Whether you’re a budding business owner embarking on the exciting journey of entrepreneurship or a seasoned professional aiming to grow your operations, the challenges you’ll encounter are as diverse as they are daunting. As the owner and operator of Genuine Local, a specialty food business accelerator that helps other businesses to grow, I have identified four practical guiding principles that are a blueprint for success.
1. Know Your Costs
Understanding the true cost of running a business is a fundamental lesson for entrepreneurs. Overlooking essential expenses can lead to underpricing, financial challenges and even business failure. The statistics are sobering: 50% of businesses fail within the first five years. This number emphasizes the importance of identifying and accounting for all expenses.
It’s surprisingly easy to overlook crucial expenses. Often, costs like utilities, travel and even self-compensation are underestimated, creating budgetary blind spots. Many emerging business owners at Genuine Local embarked on their journey driven by passion, causing them to overlook the full scope of their business’s expenses. This often leads to a common pitfall that I’ve coined as the “Farmers Market Model,” where budding entrepreneurs, selling to friends, family and often at local farmers markets, underestimate overhead. Even in this startup setting, overhead costs exist, encompassing items like mortgages, utility bills, fuel and the time spent on sourcing supplies and making and selling products. These are all components of overhead costs, often grossly underestimated or completely omitted by novice entrepreneurs.
The pitfall of the Farmers Market Model is when these businesses seek to grow since they weren’t already accounting for the proper costs of their goods. The capital implications of scaling up become challenging to overcome, and often businesses are forced to raise prices at a rate higher than customers are accustomed.
All business owners, no matter what stage they are at, should create a comprehensive list of all business costs—both tangible and intangible—to ensure accurate pricing that will set them up for success.
2. Do What You Do Best, Delegate the Rest
Effective delegation plays a pivotal role in achieving business success. A Gallup study reveals entrepreneurs with higher levels of “delegator talent” experience significantly higher levels of planned business expansion. The article states 75% of entrepreneurs included in the study exhibit limited-to-low levels of delegator talent, falling into a common trap—the belief that they must juggle all roles, from marketing to strategy to production, despite this practice potentially hindering their business growth.
A Genuine Local client specializing in beverage products initially found himself, years ago, overwhelmed with production but sought out support from those better equipped for the task. That allowed him to focus on his strengths in marketing and business development, accelerating his business growth. Today, he offers 25 beverages sold across the United States and Canada.
When business owners focus on their personal strengths and delegate other responsibilities, they ensure more efficient operations. Industry leaders, such as Goldman Sachs, recommend outsourcing responsibilities like social media, bookkeeping, customer service, production or labor. The decision of which tasks to delegate ultimately rests with each individual business owner, depending on the unique needs and structure of their business as well as their own skill set.
3. Instability Requires Adaptability
Market forecasting has emerged as an indispensable practice for any business, especially given recent market volatility. This stresses the importance of robust planning and strategic decision-making for business owners. Market forecasting is a powerful tool that can be leveraged to make informed budgetary decisions grounded in market trends and seasonal patterns.
However, it’s essential to acknowledge that forecasting doesn’t shield businesses from all challenges. Persistent issues, like supply chain disruptions, affect businesses of all sizes, regardless of forecasting. Data from Goldman Sachs in late 2022 showed that 90% of small business owners reported that broader economic trends such as inflation, supply chain issues and workforce shortages negatively impacted their business. More recent data also shows rising challenges around the credit crunch, with 78% of small businesses concerned about their ability to access capital.
These disruptions are nearly impossible to predict through forecasting, though businesses should study the patterns and frequency of these unexpected issues. Businesses that prioritize open communication with customers, especially when operations encounter delays, position themselves to mitigate the adverse impact of unforeseen events.
4. A Rising Tide Raises All Ships
Networking is instrumental to business success. It leads to heightened visibility, refined messaging, increased referrals and, most significantly, added support.
By actively engaging with online groups on platforms like LinkedIn, Facebook or other digital forums, actively participating in the local community and identifying programs committed to supporting small businesses, entrepreneurs can tap into a network of support that significantly bolsters their success.
These networks foster mutually beneficial relationships where opportunities are shared and advice is exchanged, resulting in a strong sense of community, and even reduced expenses, with business owners working together to find efficiencies in space, procurement and more.
Mary Macdonald is a graduate of the Goldman Sachs 10,000 Small Businesses Program and co-owner of Genuine Local, a small business accelerator and small batch contract manufacturer in Laconia. Goldman Sachs 10,000 Small Businesses is a business education program for entrepreneurs that also provides access to capital and business support services. To date, 10,000 Small Businesses has served more than 14,000 small businesses across the United States. For more information, visit 10KSBApply.com and genuinelocal.org.
Current Issue - April 2024