Thinking of small scale business and how to start and succeed with one? Then read this comprehensive article.
It delves deeper into considerations for starting and succeeding with such business and how you can get involved easily.
First things first though, it’s not about starting a small business. You see, starting a small business is one thing but running it successfully within a specific period is another thing.
If you would like to succeed with a small scale business then you must start and operate it well. And, of course, you must avoid all the causes of small business failure.
Keep reading to learn more about how to start and succeed with a small business.
What Is a Small Scale Business?
Before starting a discussion on how to start and succeed with a small business, it is important to understand what a small scale business means.
A small scale business is also known as a small business or a small enterprise. It is a business that is privately owned and that has few employees and capital requirements than a public company.
Sole proprietorships, partnerships and limited liability companies fall under the category of a small scale business based on their capital and labor requirement.
What constitutes a small scale type business varies by country.
According to the US Small Business Association (SBA), a small business is categorized as having less than 500 employees which are required for large scale businesses.
Small scale businesses are popular in different parts of the world. They provide income for the owners and they help to sustain the economy of a country. Many people start a small business but not everyone succeeds with it.
According to a statistic published in Fundera.com:
“20% of small businesses fail in their first year, 30% of small business fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail in their 10th year in business.”
How to Start a Small Scale Business (6 Powerful Steps)
If you are planning to start a small business, then you should follow the steps discussed below:
1. Find the Perfect Business Idea for You
You need a business idea before you start a small scale business.
You may want to start up a business afresh or you may decide to buy an existing business. Whichever option you choose, will spur you to start a business and run a business.
If you really don’t have the perfect business idea, then answering the following questions will help you generate the right idea.
Questions To Help With The Perfect Small Business Idea
What Skills Do You Have?
Have you the necessary training to start the business?
Have you worked in a place and garnered experience to start the business?
Do you have a talent or special skill related to the business you want to start?
Your answers to these questions may involve hobby or passion.
What Resources Are at Your Disposal?
The kind of business you want to start will depend on the number of resources at your disposal.
The amount of money you have, the equipment you have, the office space, and other assets, will help you find a business opportunity with minimum expenses and maximum profitability.
What Need Can You Fill?
If you identify a problem about a product, concept or business, you could be spurred to invent a solution.
You can put yourself in the place of a customer and build a business that would take care of the identified problems.
So, look out for needs to fill and this could be your perfect business idea.
2. Write a Business Plan
You need to write a business plan before you start a business.
A business plan is a summary of how a business owner, manager, or entrepreneur intends to organize an entrepreneurial endeavor and implement activities for the venture to succeed.
What To Include In a Good Business Plan
In a good business plan, you should state:
What Does the Small Scale Business Do?
The plan should state whether the business trades a product or service. Or, whether it is into the manufacturing of a product.
The name and uses of the product or service should be clearly stated.
Who Is the Target Audience for the Product or Service?
The business plan must state the targeted customers.
It should state whether the product or service is useful to men or women, adult or children or both. Or is the product useful for individuals or for businesses?
Or, is the product useful for those in a specific occupation, social class, specific location, and so on?
Understanding the target audience will go a long way to help you remain focus when you go into production or when you create and deliver the service.
Who Are the Competitors of the Business?
The business plan should state the competitors of the business.
Knowing your competition will help you create and maintain a business model. It will also help you make constant research for improvement.
What Is the Unique Value Proposition of the Business?
A good business plan should answer the question: What makes your service or product stand out from the competition?
You need to provide answers in terms of whether your business is better than others based on:
- Location of product or business
- Price points
- Product features, branding or packaging
- Ease and simplicity of use
- Quality of materials used, etc.
How Will Customers Find You?
What is your marketing strategy for the product or service?
Will you use word of mouth, radio, television, social media, website, or newspaper, etc., to communicate with your customer?
What Assets or Resources Will You Need for the Business?
You will have to state whether you are hiring employees or whether you are using outside contractors.
Also, you have to state your need for manufacturing equipment, computers, and software, retails places, vehicles, power generators, and so on.
How Will the Business Make a Profit?
You have to state the business model that would make your business generate profit.
This business model should state your business’s income stream and expenditure over a period of time.
In other words, the cash inflow and cash outflow of the business.
If you are very clear with the business model, you will increase your chance of success.
How Long Will It Take the Business to Make a Profit?
The business plan should state the forecast of expected profit. This is also known as the financial projections.
It should estimate how much revenue and income that business will make in three to five years.
The plan must comprehensively state how long the business is going to recuperate its initial investment, reach a breakeven point, and start making a profit.
What Standards of Operation Is the Business Going to Maintain?
In other words, what is the core value of the business that would not be compromised when things get tough?
You should state the quality of materials you need to use and maintain, the kind of or quality of employees you are going to use, and so on.
A clear core value of the business helps give direction to the type of men, machines, materials, and money used for the business.
What Is Your Eventual Goal for the Business?
The business plan should state if the business is going to be an ongoing venture, or is it going to be sold when it eventually starts making a profit?
The long-term endgame of the business should be properly outlined.
3. Register Your Business for Legal Identification
You should register your business with the relevant agencies or associations when you are starting out. This will give your business a legal backing so you can operate smoothly.
Get a business license or permit from the market, local government, state or country you wish to operate from.
Permits or licenses could be generic or specific.
Generic permits are those licenses cover the registration of business entity.
Specific permits cover specialized activities done by the business. For instance, you can get a license or permit to trade in used clothing only.
You should register a business name for the business. This is the name that will identify your business uniquely. When filing for a business name, you should choose the business structure. That is, state whether you are going to operate:
- Sole proprietorship
- Limited Liability Company, etc.
You also need to get the Tax identification number (TIN) or an employer identification number (EIN) so that tax agencies like the IRS can track your business for taxation purpose.
You should also apply for any trademark or copyright or patent. If your business revolves around a new invention then this is important to protect your intellectual property.
4. Look for Money to Fund Your Small Scale Business
You may decide to finance your business by yourself if you have the money.
However, there are other options you can go for if you don’t enough money to finance the small scale business startup.
Best Ways To Get Money for Your Small Business
Financing your business could mean choosing any of these options:
Borrow Money From Your Friends or Family Members
Your friends and relatives can help you with capital to start your business if they have.
Obtain a Business Loan From Banks
Commercial banks and developmental banks can lend you money to start up a business.
Get Finance From External Investors
Here you can get money from angel investors or from venture capital firms.
Consider Equipment Financing
Here you don’t need to worry about spending too much cash on machinery, computers, vehicle, and other equipment.
Your equipment is financed through an arrangement whereby you only pay a certain fixed amount to the supplier every month until the debt is paid.
Obtain a Loan From Agencies Like SBA
The US Small Business Association (SBA) helps to fund and grow small businesses in the United States.
Thus, you can receive SBA term loans for your small scale business.
Of course, you must meet their requirement before such loans can be approved. So make sure you do your homework before applying.
Utilize Your Business Lines of Credit
You can finance your small scale business by drawing from a line of credit.
This is the maximum credit that a customer is allowed by a bank or financial institution.
Get Funds From Crowdfund Platforms
You can register with crowdfunding platforms where individuals can contribute and raise funds for you.
Of course, you must offer your business’s samples to attract pledges and contributions to start off the business.
5. Plan and Assemble Your Small Scale Business Employees
You should plan and hire the right people. Ensure you employ people that would contribute to the growth and success of the business.
Create a clear job description for each member of your team and hire those who show great initiative.
Lay out an effective way to manage your team members, employees or contractors.
Thus, you should clearly state an effective way to recruit, organize, compensate, assess, and monitor your team members for the success of the business.
6. Learn How to Manage Your Finances
You should learn how to manage the finance of your business from the onset.
Learn the basic documents that would help you keep a record of your income, expenses, profits, assets, debts, and taxation.
You also need to understand how to prepare and maintain basic accounting documents like:
- Balance sheet – This lists your assets, liability, and equity at a specific period of time.
- Income statement – This summarizes your business revenues and expenses over the course of a year, letting you calculate your net profit or loss for that year.
- Cash Flow Statement – This shows the inflow of revenue and outflow of expenses resulting from all your business activities during a specific time period. It could be for a month or a financial quarter. The inflow will come from selling goods and receiving payment on invoices, while outflow will come from things like purchasing inventory, payroll, and paying marketing costs and other overhead expenses.
You should also utilize basic accounting and money saving apps and software to help you save time and energy when compiling your income and expenses.
Examples of these software applications include:
How to Succeed With a Small Scale Business (6 Powerful Tips)
If you have set up your business, then congratulation!
Nevertheless, you must know that starting a business is just one phase, and becoming successful in running it is another phase.
Here are some quick tips you must follow to increase your chance of becoming successful in your small scale business
1. Set Goals and Follow Through With Workable Plans
You must set goals in every aspect of the business, and you must follow through with workable plans. You should always set production goals, marketing goals, employee goals, sales goals, and so on.
Setting goals will help you to remain focused.
2. Be Creative and Improve on the Ways You Do Things
To succeed in business you must be creative and improve on the ways you do things. Be open to new ideas so your business, product or service can stand out from the competition.
3. You Need Steady Hard Work to Excel
Hard work is required before, during and after you start a small scale business.
Spend more time on your business and spend less time on friends and family.
Of course, you must strike a good balance so that your relationship with your family or marriage doesn’t suffer in place of your business.
Related: How To Avoid Marital Money Fights.
4. Be Open to New Knowledge About Your Industry
Keep in touch with industry news and trends. Network with other businesses to keep informed of what is going on.
5. Be Patient With the Progress of the Business
If you do the needful, eventually you will start making a profit.
You cannot become a millionaire overnight when you start running a small scale business.
6. Always Provide Value to Your Customers
Your business or product/service must solve a problem for Make sure that customers get value whenever they buy from you.
Research what customers want and provide them with the product that would solve that problem for them.
Also See: Most Profitable Crafts to Sell in a Business.
Examples of Small Scale Type Businesses That You Can Make Money From
- Small Business of Making Money Coding
- Small Scale Businesses For Stay at Home Moms
- Small Business of Flea Market Flipping
- Small Business of Buying and Selling Hair
- Small Business of Taking and Selling Pictures
- Small Business of Selling Jewelries Online
- Small Business of Writing Articles Online
There you have it – if you want to start and succeed with a small scale business, the above tips would help you generate the perfect idea, start the business and succeed with it.
But of course, that’s only if the tips are adhered to. It makes no sense to know helpful tips, if you don’t implement them in your small business.