who don’t bother to do their research before opening run the risk of being considered noncompliant and then could face fines or even a shutdown.Inadequate Business Planning
One of the most important steps to starting a small business is to create a business plan that lays out your operations for the next few years and the steps you need to take to achieve your goals. However, writing a comprehensive business plan can be a time-consuming and tedious task that many entrepreneurs decide to skip. This can lead to lack of clarity about what their mission is, who their competition is, and who their client is (as well as how to reach them). All of these problems can create a speedy path toward small business failure. Poor Management
While business owners may be great at creating and selling a product or service, they may not have the skills it takes to be a good manager and to effectively oversee employees. Without a dedicated manager or management team, an owner can run a high risk of mismanaging certain parts of their business, such as marketing or hiring, which can ultimately bring a company down.Tips for Running a Successful Small Business
If you’re ready to do what it takes to put your business on a profitable path, consider trying these small business tips for success.1. Have a Clear Business Plan
Creating a well-thought-out business plan can be a crucial step in starting a small business. It doesn’t have to be a 25-page document, but it should contain the basics to help you (and potential lenders, if you decide to apply for financing) see the big and small picture for company growth.Ideally, your business plan should identify who your company is, as well as you as the business owner and any other executive leaders. You’ll also want to detail what you plan to sell and who your audience is, as well as what marketing and sales channels you’ll use to reach them. It’s also a good idea to detail your small business budget, including operations, marketing, and staffing.You may want to think of your business plan as a living, breathing document and review it frequently to make sure it’s still aligned with where your business is headed.2. Decide How to Structure Your Business
When starting a new business, you’ll need to decide what type of business structure you want to operate as. Your options include: a sole proprietorship, a partnership, a C corp, or an S corp.It can be wise to choose carefully — your business structure affects how much you pay in taxes, your ability to raise money, the paperwork you need to file, and your personal liability. You'll need to choose a business structure before you register your business with the state. Most businesses will also need to get a tax ID number and file for the appropriate licenses and permits.3. Keep Proper Records
Successful businesses tend to keep detailed records. This allows you to always know where your business stands financially and can expose any potential problems early on so you can come up with strategies to fix them. Keeping records and receipts of all your purchases can also help you with monthly cash management, and make it easier to tally up and deduct qualified business expenses come tax time.It’s also a good idea to create contracts if you provide services to clients and keep all client files organized so they’re easy to access when you need them.Recommended: How Do You Categorize Expenses for A Small Business? 4. Understand the Competition
What does your industry look like? Who are the major players? Most successful businesses know which competitors offer what products or services. They study and learn from their competitors’ successes, while also finding weaknesses or gaps they can fill.If a competitor offers lower-priced products but poor customer service, for example, you may be able to keep your prices where they are, but provide stellar service to steal some of their market share.5. Create Processes
When you first start a new business, your goal may be to get things done by any means necessary. But even if you’re a solopreneur, it can be a smart idea to create processes for everything you do, from onboarding new customers to updating your business social media.That way, if you one day bring on someone to help you, they can follow these processes step by step and free you up to focus on other aspects of running your business.6. Provide Exceptional Service
As a small business, you will likely have to compete with the big guys. One advantage you have over them? You have a smaller customer base, which allows you to provide your clients with extra attention — the kind that will keep them satisfied and loyal to you for several years.When customers have a positive experience with a business, they’re also likely to tell other people about it. This can translate into word-of-mouth advertising, which is not only free but can be one of the most effective forms of marketing.7. Know Your Niche
It’s common to try to be all things to all customers, but you can end up spreading yourself thin and offering products or services you don’t excel in.Instead, it can be a better idea to narrow your niche to just a few things you’re really good at delivering. Become known for those, and you’ll likely attract more business.8. Employ the Right People
One secret to running a successful small business is to hire people who are smarter (at least in some things) than you. Solopreneurs often feel like no one can run their business as well as them, but this attitude could keep you from growing.While you may be an expert at running your business, you may not be all that skilled at creating logos or balancing the books. Hiring professionals in those areas can help ensure the job gets done right and you have more time to focus on growing your business.You don’t have to hire full-time employees if you don’t have the need or budget. You can also look at part-time help or contractors.9. Get the Financing You Need
Another key to starting and running a successful venture is to make sure you have enough funding for your small business. Ideally, you want to have enough capital to cover your operations and overhead, as well as grow your company. Whether you have an opportunity to purchase a competitor or you need to make it through a slow sales period, small business financing can be key to your business’s long-term success.The Takeaway
Starting and running a successful business requires meticulous planning, excellent organization, and detailed record-keeping. It’s also important to carve out your niche, provide great customer service, and bring in employees or contractors who have expertise in areas that aren’t your strengths.In addition, you’ll want to make sure you have enough funding available to invest in new technologies and equipment as they become available so you can continue to grow your business.If you’re interested in exploring different types of small business financing, Lantern by SoFi can help. With our online lending platform, you can compare rates from multiple small business lenders without making any type of commitment.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. Photo credit: iStock/AsiaVision
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About the Author
Susan Guillory
Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
