Starting a business can be one of the most exciting and fulfilling experiences in life. It can also be one of the most daunting.
I lived this when my partners and I built our business — an industrial flooring installation and manufacturing facility that we moved from Pennsylvania to Baltimore City. There were challenges along the way, pitfalls I wish I had avoided. It’s easy for eager entrepreneurs to make mistakes when it’s their first time starting a business, and they’re not carefully considering all their options.
As small business ambassador, my mission is to help others take their first steps as entrepreneurs. Here are some tips to put you on the path to success.
3 things to do
- Conduct market research: There’s so much excitement that comes from that eureka moment, the instant you know what your next big idea is. Then comes the hard part: Understanding the intricacies of the problem you’re solving for a potential customer, who that potential customer is, and what the market looks like.Research your competitors — their strengths and weaknesses — and how you can differentiate. Evaluate the size of the market and determine how much of it you can access. Stay on top of industry trends and understand the local and global business climate so you make informed decisions that will set your business apart.
- Write a business plan: Your business plan is your road map. It outlines your mission, goals, strategies, and tactics for success. Writing a business plan will help you gain a better understanding of how to operate. The insights you glean and the help you get crafting a business plan can lead to important relationships and resources. A well-written business plan shows potential investors you are serious and have a solid growth plan.
- Identify funding sources: When I owned a small business, I never borrowed from a bank — not because I didn’t need the help, but because I didn’t think I could. Minorities often write off traditional lending sources because they assume banks won’t want to do business with them or they won’t qualify. We’re still working to break down those barriers of assumption, but there are bank programs and alternatives that could help get your business off the ground.
U.S. Small Business Administration programs can be a great start. Many entrepreneurs believe they need to be up and running for two years to qualify, but that’s not true. Another misconception is that all banks are alike. But there’s no blacklist among them. If you get turned down from capital at one bank, ask for feedback and try somewhere else that you may qualify.
Be sure to explore incubators and accelerators that provide funding and guidance to entrepreneurs, or other viable options like debt and equity financing, crowdfunding, and pitch competitions. Research grants that are specific to your industry and situation. Having a clear understanding of your funding options will help you make informed decisions about how to grow. Sometimes success is about the decisions you don’t make.
3 things not to do
- Don’t quit your day job just yet: Despite your commitment as an entrepreneur, do not quit your day job until you have a proven business model. Starting a business takes time and money, and you need to understand your potential revenue streams before you discount your current income source. Speak with others who have successfully run similar businesses and learn from their experiences. Develop a plan for how to manage your finances during the startup phase and be prepared for the possibility that your business may not generate revenue immediately.
- Don’t build for a small audience: Starting a business based solely on your or your family and friends’ preferences is not a sound strategy. You need to build a business that solves a problem many people have. This will ensure you have a larger audience that will continue to buy your product or service.Focus on identifying a real problem and providing a solution that meets that need. I like to say, “the bigger the problem, the better the business.”
- Don’t go it alone: There’s so much work that goes into constructing a successful business. Seek out experienced mentors who can offer guidance and support. Join business networks and organizations that provide resources and connections to other entrepreneurs. There are plenty of people and organizations that can help you build and grow your business. By leveraging the knowledge and expertise of others, you will be better equipped to handle challenges.
Careful planning and execution are required to make your business a success. Your journey will likely be a roller coaster of ups and downs, but by understanding some common experiences you can be better prepared for what’s coming. Don’t be afraid to take that next step as an entrepreneur and write the first chapter of your business story.
Jim Peterson is vice president and small business ambassador for M&T Bank in Baltimore.