Entrepreneurship is no walk in the park. In fact, launching a business can be one of the hardest things many people experience in their entire lives. From early mornings to late nights, it’s a time-consuming task, however nonetheless rewarding. Yet, before you take the plunge into entrepreneurship, it’s important to know exactly what you’re getting into.
Today, there are over 29.6 million small businesses in the U.S., which makes up a whopping 99.9 percent of all businesses in the country. However, all too often new businesses find themselves closing their doors within the first couple of years. In fact, 20 percent of businesses fail in the first year and that number jumps to 50 percent by year five.
To make sure your business isn’t just one of these statistics, here are 10 important things to know before starting a business.
1. It’s a saturated industry.
Today, there are millions of businesses out there. That’s why it’s more important than ever to make your business stand out from the crowd and offer something niche. To give you a better idea, in 2017, there were 29.6 million small businesses just in the United States. And those small businesses make up 99.9 percent of all businesses in the country, according to the Small Business Association.
2. There are high failure rates.
With the highly competitive startup landscape of today, it’s vital to test out your business idea to make sure it has a high success rate. Because all too often, businesses find themselves closing up shop. On average, 20 percent of new businesses fail within the first year. By the third year, this number reaches 34 percent, by year five 50 percent and by year ten 70 percent.
3. Some entrepreneurs don’t make a salary at all.
Starting a business comes at a cost. From overhead costs to salaries, depending on the type of business you launch will determine how much you’ll be spending and making. That being said, don’t expect to become a millionaire overnight. In fact, according to a 2017 study, 86.3 percent of small business owners say they take a salary of less than $100,000, and 30 percent of those say they don’t take one at all.
4. Some loans can be harder to get than others.
Many entrepreneurs turn to banks and other financial institutions to secure a loan for their small business. If you’re one of these people, here are a few stats to know. According to recent research, big banks approved 24.1 percent of small business loans last year. However, don’t worry — small banks and other types of lenders have higher rates of approval for bank loans. In 2017, small banks approved 48.9 percent of small business loans and alternative lenders 58.2 percent.
5. Capital can fluctuate.
Every business needs capital to get started. Of course, depending on the type of business and what exactly it requires will determine how much money you need to successfully get started. On average, research finds that 64 percent of small business owners typically start with $10,000 or less. Another 12 percent usually begin with $10,000 to $20,000, 11 percent with $20,000 to $50,000 and 13 percent with $50,000 or more.
6. Some entrepreneurs dip into their savings.
When they’re just getting starting, many small business owners choose to self-fund. In fact, according to a 2015 study, 75 percent of small business owners use their own money as their primary source of startup funding.
7. Small business owners wear lots of hats.
Entrepreneurship is not easy, especially when you’re first starting out. And to save money, many small business owners find themselves taking on many roles. For example, according to recent research, nearly half of small business owners take care of their own marketing efforts. Other research suggests that 20 percent of small business owners spend 10 to 24 hours a month on accounting, and 50 percent spend nearly ten hours.
8. Home offices are very common.
When you’re just starting out, one great way to save money is by launching your business from home. In fact, according to the SBA, 52 percent of small businesses in the U.S. were home-based in 2014, and this number has remained fairly constant since.
9. Some industries are stronger than others.
Before choosing what exactly your startup will be, it’s important to do some research about the hottest industries at the moment. According to recent research the top industries with the highest forecasted growth rates are health care, marijuana, e-commerce and information technology.
10. Economic uncertainty can be a major challenge.
There are certain challenges in the startup world that have the potential to thwart your new business’ growth. Recent research finds the biggest challenges that stop businesses from scaling are economic uncertainty, lower consumer spending and regulatory burdens.
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by Rose Leadem