According to the SBA, more than half of small businesses fail in the first 5 years. Unfortunately, an even greater number of small businesses don’t even hit that magical one year mark. Businesses are forced to close their doors for a number of reasons ranging from insufficient capital to poor business strategy. One of the most helpful things you can do to ensure the success of your business is to develop a complete and thorough business model.
Below are a few things to consider when putting together your business model. Yes, some of them may seem elementary but it’s amazing how many people go into business without even considering things like location or how they’ll reach potential customers.
Research. And that doesn’t mean ask your friends what they think. Find out if there is a genuine need for the product or service you are offering. Is anyone offering a similar product or service? If so, what are people saying about it? Can you do a better job?
How will location play into the success of your business? Will your market be limited to the local area or can you reach markets in other geographical locations? Are there any tax breaks available by setting up shop in a specific location?
What are the costs associated with opening this business? A big one that is commonly overlooked are special fees or permits that are required in order to do business. Manufacturing brings with it a world of expense by way of permits, building codes and special insurance so if you’re planning on having a plant or facility, dig deep before you jump in. And lets not forget about uncle Sam. He’s going to take a large portion of whatever you make, no matter how great or small. Is all the sweat, blood, tears and sacrificed family time going to be worth the little bit of money that will be left after the government takes their cut?
The bottom line is, look before you leap. Make sure you’ve done your homework before you jump into a new venture.
Identify. Doing many things poorly is rarely better for a person, or a business, than doing a few things well. For that reason you must clearly identify who you are as a business and what it is that you do. What is your brand image? What do you want people to think of when they see your logo or hear your company name?
Identify how you want to do business. Will it be brick and mortar with a physical location or will you work from home? Will you run an online store or simply offer a service from your vehicle, like landscaping or carpet cleaning? If you create a product do you want to sell it yourself or license it to another company in a similar field who already has a captive audience?
Will you have employees or work alone? Remember S.W.O.T. Analysis? (Strengths, Weaknesses, Opportunities, Threats) That’s a great place to start when establishing your company and identifying who you are as a brand as well as the where and how you want to do business.
Plan. It’s a goofy old adage but it’s undeniably true, “Those who fail to plan, plan to fail.” If your idea of starting a business is build it an they will come, chances are you won’t be in business long. You might have the greatest product in the world but if no one knows you exist, it won’t matter.
Once you’ve established the meat and potatoes of your business, it’s time to hash out a strategy that will allow you to make, market and sell your product or service. Once you have the product or service, how will people hear about you? Marketing is a much different game today than it was ten or even five years ago.
Social media and the advances in technology have dramatically changed the way businesses advertise and market themselves. I remember just 10 or 15 years ago, if you had a website for you business, you were in the minority. Now if you don’t have a website (and Facebook, Twitter, Instagram, Pinterst etc) you’re in the minority and probably getting left in the dust.
We see 3,000-5,000 marketing messages every day. Every element of developing a RIPE business model is important but defining a specific and effective marketing strategy is crucial if you’re going to stand out amidst a see of other messages bombarding your customers.
And to those who say you don’t have to plan, just have to make a catchy video that goes viral and viola, you’re the next Justin Beiber…that’s called luck. Judging by the number of business that try, and fail, every year, I would argue that very few experience that kind of luck.
Execute. This is the hustle phase. No doubt you’ve been hustling for months doing market research and working on your business plan but this is the stage where you get to implement everything you’ve been working so hard on. To put your hypothesis to the test and see if you’ve really done your homework.
No matter how much planning you do, there will still be fires. Potential catastrophes will pop up that must be dealt with and little details that seem to suck the life out of you but are necessary for the business to run. And all of these things take hustle.
If you’ve done your homework, researched your market, developed your brand and created a plan of action, you’ll be much more prepared than a good many of those who enter the entrepreneurial waters only to have their dream of owning their own business go down like sinking ship. And we don’t want that!
So what do you think? Ever considered opening you own business? What are some of the pitfalls you have experienced along the way? Which areas of the R.I.P.E. model do you find the most helpful/important?