Self-made millionaires often attribute their financial success to starting their own business. But starting a business that actually performs well is easier said than done. The chances of failure are discouragingly high. According to the Bureau of Labor Statistics, approximately 20% of small businesses go bankrupt within their first year.
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And the odds of a small business going bankrupt only increase over time, with bankruptcy rates rising to 30% by the end of the second year, 50% by the fifth year, and 70% by the 10th year.
How can you start a small business that will stand the test of time and put you on the path to becoming a self-made millionaire in 2024?
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Now is a good time to start a small business
There are eternal challenges for small and medium-sized businesses, and 2024 looks like the perfect year to launch a new one.
“There's never been a better time for people who are hesitant to start a business,” said Yali Saar, co-founder and CEO of Tailor Brands. “Changes in the job market, combined with rapid advances in AI, signal a significant shift in occupational roles and opportunities. Consulting firm McKinsey predicts that these advances will result in approximately 12 million job openings by 2030. We estimate that migration may be necessary.
“This climate is an ideal environment for starting a small business, providing opportunities to innovate and adapt to the evolving economic landscape.”
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Create the perfect business plan
Before you start setting up a small business, you need to create a solid business plan.
Ben Richmond, US Country Manager at Xero, said: “Developing a thorough business plan early on is essential, as it provides a roadmap for your business journey.” “It should include the current business situation, future vision and goals for the business, financial projections, and operational strategy.”
Get ready to overcome high borrowing costs
While there is reason to be optimistic about starting a small business in 2024, you should know that the cost of borrowing, including business loans, has increased significantly because the Federal Reserve has raised interest rates. However, raising capital for small businesses is still completely viable.
“Financing remains relatively easy, with only 2% of business owners reporting unmet borrowing needs,” Searle said. “While borrowing is more expensive, 31% of business owners regularly access these funds, showing that capital, while expensive, is not unaffordable. Now more than ever, it’s important to plan to reduce fixed costs.”
Tap generation AI technology
To reduce high fixed costs, leverage the latest technologies, especially those related to generative AI.
“These technologies streamline various business operations and reduce the need to hire employees or outside agencies for any task,” Searle said. “By integrating AI tools into business processes, entrepreneurs can increase efficiency, reduce costs, and allocate resources more strategically.”
Prepare to be agile and resilient during economic downturns
Staying resilient and agile in a volatile economy is difficult for everyone, but especially critical for business owners. It pays off in the long run and gives you an advantage over larger companies here.
“While small and medium-sized businesses (SMBs) often face greater challenges during economic downturns and experience higher rates of business closures, sole proprietorships tend to weather these periods with greater resilience,” Searle said. . “Solopreneurs' agility and lean operating structure allow them to quickly adapt to changing market conditions. Unlike large corporations, which have more fixed costs and operational complexity, sole traders can more easily You can pivot, reduce expenses and change your business model to align with the evolving economic landscape.”
Understand the new small business regulations
Regulations are constantly changing and could be tightened or loosened depending on which political party comes to power later this year.
“Staying up to date on recent regulatory changes is extremely important for new business owners,” Searle said. “For example, in 2024, U.S. entrepreneurs will need to adapt to new FinCEN reporting requirements that require disclosure of important information about business owners and their beneficiaries. Failure to comply could result in significant sanctions. This highlights the importance of staying up to date with regulatory changes.”
Choose the right business structure
How is your business structured? Take some time to think about this and strategize for success.
“The legal structure of a business is an important decision that affects many aspects of business operations, including cost of formation, administration, applicable state laws, tax reporting, and legal liability,” Searle said. Each business entity has its own legal requirements, so it's important to choose the structure that best suits your business goals and regulatory obligations. This decision can have a significant impact on the financial and legal health of your business. ”
Focus on sustainable growth
“Finally, it is important to focus on sustainable growth strategies,” Searle said. “This involves balancing the pursuit of expansion with the need to maintain financial health and operational stability. Sustainable growth depends on careful planning, prudent financial management, customer This can be achieved through a commitment to delivering value.”
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This article originally appeared on GOBankingRates.com: Want to start a small business in 2024? Here's what you need to know
