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More than 80% of US startups fail within their first year, with financial inadequacies frequently leading to their downfall. So with entrepreneurship booming in the US, how can young people give their businesses the best chance of success?
Eager to advise budding entrepreneurs, the experts at Wix.com have compiled their best advice for starting a new digital business as a young person, including the common pitfalls, and how to stress-test your business plan.
Three common business pitfalls
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Lack of online visibility
If your start-up business lacks online visibility, this can negatively impact brand awareness and ultimately, revenue. Young entrepreneurs should aim to concentrate efforts into ensuring your website ranks high enough on mobile and browsers by implementing strong SEO techniques such as using trending keyword search tools, and optimizing website content to help you to do so.
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Avoiding personal networking to grow brand awareness
Utilizing personal networks is particularly important for new businesses. Using social media advertising through friends and family is an easy way to help grow awareness of your company and its product. The more people using your product and leaving reviews, the more interest you’ll receive from future customers. Many young budding entrepreneurs forget how useful their personal network is.
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Poor product pricing
It can be hard to find the right balance between pricing a product low enough to attract consumers, yet high enough to cover labor costs and return a profit. You should consider the purchasing power of your consumers, so that you can enable your business to generate enough revenue.
Many start-ups opt for penetration pricing, which involves offering low prices that initially undercut competitors to win consumers, then gradually increasing prices as your market share grows. However, this does entail some risk as it could result in a financial loss whilst you are building brand awareness within the market. Be sure to conduct thorough research into your market niche, in order to analyze pricing and consumer purchasing power.
Top tips for starting a new business
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Identify and know your passion
There are numerous benefits to starting your business around your passion. Not only will you be able to bring your own expertise, but you will also be more motivated to make the business a success, striving to get the most out of your business and giving it the best chance of competing within the market.
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Plan, Plan, Plan
Planning all aspects of your start-up business is vital as a young entrepreneur. You will need to create a solid business plan which summarizes your business, industry and consumer analysis, as well as an operational plan and financial estimates and projections. Competitor analysis is also an integral part of planning, which can aid you in growing your own marketing and sales strategies, in order to grow your brand awareness and push your USP.
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The importance of finances
Financial limitations frequently lead to the downfall of startups, which is why it is vital to have your finances in order. Many young entrepreneurs have to fund their business themselves, so having your personal finances in order is crucial. If you need to get a business loan, having a good credit rating can help you to acquire the funds to set up your business. However, once this is acquired, ensure you keep your business finances healthy and implement adequate pricing, to cover costs to avoid losses, and also to keep customers happy.
How to stress-test your business plan
Stress testing is vital for ensuring that your business can withstand economic disruptions, as well as understanding the health of your business model, and identifying gaps in your plan that may threaten the longevity of your business. Here are some tips on how to do this:
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Identify risks your business may face
These may be risks in strategy, such as market focus, financial risks, how the business finances will be managed, operational risks on how the company operates, or compliance risks which could be picked up on by government regulators.
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Create a risk management strategy
Generating a strategy to prepare for those risks identified is key. Look to create methods and plans of how your business will manage the risks identified if they were to arise. As a young entrepreneur, it is also valuable to talk to experts within your field who can give key advice and knowledge on business strategies, as well as money and time management to help you avoid downfalls in your plan.
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Utilize this to review your plan and update it
Once you have identified risks and a risk management strategy, you can utilize what you know to ensure your business plan is up to date and has the best chance of success and longevity. It is important to remember that you will need to occasionally review your stress test and strategies, to ensure they are updated in line with any new risks or changes to the financial climate.
Kim Rekhess, expert at Wix.com, provides commentary on the importance of using these tips to set up your business, as well as how to start an online store to boost brand awareness:
“Setting up your own business as a young entrepreneur is never easy, however, following these tips may help ensure that you don’t fall at the first hurdle.
“As mentioned, networking and product awareness is vital, and showcasing your business through a well made website can help you do this. Choosing a domain name which is memorable and includes keywords relevant to your business is a good first step. When it comes to designing your business website, your homepage should be eye-catching, and make it easy for viewers to understand what your business offers. Clear fonts and striking graphics can help with this. You should also aim to have accessible ‘about us’ and ‘contact’ pages, in order to outline your business’ values, mission, and points of contact.
“By combining meticulous planning, financial awareness, stress-testing, and a well made website, your business can be given the best chances of making it past the initial set up stages.”
Credit: WIX
Methodology:
- Wix.com sought to provide expert tips for young people looking to start a business.
- Expert commentary was then provided on behalf of WIX.
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Research was conducted May 2024, and is accurate as of then.
