The pandemic brought on a new wave of entrepreneurs. According to the U.S. Census Bureau, 5.4 million business applications were filed in 2021. Those entrepreneurs were taking a risk. According to Fast Company, the failure rate of small businesses remains high: 20% fail after two years, 50% after five years, and 70% go under after 10 years. As the president of the Association for Entrepreneurship USA and a business owner, I have seen the ins and outs of running a successful company. Here are five ways to make sure that you are setting your business up for success:

Conduct market research

When starting your own business, you want to make sure to research the different aspects of your business such as the supply chain, business models, expenses, etc. Also, you should be researching your target audiences, testing the product/service before going live and gathering information about competitors. One great place to find information about your competitors is by visiting their website and social media accounts. These resources can give you insight into what is/is not working well for them. Then, you can determine how you plan on marketing your own products/services.

If your business product and or service is already established, try working in the industry first before you invest your time and energy into it. When getting into business, you can find an existing business for sale by contacting a business broker (or use BizBuySell or LoopNet) to get more information. Your ideal business may be for sale. You can get a wealth of information by meeting with a business broker such as all profit and loss statements, costs, payroll, insurance and taxes for an existing business. Then you can meet with the seller / business owner and hear firsthand all about your ideal business from the inside.

If your idea or service is new, start on a small test scale to see the potential. This can help minimize costs because failure is always a possibility.

Get ready for inflation

As of June 2022, the annual inflation rate has risen to 9.1%. If you are starting your business now during this time of increasing inflation, connect with your accountant to set up a plan. Figure out the sum of your costs and calculate what you need to sell your product/service for to make a profit. If you can, work with local suppliers to potentially decrease the cost of supplies. New businesses generally do not get a discount in purchase power, if anything, it is the opposite. Ask yourself: am I in the business of needs or wants? Example: I need new tires for my car vs. I want new rims for my tires. During a time of inflation, people may opt to save on spending on “wants” like rims. Restaurants are another example of a type of business that might suffer. Therefore, if you are in a “want” business, be prepared for fluctuation of sales in periods of high inflation.

Hire the right people

This is one of the most important steps in business success or failure. Handpick the people who will work for you. Create archetypes of the best employees you envision for your business. Right now, we are experiencing a labor shortage, so many business owners might be tempted to hire, just to hire. However, it is important to make sure that you have the right people working for you. Once you have a core group for leadership, talk with them about any employee references they have. Have they worked in the business that you’re starting? Are you relying on them or are they helping you? Will they be opening a location for you?

Make sure to conduct in-person interviews to get to know the potential employee face-to-face. Also, get a list of references from them, so you can speak with people who can vouch for their work ethic. Call previous employers and read in between the lines if they are hesitant to talk. Ask the question: “would you rehire them?”

Keep spending low at the start

Financing has always been a critical part of business success and failure. Are you using your nest egg, retirement savings or even taking a loan out on your house? Be wise with spending. Even if you start out your business with a large budget, you want to make sure that you stretch it as far as you can. Entrepreneurs should find ways to keep costs as low as possible to foster success in the future. When working with a budget, you can always spend your savings in the future, but if you get yourself into huge debt, it can be difficult to come back from it during slow times in business. One important note: Keep on top of your payroll taxes! If this is backed up, the government can garnish your bank account, which could put your bills in jeopardy. 

Be tenacious

Starting a business is not easy. There will be many bumps and challenges during your first year of business and it’s important for you to learn how to ride those bumpy waves. Tenacity is the biggest component of being a successful person. Be ready for any challenge at any moment. You have to have the attitude, if you come to a wall, say to yourself: “My plan is to go through it, over it, under it, or around it but it will not stop me.”

The above tips will support you in your first year as a business owner. Remember that it is important to be prepared, plan ahead and not give up.