Want to Start a New Business?
Written by CMG News Contributor, Doug Carleton
Over 4.3 million new business applications were filed in 2020. According to the U.S. Chamber of Commerce Foundation, that was the largest increase in new business applications since records started being kept. In addition, through September 2021, nearly 1.4 million applications have been filed, the largest number through the third quarter ever recorded. A great deal of these new business starts is probably - in one way or another - related to the pandemic. Millions of people lost their jobs and millions have quit their jobs because of the generous government benefits designed to help people survive job losses. Either out of necessity or out of the desire to fulfill a dream, millions have decided to start their own businesses and become their own bosses. What I found particularly interesting is the result of a Salesforce survey that found that 52% of small business owners started their businesses with less than $10,000 in funding and almost half of them started with less than $5,000 on-hand on opening day.
As a financing specialist and a former small business lender, my first reaction is that that is insane, although a large number of these new businesses are probably more side-gigs to start rather than an "all in" start of a new business. A side-gig to start is the only option that many people can afford to do in the beginning and I completely understand and support their dreams. However, it has also been noted that the generally accepted number of businesses that never make it past the first year approaches 50%, primarily due to running out of cash.
It is easy to say that as a business owner, one of your top jobs should be managing your cash flow. Make sure that you consider that the cash flow produced by your sales may be coming from a variety of customer types and sources as well as for various reasons and utilizing various platforms. Historically, most of your sales may have come from in-person purchasing. Maybe now, a majority of your sales are coming from online purchases. This may give you the opportunity to upsell something or to offer something that you were unable to offer in a physical environment. It has always been - and will continue to be - critical to know your customer. But now, in our post-pandemic dramatically-changed economy, it has become even more important to know why that pre-pandemic customer is not behaving the way he or she did before. Where and how are these customers making their purchases now? It is not just economic forces creating changes in consumer behavior. For some, the feeling that life may not ever be quite the same may have morphed their buying habits into never being quite the same as well. Knowing your customer is even more important now than ever before.