Starting a new business can feel like an adventure, but for many entrepreneurs, it's a short one. According to the Bureau of Labor Statistics, 20% of new businesses shut down within two years of opening, while 45% fail within the first five years[1].

Building a company from the ground up comes with a to-do list most people are familiar with, like writing a business plan and raising capital. But there are also a few steps to starting a business that are critical to success but often overlooked.

Here are five steps that will help you gain a competitive advantage.

Ensuring that you have a strong target audience

Market research is crucial for any business, but are you approaching it correctly? Most small businesses start with an idea someone is passionate about and wants to share with an audience. Unfortunately, many entrepreneurs fail to find their business a viable customer base before committing.

Before finalizing your offering, take some time to research your market and determine how high of a demand there is for it.

Questions to ask yourself:

  1. How can I best position my offering to meet market demand?
  2. What does my local competition look like?
  3. What gaps or unmet needs can I capitalize on to differentiate my business?  

Creating an effective brand

You're ready to think about your brand once you're clear on what you're selling and who to sell it to. Don't make the mistake of jumping ahead with a logo design, packaging, or other visuals.

Instead, focus on your:

  • Mission and vision statement: A business mission statement[2] summarizes your goals, values, and objectives, while your vision shares what you hope to achieve.
  • Brand story: The story behind what you do and why is critical to an authentic, compelling brand that draws people in.
  • Marketing plan: This forces you to be strategic about how and where you reach your audience and share your brand story, mission, and vision.  

Get your finances in order

According to a recent report by Xero, nearly half (48%) of small business owners struggled with cash flow due to inflation last year. As a result, 85% consider cash flow management to be a top priority[3].

Here are a few tips for managing your finances effectively in business:

  1. Create a financial plan before you begin looking for funding to ensure that you'll have enough capital
  2. Commit to a minimum viable budget that keeps you operating during difficult times and increases your profit margin as you grow
  3. Keep cash reserves on hand for emergencies
  4. Manage your inventory carefully: it's your most significant asset  

Map your customer journey

Your target audience keeps you in business, so you need to know them inside and out. Customer needs and desires can change over seasons of the year, phases of life, and economic downturns.

Prioritize learning your target market's needs over time by constantly researching and collecting feedback.

Fully understanding your audience isn't just good for sales; it also allows you to enhance the customer experience and develop tailored products and services. This can increase your longevity in the market and help you develop a loyal following that will recommend your business to others.

Think long-term about business operations.

Business operations may not be the most exciting part of starting a business, but it will help keep you running. Think about your ideal outcome and how you envision growing over the years. Do you want to open several brick-and-mortar locations? Expand online offerings? Build a large team?

None of these will be achievable without a long-term operational plan. Several things to consider as you create yours:

  • What leadership skills do you or your founding team have? You will need good managers to run locations, staff, and departments.
  • How can you position yourself for healthy growth? Many businesses have failed because they scaled too quickly.
  • What will you do if you need to pivot suddenly? Leave some room for flexibility.  

Perhaps the most important thing to remember about these overlooked business-building steps is that none operate alone. Each relies on the other to create a firm foundation for your new company.

By starting with a target market, strong brand, well-thought-out finances, a customer-focused experience, and long-term operational plans, your business can beat the odds —and leave a lasting impression.

For more on small business, check out PNC’s small business Insights hub for advice and tips.