Advise for Small Businesses and Startups

The true definition of a Small Business is a business that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size in terms of employees or annual receipts. The purpose of t

his post is to give people a few statistics on small businesses, as well as hopefully impact your impression and interest in small businesses.

The effects of small businesses on the economy

1. There are over 20 million full and part-time home-based businesses in the United States.
2. Nearly 750,000 tax-paying, employee-hiring businesses are started every year.
3. Small Businesses create 75 percent of the new jobs in the United States.
4. Of all non-produce businesses in the United States, almost 97 percent are considered small by the SBA standards.
5. Small businesses account for more than 50 percent of the gross domestic product (GDP).
6. About 80 percent of all Americans get their first job at a small business.

Although there are so many small businesses that open every year, many studies say that a third of them fail in the first four years. Another study says roughly 60 percent of them fail within the first six years! So I am going to continue with some reasons why a lot of them fail so you can think through these things.

Why small businesses fail

1. Testing the Waters: Plunging in without testing on a small scale.
2. Pricing: Underpricing or overpricing goods or services.
3. Marketing: Understanding how much time it will take to build a market.
4. Money Starting with too much capital and being careless or too little and going under.
5. Experience: Going into business with little or no experience in the industry or market.
6. Management: A lot of small businesses go out of business because of poor management.

As a small web development company, we had to run through this list to make sure we were starting our business on the path of success. This is how we met each of these requirements to ensure our success, maybe these models will help you in your venture as well.

We started with (and you should as well) experience. All of the employees in Chosen come from a design, marketing, or development related background and know their talents well. This is crucial as more web related businesses begin to spring up, many do not have the background, experience or skills needed to develop high quality applications, and portfolios can be very misleading. To ensure that our employees are competent, we have them get certified for specific technologies via Brainbench, as well as blog and host seminars to share their skills with others (studies say the best way to learn is to teach). Once we had done this with our core team, we knew we had the experience and knowledge base to move to the next step.

Next, we tested the waters by starting out as a contract based business (which we still do). This way we weren’t immediately relying on clients to sustain our growth, and could focus on offering our services to other successful businesses in related industries. This not only provided a steady revenue which helped us avoid needing a loan or investment, but it also gave us insight as to how other businesses succeeded and how they conduct business.

After we launched ourselves as a client based business, we had to find the balance between competitive prices and steady cash flow to sustain and grow our business. We decided to market our services in different packages to offer a range that will fit almost any budget or need. Package based pricing as well as marketing online, helps us to slowly establish ourselves online as well as by word of mouth offline. Note though, that all types of marketing take time and that you shouldn’t get discouraged if you don’t see results overnight.

The point of the message is clear, we want to help your business succeed, whether it’s online or off. If you want to see what Chosen can do to help your business succeed, you can contact us and setup a meeting to discuss some options. There are also many courses and programs that aim to help small businesses including resources such as this very blog. A great place for a business to start is with government agencies such the Small Business Administration (SMA) which is a government agency that advises and assists small businesses by providing management training and financial advice and loans. There are many other agencies as well such as your local Chamber of Commerce, SBIC, and SCORE. The government does not want the small businesses to fail. So if you need help seek it.