— January 30, 2019
The New Year is here and with it a time to reflect on career goals. Aspiring entrepreneurs who are considering starting a small business in 2019 may find encouragement in new survey results from Kabbage. After polling 600 thriving U.S. small business owners, the survey found that the majority of successful entrepreneurs got started with little cash and short run rates. The survey also demystifies the cash flow obstacles many aspiring entrepreneurs may perceive as reasons to not start a business, when in fact they’re all too common.
These are three myths aspiring entrepreneurs should know when starting and building their company.
Myth #1: You Need a Lot of Money to Start. One of the biggest perceived barriers to starting a company is the amount of capital required. In reality, many successful entrepreneurs get started with surprisingly small amounts of money. According to new data, 58 percent of small businesses started with less than $ 25,000 and one-third of successful businesses started with less than $ 5,000.
While the amount of capital required to get started may be lower than expected, managing cash flow is critical to growing a company. Many small business owners have begun using online lending platforms that look at a business’ live performance data to approve funding instead of old bank statements and dated tax returns. These innovations help small business owners who may not have long credit histories and allows for faster and more flexible access to working capital.
For example, years after Illinois-based couple, Maryla and Derek Bosek, started their kitchen countertop store, Factory Plaza they found themselves struggling with cash flow. Having taken out several loans from their bank to buy a warehouse and cabinet production equipment, they needed more funding to hire a production team to keep up with demand. They turned to online lending and were quickly approved. With that funding, they were able to hire three more people and, as sales grew, eventually increased their production team to 16 people. By expanding their production, Maryla and Darek were able to increase their annual sales by $ 500,000.
Myth #2 Start a Business In The Industry You Know Best. Forty-one percent of survey respondents started a business in an industry that was new to them. Despite this, 82 percent of respondents did not doubt they had the qualifications and experience to successfully run a company.
While confidence is key, no business owner should go it alone. Aspiring entrepreneurs should find a mentor or advisor in their industry who can help them avoid mistakes, keep an eye on long-term goals, anticipate upcoming expenses and give objective advice about cash flow issues. For those searching for a mentor, try connecting with industry contacts on LinkedIn, join a trade association or look at SCORE for opportunities.
Myth #3 Being a Business Owner Means Doing It All. Another common misconception is that business owners should both know how to do and manage every aspect of operating a business.
According to the survey, the areas of business in which entrepreneurs had the least amount of experience when they started their company was financing/bookkeeping, legal/compliance and marketing/advertising. To free up time that could be focused on bringing in new customers, hire consultants or part-time freelancers to manage tasks that you are unfamiliar with or that are time consuming.
Small businesses can also benefit from using technology to automate different aspects of business operations. Technology platforms can help manage tasks like resource scheduling, inventory management, digital marketing and customer service. Having the right tools in place can improve operational processes, reduce paperwork, increase efficiency and even improve worker productivity. Remember: a smart investment in your business is one that will secure its future.