3 Signs Your Small Business Will Be a Success

4 min read

According to the US Small Business Administration, there are 33.2 million small businesses in the United States, accounting for 99.9% of all businesses in this country. This is staggering, but note that the SBA considers companies with 500 or fewer employees to be small businesses.

If you’re dreaming of starting your own business, you’re clearly in good company.

But if you’re preparing to make the leap from someone else’s employee to business owner, how can you tell whether you’re ready? Here are a few ways to know if your new small business venture is likely to succeed.

1. You have a great idea — and a solid business plan

The first step in creating a successful business is having an idea. Ideally, that idea is both unique and represents a good or service that people will actually want to buy from you. But it isn’t enough to have the idea — you need to make a real plan to help ensure your success.

A business plan forms a specific roadmap for your business, as it outlines your goals and provides a concrete record of how you’ll handle finances, business operations, sales and marketing, and beyond. In addition to helping you lay out your ideas and figure out what to do next, having a business plan will make it much easier to get funding for your ventures, including small business grants and loans. After all, any entity that could give you money will want to see how you intend to use it.

2. You’re financially ready

If you’re going to be leaving a more traditional employment situation to pursue your dreams of business ownership, it is absolutely essential that you’re in the right shape financially first. The traditional recommendation for an emergency fund is three to six months’ worth of bills, but if you’re starting a business, you should give yourself as much runway as possible.

Aim to save as much as a full year’s worth of bills in a savings account before launching your venture. Yes, this is a lot of money, but if you’re working on a passion project and are concerned about how long it’ll take to become profitable, the last thing you need is worrying about how to pay your regular expenses – – or going into debt to do so.

You may want to try to get your business off the ground while still working your day job, if you can. This might be a challenge, because running your own business is definitely more of a time commitment than your standard 40-hour workweek.

3. You’re prepared to keep excellent financial records

It’s absolutely essential that you keep track of all of your business’s income and expenditures right from the start. As a business owner, your taxes will be different from what they were when you worked for someone else. In those days, your employer takes taxes out of your earnings before issuing you paychecks. But with your own business, you’ll be responsible for paying quarterly estimated taxes, and if you miss those deadlines, you could be penalized. You’ll also be able to write off business expenses, reducing your tax liability.

To help you deal with money matters and taxes, it’s a good idea to make an accountant your first hire for your new business. They can help you decide how to structure the business, which accounting software will work best for your situation, and other bits of financial groundwork. And remember that even though your new business may take over your life (at least for a little while), it’s crucial to keep your personal finances separate from it. Thankfully, there are plenty of great business checking accounts available to help you do just that.

Starting a new business is both scary and exciting. Use the above metrics to decide if you’re ready and if your business is likely to succeed — or if you need to go back to the drawing board.

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