Starting a business feels like a daunting and scary task. It just doesn’t feel like it, because it is. Not only is it daunting and scary, but there’s also a lot of investment, effort, blood, sweat, tears and money at stake.
Almost anyone can start a business, from your local food stall to a store franchise to start up. If you have the right business goal, a business model canvas, a clear direction and resources, anyone can challenge starting a business.
Small businesses, in particular, face a lot of challenges during their early years. Fret not, though, because it’s something that all business must and should go through. Being a small business, you are not only struggling against limited resources, you are also challenging many similar developed businesses in the same business niche as you while at the same time figuring out how not to be affected by external factors.
Business growth can be divided into five stages:
- Rapid Growth
At the foundation stage, your goal is to make the core of your business strong. Be it through a business model, good management, hiring the right employees or allocating your resources. Next comes survival where you need to step out of breaking even and make actual profits or a return on your investment. Then, sustain your business in a way that it can make money without you sweating too much or breaking the bank. Once your business is stable, aim for rapid growth, expand your business and diversify and enter new markets.
Sounds easy, right? It’s not.
There are a LOT of factors a business, especially small business should go through even just at the foundation and survival stage. Heck, even breaking is quite an achievement at some point.
As a business owner, it is your prime goal to see a return on your investment. That’s what we’re all here for, right? We need profitability and income to gauge if a business is worth the investment and effort.
There are a lot of factors affecting small business growth, and here we list down the 7 most important factors that can make or break the success of your business.
1. Identify Your Target Audience
It is very important for small businesses to properly identify and tag their target audience and market.
Now, how do you do that?
Ask yourself these questions:
- Who will best use my product?
- Who is most likely to be enticed to buy my product?
- What is the age range and type of people likely to be interested in what I sell?
With these questions as a base, you can narrow down what type of niche market you’ll target, since, as a small business, you’re working around tight capital and resources.
Take for example a small coffee shop business (we will be using this example for the rest of the discussion). You can conduct a simple survey, study trends, and behaviour of the society to identify what kind of people like going to coffee shops and use this data to further know how you can build strong relationships with your clients and customers.
You will eventually find out that coffee shops are big among Millenials and Gen Z’s in this generation since this is where they often hang out, meet and talk, so work your business towards targeting these types of audiences.
2. Incorporate A Marketing Plan
Put your product out there!
After identifying your target market it’s time to create the perfect marketing plan for your business.
Having the right marketing plan is a detrimental factor in the success of your small business. Why?
Did you know that 90% of marketers say that their social marketing efforts increased the exposure of their business and 75% of them said that this same scheme increased the traffic on their website?
There are also factors to consider in deciding your marketing gameplay.
- Trends. We have long said goodbye to traditional marketing. Putting up flyers doesn’t work anymore when people spend too much of their time staring at their phones and social media. So consider this when choosing how to go about your marketing scheme. Online advertising works a lot better than traditional ones, and you’ll reach a wider audience with fewer costs for online and social media campaigns.
- Platform. Consider what platform to use for your online marketing. Are you targeting to get your close acquaintances to try your cafe business? If so, choose the platform where most people you know are, be it Facebook, Instagram or Twitter.
- Word of Mouth. Now, I know I said traditional marketing doesn’t work anymore. But not all the time. One of the most influential factors in terms of marketing is still and always will be the word of mouth marketing. Get people you know to try your cafe. Offer them special discounts in return for spreading the good news about your cafe. Word of mouth marketing is a good platform to increase customer loyalty, which in turn results to further word of mouth marketing that works as a wonderful cycle.
Marketing doesn’t necessarily require a lot of capital. There are a lot of marketing schemes small businesses can get into with spending no to little cash.
3. Utilization of Capital and Resources
I am a small business. I do not have a lot of capital? How can I grow my business?
One of the major challenges a small business faces in the process of its growth is limited capital. You have to work around with limited resources so this means that you have to be wiser in deciding how and where to invest your hard-earned capital.
What does this mean?
In starting your own small business, consider first the things you need with the most urgency; the ones you need most to operate your business.
In the case of your coffee shop, one of the few things that would eat up your capital is location, rent, utilities, equipment and payroll.
It is important to allocate your costs properly during and in the course of running your business to eventually hit a profit or make a return in your investment at most a year into your startup.
Simply, put. Spend wisely.
Choose an ideal location that gets a lot of potential customers, purchase equipment with the best deals that you can get, and consider how many people you need to operate your business. If you can work around with 1 or 2 staff, the better.
Growing as a business starts with properly managing your capital and cash flow which eventually leads you to use those earnings as additional capital to purchase better equipment, transfer to a better location, build improvements, expand and hire more people.
4. Business Structure and Management
Creating a clear and concise business structure is important no matter how small or big you are intending your business to be.
This just means that you have your business model canvas planned out: from your customer segments, value propositions, revenue streams, resources and partnerships.
Good leadership is also detrimental to determine the success and failure of a business. If you established your business as sole ownership at first, you might find no problem as you handle things yourself. But as your business grows, you might be needing the assistance of partners who will take part in the management of the business and it is very important to choose the right and trustworthy people who can communicate and make wise decisions for the development of the business.
5. External Factors
Perhaps one of the most difficult factors to control when establishing a small business is the effects of various external factors. These can include cultural, political, economic and even environmental conditions.
While you don’t have much control when it comes to these events, what you can do is make sure you are on top of all regulatory requirements and develop a good network and relationship with people in the same field as well as your business stakeholders.
This way, you can curb the effect of these events by preparing your business beforehand for events like a scheduled blackout, an upcoming storm, changes in legislation, and many more.
You can take for example the recent pandemic that stormed the world. While there is no way to avoid this situation, being on top of your business game by having back up plans during these emergencies which is happening now and might continue to happen again in the future is very important.
Location of your business does not only mean physical location. It can include a virtual location as well.
What does this mean?
Choosing the right location for your business can decide your revenue streams. How? A perfectly situated business can attract the most number of customers.
Take our coffee shop business as an example. A coffee shop located in the suburbs is less likely to do better than ones situated near universities. This is because your target audience is always located near universities rather than the suburbs, which makes your business more visible to them and the better are your chances of getting customers.
This same principle applies online as well. If you are into eCommerce, choosing the right eCommerce platform that best suits your business will eventually have a huge effect on your revenue streams.
7. Grow Your Product
They say the sky’s the limit. And that has never been truer for any kind of business out there.
Study trends, seek development, improve your products, offer new products, offer discounts and promos, launch special events or seek ideas to develop your website. These are just some of the ways you can grow your product.
Society hates stagnancy. People are always interested in what’s new and interesting in their eyes. The way to attack this is to develop your products according to marketing trends and continuously put out products that will make your audience reach wider.
If your current target audience is those from ages 20-35, think about what you can offer that would make those from 36 and above to be interested in your products.
Did you know that there are 30.7 million small businesses in the United States which create at least 1.5 million jobs annually? Small and medium-sized businesses account for 90% of the business in the US according to SalesForce, therefore being the major driver of global economic growth.
Growing your business is a demanding task. It takes a lot of effort and sacrifice, but as long as you have the right business mindset and foresight, and consider some of the factors we have listed above, growing your business will be a tough but rewarding task.
So, if you’re thinking of starting a small business, the best time to do it is now.