Thinking About Starting a Business? Here’s What You Need to Know
Thinking About Starting a Business? Here’s What You Need to Know
It’s the beginning of a new year and you’ve got a killer business idea that you’re ready to get off the ground. (Finally you can put the title ‘entrepreneur’ somewhere other than your Tinder bio.)
Considering the current economic climate, is this really the best time to start a business?
Before embarking on a new business venture, here is a breakdown of the current landscape and challenges:
Good Reasons to Start Your Business in 2023:
Time and money saving technology
One of the biggest perks of starting a business in 2023 is the modern technology we have. In fact, it’s completely possible to run your entire operation from your laptop.
Your business idea may be in demand right now
There are many businesses that are deemed highly profitable in 2023 due to their demand. This article highlights a few of them,including home healthcare, food waste reduction, pet products, clean health and beauty, greenhouses/ florists, and travel technology.
If you’re thinking of starting a food business, the plant-based market is where it’s at. Or if you’re tech savvy it’s recommended you start a business in digital marketing, affiliate marketing, SEO consulting, or dropshipping — that’s where the money is right now.
Service-related businesses like cleaning, childcare, tutoring, or private music lessons are also potentially lucrative ideas and in high demand..
Got a unique idea that doesn’t fit into any of these trends? That’s fine, too! Keep reading for some tips on starting your business.
6 Tips to Get You Started
Once you have your business idea consider following these initial steps:
Determine the best type of legal structure for your business: Sole proprietor, Partnership, Limited Liability company (LLC) or Corporation.
Choose a business name and register it with the appropriate federal, state, and local agencies.
Get federal and state tax IDs such as an employment ID number and a state Tax ID number.
Apply for necessary licenses and permits. Do your research to determine which ones you’ll need.
Open a business bank account to help keep your personal and business funds separate.
Create a website to educate your customers about your brand.
3 Potential Challenges to Know
1. Inflation is at an all-time high
Inflation has hit a forty-year high, driven by strong consumer demand for both goods and services. Unfortunately, the government anticipates ongoing increases .
If this sounds like a bunch of economics jargon let’s break it down:
High inflation weakens currency and decreases purchasing power, resulting in price increases.
When prices increase, it makes people less interested in spending money, especially on leisure items.
According to this article from November 2022, high inflation rates caused individuals to spend an extra $445 a month and most of it was for essential items. Yikes.
High inflation also means a higher cost of materials for your business and difficulty setting prices.
Here’s how you can protect your business from inflation:
Create a business plan to ensure max productivity and minimal cost.
Do some research to make sure your goods/ services are priced fairly,
Keep an eye on how competitors are responding to rises in inflation.
2. High interest rates severely impact new businesses
In an effort to reduce inflation, the federal government has raised interest rates. As of Dec 14, 2022, the current Federal Reserve rate is 4.25% to 4.50%...and that’s just the beginning. Interest rates are expected to rise to 5.1% by the end of 2023. (For a clear breakdown of how inflation and interest rates influence each other, watch this video.)
Here’s how high interest rates can affect your business:
Low interest rates stimulate the economy by making it easier for people and businesses to borrow money for major purchases and investments.
High interest rates discourage spending from both consumers and businesses by increasing the cost of borrowing, leading to reduced economic activity.
Essentially, this means there’s more reward for saving money right now than there is for spending it.
As such, small businesses that need more sources of financing are being negatively affected by today's interest rates.
To prevent the effects of high interest rates:
Find the best opportunities for financing a small business. This article encompasses the best loan options for 2023.
Keep an eye on interest rate fluctuations.
The pandemic has resulted in a lot of global supply chain problems, including delays and disruptions. These supply chain problems are expected to last until at least next year.
Tips to prevent supply chain issues:
Avoid relying on a single supplier, overseas suppliers, and materials that are challenging and costly to store.
Opt for domestic alternatives, determine backup supply chains, and stock up on supplies with minimal storage costs.
Conclusion
There’s a lot to consider if you’re starting a business in 2023. Researching what’s in demand and determining what type of business you want to have is a good place to start. Additionally, it’s important to consider the challenges brought about by inflation and high interest rates when it comes to taking out loans, setting prices and ensuring you have a steady customer base.
Sure there are risks, but with the right research and right tools, there’s no reason your business can’t succeed in 2023.
Got any other useful business tips for 2023? Drop a comment below, we wanna hear 'em.