Up until the COVID-19 crisis began, this year was looking like the perfect time to create a startup business. In 2020, entrepreneurs have more access and opportunity than ever before to help them succeed.
But now many startups are feeling the pain of dramatic financial losses. Launching a startup business is highly uncertain and very competitive, and even when there’s not a global pandemic going on, many new companies fail within their first year of business.
A startup business’s failure can be caused by a variety of issues, both in and out of the entrepreneur’s control. But on the other hand, many of those very same factors can help a company flourish and grow if they work out in the business’s favor. These are some of the factors that can make or break a startup.
1. Location of your startup business
Depending on your product, your startup business location can be critical in making sales and creating brand recognition. But even for companies not selling a physical product, location can still affect your overhead costs, the type of employees you’ll draw in, taxes, and other factors.
Depending on your enterprise, it might be in your best interest to stay near the hub of your industry: for example, relocating to Silicon Valley if you’re working with software, or creating your financial business in New York City. Being located close to industry experts and investors has been a critical factor in many businesses’ success.
Another factor to consider when it comes to location is virtualization. Many jobs and processes can now be done remotely, so creating a completely digital company is an option. However, a physical office still has many benefits, so it’s worth considering the pros and cons when deciding whether to go remote.
2. Timing
According to one expert’s “critical mass theory of startups,” timing plays the same role for startups that it does in creating a nuclear chain reaction: Forces build until they reach critical mass, when they take off and become self-sustaining.
The reason timing is so vital is because a startup business must be there for the take-off. If it enters the market too early, it will waste resources waiting for the trends to catch on; too late, and it will be swamped by competition fighting for a foothold.
Utilizing the most up-to-date technologies can help you succeed as you catch the forefront of a movement. But other forces, like the economic climate and cultural readiness, may be out of your control when it comes to the right time to start your business and sell your product.
There are, of course, phenomena like our current pandemic that are unforeseeable and massively destructive for small businesses and startups. No one can predict the future, so even with the best timing, there’s still risk in launching a business. But if you can gauge the readiness of your market and technology, you could improve your chances of success by launching at a more opportune time.
3. Small Business Insurance
Some startup businesses choose not to buy insurance initially, claiming they can’t afford it. And admittedly, finances are usually stretched to the breaking point for a new business. But, considering the risks, startups really can’t afford not to have business insurance, since one uninsured disaster could bankrupt a company before it ever gets its feet on the ground.
Insuring against unforeseen loss and damage is a critical part of a successful startup strategy. Businesses based in physical locations will need to have property insurance to cover losses from theft, fire damage, and other natural disasters. And every business needs general liability insurance to protect them from potential lawsuits leveraged against the company.
Small business insurance can offer the best of both worlds, insuring companies against potential liabilities while cutting out extra costs for unnecessary coverage.
4. Startup Business Employees
A good team is vital in turning a startup founders vision into a reality. Startups often begin with just a few core employees, so you will need to have the right people on your side from the start. Find workers who are trustworthy, positive, believe in the company, and can wear multiple hats.
The wrong individuals might be those who, despite being good people, don’t have the core skills needed to get things done. Or, they could be hardworking but constantly negative and bad for morale.
A startup enterprise is a fast-paced and fast-changing environment, you will need people capable of thinking and acting quickly and appropriately, and who add value to your core team.
5. Growth Management
Every business wants to grow, especially as growth can get small businesses access to greater funds and resources. The intention to grow is not mis-placed, but if you’re growing at a pace that outruns your resources, it can ultimately be your downfall.
Similarly, if you try to expand your products or services beyond your area of expertise, you may lose the niche market space that differentiates you.
Growth is an ultimate goal for businesses (as it should be!), but decisions about expansion must be made with the long term in mind rather than trying to force growth before you’re ready.
There are, of course, many other factors that influence a startup’s success, but focusing on these five important attributes is a good place to start when considering how to successfully launch your business.