Eco-friendly businesses are becoming a lot more common these days. Part of this change is due to companies feeling a sincere desire to help the planet, although market forces also play a key role. Last year, a poll cited by Barron’s showed that two-thirds of consumers preferred environmentally friendly businesses.
Unfortunately, while the popularity of eco-friendly businesses is growing, they still have a hard time thriving. The failure rate for eco-friendly companies is still worrisomely high.
Delving into the business industry is exciting, but it is not an easy task. According to the United States Small Business Administration (SBA), almost 50% of new businesses fail within their first year and only one-third are still operating after two years. It can be even harder for sustainable businesses, in spite of the growing demand for green products and services. This is partially due to the cost structure of eco-friendly businesses. Without proper planning and execution of a business plan, you might find yourself in hot waters.
We previously talked about some tips to make environmentally businesses more viable. We wanted to share some more insights today.
Why is the failure rate so high?
With thousands of people getting their business degrees or working as corporate interns, it’s shocking to know that the failure rate of new businesses is still relatively high. It is not much better for green businesses, as Harvard Business School experts point out. But that exactly might be the issue – taking the knowledge from the classroom and into the market.
Studies have shown that “most new businesses fail due to lack of planning, underestimating risk, and inexperience in the marketplace.” Business owners often adopt a tunnel vision. They are so focused on their core business services that they lose sight of other essential matters like taxes, accounting, client satisfaction, and even federal paperwork like a CASp report.
Lack of professionalism can also get in the way. Start-ups are mostly composed of friends or family who are trying to explore the field of business, and how they can make money out of it. This is of course highly possible but not without difficulty. When costs and problems start to roll in, their lack of experience can get in the way of their success – not to mention that this affects their personal relationships and vice versa.
What does it take for a new green business to survive?
Intelligence, money, experience all contribute to starting a new business. But this does not guarantee success.
Operating a green business isn’t easy, but you can make it practical by taking the right steps. We’ve compiled the five most important things that every green business needs.
1. Excellent business plan
You might think that this goes without saying, but some owners still don’t prepare for the long term. Green business owners aren’t much better at planning on average. Companies that plan for at least 12 months have a much higher success rate than the companies that don’t.
Planning should include the appropriate business structure, an analysis of the competition and market, cost projections (including official documents like a CASp report), and tax considerations. The business structure will protect you from liabilities in the future because this lays the groundwork for all operations. You can choose to operate as a sole proprietorship, partnership, corporation, or a limited liability company (LLC) for your business. It’s important to weigh the pros and cons, though, as there are many to consider. If you want more flexibility, affordable setup costs, and less liability for business debts, the LLC structure is the way to go. It is the most popular choice for small business owners operating in the United States. You can form an LLC business with services like LegalZoom so you don’t have to be knee-deep in paperwork processes and state requirements.
2. Unique vision
A unique vision will carry you into a successful path, especially if you are differentiated from your business competitors. Even if you offer services or products that are not exactly new to the market, this does not mean that you won’t make it. You just need to establish and find your niche in the market.
Being a green business is not enough of a way to differentiate. Green companies are a dime a dozen today, so you need other value propositions too.
How does one find their niche in the business industry? If you are offering something that’s already out there, check if you are covering the same places and what the most effective strategies are to generate sales for your company vs. theirs. Invest in standing out so that you can find stability in such a fast-paced and competitive market.
3. Good administrative work
Businessmen tend to overlook the administrative work, leaving it to their personal assistants or even secretaries. But the paperwork is the backbone of your company especially if you find yourself in a legal battle.
Have a good accountant to handle your quarterly profit and loss statements, among other financial reports. Furthermore, if you are renting or leasing a commercial property, it must comply with accessibility standards like that of the United States American Disabilities Act (ADA). Having an inspection followed by a good CASp report for your public accommodation can save you from potential lawsuits. You may want to invest in a CASp report early on because this will help you identify the non-compliant elements of your property, and advise you how to renovate it. A CASp report typically costs $ 1200.
4. Great customer service
Nothing carries a business upwards like satisfied (and returning) customers! Even if you follow all the steps we mentioned above, there is nothing like happy customers to help sustain your business. Always make sure to have a good customer service team. One bad review could quickly ruin you nowadays.
Once you have found your niche in the market, work hard to stay there. Having a real connection with your customers will draw them to your business rather than other ones out there that only care about making profits. Take it from us. The more you get to know your loyal customers, the more they will keep repurchasing from you!
5. Full-service payroll company
Lastly, a good payroll company is necessary for any good business. They will handle employee compensations and file your federal tax deposits on time. Outsourcing a payroll company will cost you but look at it as an investment – they will take care of your payroll services while you can focus on other aspects of your business.
Another option is to have an internal employee handling your payroll. If you go this route, make sure to understand the process to avoid any mistakes and accidents. It is very important to be careful since you are handling your people and your money.
Make Your Green Business a Success!
Starting a green business is daunting, especially in such a competitive market right now. You want to be really careful with where you put your money. But investing time, working hard, and having the right people will surely help you grow a profitable, eco-friendly business!
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