The Top 3 Things You Should Know Prior to Starting Your Entrepreneurship Journey
According to the Global Entrepreneurship Monitor, roughly 27 million working-age people in the United States are preparing to start or run a new business? Close to 80% of those who plan to start a new business in the next three years are taking the action to register their business ideas with the U.S. Small Business Administration (SBA) or securing lease vspace.
“Business statistics are essential to entrepreneurs because they offer insight into determining which data and conclusions are trustworthy when moving forward with a business. Without stats, entrepreneurs may be forced to make decisions based on gut feelings and educated guesses” according to a recent article from Washington StateUniversity (WSU) on entrepreneurship. WSU offers an Online Executive MBA program to assist new business owners increase their chances of success.
Here are the three things you should first ask yourself.
1. Who is Starting a Business?
Knowing who is starting a new business is even important than the funding needed for the venture. Entrepreneurship inherently is a high risk proposition for principals, employees and investors alike. We are also seeing a shift in generational ideas towards launching a business as Millennials are leading the charge as covered by New Theory, where 90% consider entrepreneurship to be a mindset.
According to the Kauffman Foundation’s 2016 Index of Startup Activity notes that 84 percent of people willingly take risks when beginning their own business, as opposed to the 16 percent who deem it necessary because of unemployment or other financial hardship.
We’re also seeing more women stating their own business as 2016 saw the highest rate of women starting their own businesses in almost 20 years, rising from 220 businesses per 100,000 women to 260 businesses, for an earning average of $72,529.
The main reason why “who” is starting the business is that investors and stakeholders look for established track records. People who have succeeded in this space and more likely to do it again vs. a beginner who is going to make mistakes with their resources. Even banks are not so friendly when it comes to first time entrepreneurship as they are most likely not going fund a new venture without asking for some type of personal guarantee. So consider either having an established parter or advisory board to legitimize your venture and strengthen the “who” is starting your business.
2. What is the Forecasted Growth in Technology?
This is one of the biggest mistakes Entrepreneurs make when starting a business. They assume that technology is static and will not have an effect on their new venture. Further, how will you use technology to get your message out. First, company executives now look to video as a key way of receiving business information. According to a recent study conducted by Forbes:
• 80 percent of executives said they are watching more video than they did just one year ago.
• 75 percent of executives said they watch work-related videos on business-related websites weekly.
• 52 percent of executives watch work-related videos on YouTube weekly.
• 65 percent have visited a vendor’s website after watching a company video.
• 55 percent of users say they watch an entire video, as compared to 29 percent who read short blogs
“Video will be all over [different platforms] in 2017,” said Mike Arce, founder of Loud Rumor Marketing Agency in Scottsdale, AZ, “and businesses need to keep up. This includes Facebook Live, Snapchat, YouTube, video series, and more.”
Joselin L. Estevez, a digital marketing and social media director at X Factor Media, believes video broadcasts through social media platforms will increasingly be used as a sales platform referred to as live video commerce.
“You can now buy through Facebook and even Instagram through third-party apps,” he said. “This is great for startups and those who don’t have the resources for an e-commerce store.”
As opposed to traditional broadcast outlets, live video commerce provides advantages to businesses, especially startups, because little capital outlay is needed and the message is delivered quickly and directly to consumers.
Secondly, social media integration is not new, but the importance it plays in small businesses is. Forty million businesses have already established a social media marketplace for themselves to take advantage of the more than 1 billion people who visit Facebook business pages each month. Facebook itself estimates that 75 percent of all brands on the site pay to promote their posts according to WSU.
Business Insider estimates that 64 percent of all brands follow other businesses on social media to find solutions to their needs. Whether seeking clientele, keeping an eye on the competition, or sharing company briefs and advertisements with others, the Internet will continue to be a driving force for business relations, especially for entrepreneurs.
Finally, with the advent of smartphones, the ability to reach customers anytime, anywhere has increased. Radware, a cloud-based security firm headquartered in Tel Aviv, Israel, finds that more than half of all e-commerce traffic comes from mobile use. Clutch, a software and financial advisory firm in Washington, DC, notes that almost 50 percent of all small businesses expect to have a mobile app in 2017.
According to GoDaddy, six out of every ten small businesses are not online – even though, overall, 83 percent of small business owners believe they have a distinct advantage over their competition. A fully functioning website is just the tip of the iceberg when it comes to promoting your business’ distinct advantage and being prepared for success as an entrepreneur. Having an online source where customers can view products, services, and pertinent information any time of the day helps entrepreneurs succeed in the 21st century.
It’s critical to utilize the technology to find a gap or need to fill a void, a strong trait amongst entrepreneurs. Here is an except from Roland Reznik, CEO of Kd Smart Chair who was recently featured in the Huffington Post:
“I recognized that not only there was a dramatic need for a change in the options available within this arena [those with disabilities], but more importantly there was an urgent call to alter the stigma of being impaired. I set out to create a device that not only offered freedom in mobility, but one that lifted self-esteem and gifted control and a sense of normalcy”
He took a space that was accepting traditional wheelchairs as the norm and provided a better solution, the smart electric chair as older americans and those with disabilities preferred the ease of convenience which made Roland’s product a stellar success.
So you need to ask yourself, what technology should I use to get the message out? Also what effect will technology have on my core business. What is the best way to leverage technology
3. What are the Economic Risks?
According to a U.S. Bank study, 82 percent of businesses fail because of cash flow problems. Even so, a 2015 report by the National Association for Small Businesses (NASB) says that 75 percent of business owners report that they are confident in their ability to stay afloat. Which further reinforces the mantra that “Cash is King”. Small businesses live and die by cash flow as its needed to keep ongoing obligations. Access to credit is also critical as it’s often needed to gain access to cash when your business has a shortfall.
Because of increasing interest rates, many entrepreneurs look for alternative investment options. The crowd-funding resource Fundable found that friends and family are the main sources of funding for entrepreneurs, investing more than $60 billion in 2015, almost triple the amount coming from venture capital sources. Hence, the environment is becoming ripe for raising capital for your business through outside sources as they may be willing to take the risk with the perceived reward.
For the startups that were able to secure funding, approval rates varied. In 2015, the SBA broke down the rates according to gender, ethnicity, and location:
• 29 percent approval for minority-owned businesses
• 57 percent approval for white-owned businesses
• 71 percent approval for male-owned businesses
• 29 percent approval for female-owned businesses
• 17 percent approval for rural-located businesses
• 83 percent approval for urban-located businesses
According to the NASB, many business owners are shying away from the once-popular C-corporation structure that follows stringent internal and external corporate formalities and obligations. C-corporations are good for business owners who plan to raise money through venture capital funding or stock offers. The disadvantages of C-corporations include expensive fees that are part of filing the Articles of Incorporation, no deduction of corporate losses, double taxation on earnings of the company and regulations on how shareholders must pay taxes on dividends received.
The majority of new businesses are organized as S-corporations (43 percent), and limited liability companies, or LLCs (23 percent).
Many entrepreneurs prefer to take advantage of these corporate structures because of the protection and tax incentives they offer. Both feature pass-through tax incentives, meaning no income tax is paid at the business level, instead profit or loss is passed along through the owners’ personal tax returns. Consult a business attorney for which business set-up is right for your venture. So know what is risk economically when staring a business. It’s not just your start-up cash, but also the opportunity of doing something safer, such as staying in your old job. By fully understanding what is at risk provides with a clear assessment of what you have to gain or even lose bemoaning forward with your idea or business.
ABOUT WSU’S ONLINE EMBA PROGRAMS
Although there are many Online Executive MBA programs, we would like to point out WSU’s program as you can learn to craft high-level business strategies and develop a strong foundation in problem solving, ethics and leadership. The program has a full-featured curriculum designed to help executives and entrepreneurs successfully analyze and synthesize information. For more information, visit WSU’s EMBA degree website.
• NIFB: http://www.nfib.com
• NSBA: http://www.nsba.biz/wp-content/uploads/2016/02/Year-End-Economic-Report-2015.pdf
• SBA: https://www.sba.gov/sites/default/files/2014_Finance_FAQ.pdf
• Entrepreneur: https://www.entrepreneur.com/article/275813
• Forbes: http://images.forbes.com/forbesinsights/StudyPDFs/Video_in_the_CSuite.pdf
• Business News Daily: http://www.businessnewsdaily.com/7605-business-trend-predictions.html
• Forbes: https://www.forbes.com/sites/forbesagencycouncil/2017/02/09/why-live-video-commerce-is-a-game-changer-for-marketers/#6283e388719c
• Biz2Credit: https://www.biz2credit.com/research-reports/women-owned-businesses-improved-2015
• HBR: https://hbr.org/2014/02/scaling-up-is-a-problem-of-both-more-and-less
• Radware: http://www.webperformancetoday.com/2015/02/04/11-reasons-care-mobile-performance-2015-infographic/
• Clutch: https://clutch.co/app-development/resources/small-business-mobile-apps-2016-survey
• GEM: http://www.gemconsortium.org/report
• Fundable: https://www.fundable.com/learn/resources/guides/investor-guide/types-of-investors
• Green Candy Media: http://www.greencandymedia.com/services/