For some people, starting a small business remains a dream that's always a little bit out of reach. The time never seems exactly right or the risks seem a little bit too large.
This year, however, may be the right time. With unemployment near record lows, quitting your job isn't the risk it once was. If you have a well-thought-out plan, the correct amount of capital, and a willingness to put in the work, 2018 is the year to start your small business.
"Projections show that the number of U.S. small businesses will grow from 30 million in 2016 to over 42 million in 2026," according to a study by Intuit. "Nimble small businesses are better suited to the realities of the 21st economy. The most successful small businesses are capitalizing on new opportunities, adapting when needed and pivoting to serve customer expectations in a rapidly changing world."
Image source: Bureau of Labor Statistics..
What steps should you take?
When starting a small business, the difference between success and failure is often planning. About 20% of small businesses don't make it through their first year, while roughly 50% don't survive for five years.
In many cases, that's because the business founder underestimates capital requirements and overestimates revenue. In fact, over half of failed small businesses close because they don't make enough money and have run out of funding, according to the 2015/2016 Global Entrepreneurship Report published by Babson College.
The amount of capital required varies greatly by industry, but it's important to figure out your personal budget during your company's ramp-up period. Can you afford to go six months without a salary? What are the start-up costs, the monthly operating budget, and other cash needs? How long will you have to fund those until capital coming into the company will pay for the business to operate?
Be pessimistic. Assume things will go wrong and that you will need more cash than expected.
This might be the right time to open your small business. Image source: Getty Images.
Why is 2018 the right time?
In addition to the relative ease of getting a job in many fields should your business fail, the rapidly changing nature of business has created some opportunity.
"Consumer habits are changing, forcing Americans to consider how they open small businesses in 2018 -- whether it's focusing more on e-commerce than actual storefronts, or focusing on selling to a local community or region instead of a broader national audience," said Luke Pittaway, Ohio University's Copeland Professor of Entrepreneurship, in a press release promoting UPS Stores' Inside Small Business Survey.
In addition, tools have evolved to make it easier to start digital businesses, or companies with a digital component. For example, Shopify makes opening a digital storefront something anyone with basic technical skills can do. In addition, web platforms like WordPress and Drupal have dramatically lowered the cost of creating content and feature-rich websites.
Of course, the changing nature of retail has also created opportunities for those who do seek to open a traditional storefront. A record number of store closures has forced mall owners and other landlords to be more creative in filling space. That can lead to cheaper or more creative leases that allow small businesses to go places they once couldn't.
Go big, but be cautious
Before you risk your life savings or, worse, money from friends and family following your small-business dream, do a reality check. Write a business plan and have successful small business owners review it for you. Do a full strengths, weaknesses, opportunities, and threats (SWOT) analysis and be honest with yourself.
Take advantage of services offered by SCORE, an organization that will match you with a free mentor to help you evaluate your plan. You may also be able to find help from the U.S. Small Business Administration, and in some cases, your local chamber of commerce or other business organization may be willing to help as well.
Once your planning is done and your numbers have been checked, take your shot. Starting a small business has its risks -- but once you have done everything you can to ensure your success, it's a dream worth pursuing because the rewards can be so high.
