In 2018, the United States alone raised $1,038,000 in crowdfunding. This amount is expected to show an annual growth rate of 10.4%, resulting in a total amount raised of $1,298,000 by the year 2022. From a global perspective, that amount is even higher – China raised $7,463,000 in 2018!
What makes or breaks a successful small business? There are several key commonalities among businesses that succeed, according to several studies polling entrepreneurs.
Here’s a closer look at four things successful business owners do right—and one thing they need to do better.
What successful entrepreneurs do right
They start strong. In a poll of 500 successful entrepreneurs, a whopping 84% of respondents say their companies achieved profitability within their first four years in business. In fact, 68% became profitable within the first year. Only 8% became profitable after their fifth year in business, suggesting that the first years in business are make-or-break ones for most entrepreneurs.
They focus on finding new customers. Small business owners in the survey say finding new customers is their top business challenge—far ahead of cash flow issues or dealing with the competition. Smart entrepreneurs stay focused on continually generating new leads and closing new business.
They put cash back into the business. Forty percent of business owners say whenever they have surplus cash, they put it back into the business rather than paying themselves, a separate study found. What’s more, 47% tap into personal savings to finance their businesses at one point or another.
They work hard. Never let it be said small business owners are slackers. Some 86% work on the weekends; 23% take fewer than two vacation days total all year long; and of those who do take vacations, 75% work during their time “off.” Continue reading →
Cash is the fuel that makes a business run. It is needed to pay salaries including your own, fund marketing programs to acquire and retain new customers, invest in equipment and facilities, pay rent, supplies and many more day-to-day activities. Most financial experts recommend three to six months of operating expenses, but using this for every business in every situation is misleading.
To determine how much cash you need, you must look at the following key areas.
How Much Cash Have You Been Using?
If you’re an established business owner, look at your monthly cash flow report (or go to the next paragraph if you’re a start-up). This report will provide an historical and seasonal perspective. Note the cash received from sales and the cash spent. The net of these two is often referred to as the “net burn rate.” For example, if you have $50,000 in sales and $30,000 in expenses, then your net burn is +$20,000
Your “gross burn rate” only takes cash expenditures into account; in our example, that’s $30,000 and is the more conservative amount, since it does not assume any sales are made. Historical spending patterns are a good starting point in considering future spending plans. Continue reading →
Many startup small business owners take pride in pulling themselves up by their bootstraps and not using financing to get their companies off the ground. But that approach can backfire, a new study in the Journal of Corporate Finance suggests.
The study, conducted by Florida Atlantic University faculty, assessed what happened to companies that took on debt during their first year of operation.
The authors discovered businesses that took on debt are more likely to succeed (as long as they use business debt as opposed to taking on personal debt).
Marty Zwilling is the Founder and CEO of Startup Professionals as well as a regular contributor to Forbes and Entrepreneur. In addition to writing “Attracting an Angel,” Zwilling is an an accredited angel investor.
Neva Peterson founded a bookkeeping and consulting business in Las Vegas five years ago, mainly on a shoestring budget, working alone from a home office.
Before the first year ended, she’d grown Neva Knows Business enough to sublet office space, and hire a part-time employee. That employee worked more hours as Peterson brought in additional clients. Soon, it was time to hire again. Business was flourishing, but there were occasional cash shortages when Peterson needed to make payroll.
“Small-business loans are so hard to get,” Peterson says. “It’s practically like donating an organ, you have to jump through so many hoops. And, meanwhile, the clock is ticking.” Continue reading →