How to start a business from scratch

Want to start a business? Five things you need to know to really get started.

There’s no doubt that setting up and making money from your own business is one of the most rewarding ways to earn a living and also the most challenging. You’re in complete control of your own destiny and the power is in your hands to increase your chances of success and outwit the competition. That also means you’re responsible for all your decisions and for tackling whatever challenges arise along the way. So it’s vital you get your business on a firm foundation. Better that, than quit your day job straight away! Here are five key steps you should take.

1.       Decide what type of business to start

When deciding on your business idea, it really helps to be familiar with the market that you’re interested in and also that you are absolutely clear about what you can add and how you can serve customers differently. Many entrepreneurs know what type of business they wish to start because they have identified a gap or come up with a unique idea for a product or service. You may have several ideas that you want to pursue and don’t know how to whittle them down – in which case you can use the resources of the Business & IP Centre to assess which ones have the greatest chance of success.  You may be an aspiring entrepreneur looking for a business idea and, again, the Centre is a great place to draw inspiration. Whatever you choose make sure that your business idea is something that you feel passionate about. This way you can be sure that the passion and enjoyment of running your own business will never waver, even when times get tough. 

2.       Find out if you can protect your idea

One of the first things you should investigate as an entrepreneur is how you can protect and future-proof your business idea. It may be possible to trade mark your business name: something to remember is to check that your name is unique in your sector does not mean something completely different or negative in another language, since you may wish to trade abroad in future.  You should also make sure that any business with a name similar to the one you have chosen does not have a bad reputation or trade in an area that is counter to your business ethics.

If you’re developing a product that you believe to be new to the market, you should search for patented works to see whether that is actually the case, it could be very costly if you are infringing any rights held by another business. And if you’re planning to make money from photography, writing, fashion or other creative works you need to look at asserting your copyright and possibly registering your designs.  If you’re unsure how to go about this and which element of intellectual property applies to you, attend our ‘How can I protect a business idea?’ workshop. This way, you can ward off the copycats and make sure that you are in pole position to take advantage of future growth opportunities through, for example, licensing and franchising your ideas or inventions. Protecting your intellectual property can also increase the value of your business when you’re looking for investors or planning to sell it.

3.       Make sure your idea has legs

A fundamental aspect of setting up any new business is ensuring that there is a gap in the market and that your product or service resonates well with your potential customers. Can they afford to pay the price you need to charge after all of your costs are covered?  What are your customers or clients already doing to solve the problem your new idea solves. How does your idea compare?  Thorough market research and competitor analysis gives new businesses like yours the ability to make informed decisions about the way you position your products and services and identify your niche.

A great place to start is to do your research in the Business & IP Centre, where you have free access to a comprehensive collection of UK and global market research and business databases.  Here you will find a wide range of up-to-date industry reports and company databases to help you assess the size of the market, who’s in it and what the emerging trends are.  Information professionals are also on hand to help you find the information you need. ‘Introduction to using the Business & IP Centre’ is a workshop that gives you practical guidance in using key British Library sources to help take your business forward.

4.       Develop a business plan

A business plan is an absolute necessity for any business aiming for long-term success and growth. It’s also good discipline as the key headings in a business plan really make you think hard about all the areas you need to cover for your business to be sustainable, mid- to long-term. Write the plan for yourself primarily.  It’s the perfect opportunity to create a roadmap for the coming months and years and it doesn’t have to read like ‘War and Peace’. A 2-3 page executive summary,  a 10-20 page plan and any appendices you want to add should be sufficient. Having a plan will help you keep on track and is essential when you approach potential partners and investors – and will give them the confidence they need to invest in you.  

Naturally, any business plan needs to be flexible and fluid, with the ability to change and adapt over time as your business evolves. Many businesses of all sizes find the Business Model Canvas an effective and flexible tool to mapping out what their business can do now and where it could be in the future. You can get help with writing your business plan by attending our ‘How to write a successful business plan’ workshop.  

5.       Don’t run before you can walk

As a new business in the midst of new product development it’s important not to a) put all your eggs in one basket and b) spend all of your resource on something without proof of its market potential.

The Lean Start-up methodology is an excellent approach to finding out whether your product or service will attract real customers before you invest too much time and money.  Some people spend months, even years, developing and refining a product without ever testing the product in their target market.  It’s then a huge shock for a potential business owner to find out that the product is not fit for purpose, resulting in the failure of the business before it’s even taken off.

Defining a minimum viable product to get the opinions of target consumers is a great idea. It’s a skeleton of the final product you’d take to market but it allows you to understand its potential and make any necessary changes before investing maximum resource.

For over a decade we have been helping entrepreneurs based in and around London start, run and grow their businesses. Visit our events page to view our upcoming events.

7 tips for starting a business successfully

Rule number one: It’s not enough to simply have a good idea to start a business. Successful entrepreneurs must first look at the market, plan realistically, and mobilize their troops to achieve their objectives.

In practice, vision is only one part of the equation; it is just as important to know how to deal with concrete problems and to be able to market yourself in a competitive environment.

Here are just some of the basics:

1. Pinpoint the right market

Ideally, you should introduce your products or services to a young and fast-growing market. In more mature sectors, you will need a competitive advantage in order to distinguish yourself, i.e. product or service innovation, great customer service, or the right price point.

That means you should use a specialized research company to help you first gather as much information as you can to define your potential market, such as your competitors’ strengths and weaknesses and the development time required to get your product off the ground. Keep in mind that during this time, you will not be making any sales.

2. Put the right people on your side

People on your management team should have skills that complement one another. The best leaders ensure that they recruit the top experts for each area of operations. You should not be afraid to hire people who have, in their respective fields, more expertise than you do.

You should also look at your outside resources as a part of your team. From a practical point of view, you will need technicians, sales people and managers, a lawyer, an accounting firm, as well as marketing or public relations help.

If you don’t have the resources to set up a board of directors, you can also opt for a strategy committee and invite an expert to act as a sounding board for your business decisions. In advanced technology, there are more and more incubators that offer a wide range of assistance for increasing your chances of success.

In the end, the true test is the market. To reach customers quickly and efficiently, you should think about hiring marketing specialists at the outset. Marketing, while often neglected, is critical to the success of any business.

3. Think about the road ahead

Avoid fire-fighting and losing sight of your long-term objectives. Make a list of all the factors you have to consider in the immediate and medium term, especially if you foresee rapid growth. To help you manage that growth, you need to examine all available options, such as purchasing or leasing premises, furniture and equipment. You might also consider outsourcing different operations, such as human resources, rather than handling it internally.

Down the road, you will have to consider growth factors, such as energy and resources, raw materials, salaries, financing and technological needs. If you have carefully assessed your growth potential, it’s acceptable to think big. For example, if you are positioned in a niche market, you may not be profitable unless you start exporting. To get a better idea of your exporting potential, check with national, provincial, and regional export support services such as those offered by Canadian trade commissions in other countries.

4. Get your financing in shape

Start-ups are often financed by the savings of their founders (as well as the savings of families and friends). In many cases, it may be necessary to look for outside capital such as Angels (private investors), venture capital funds, assistance funds, or social economy funding agencies.

Be sure you do your homework and know what investors expect from you. A businessperson who invests in companies once said, “If you knock on a door prematurely, you run the risk of it being closed to you later, particularly at the time when you are really ready to enter it.”

Talk to BDC about your start-up financing needs. The bank offers customized solutions for businesses with high growth potential.

5. Use your time well

Most companies take time to get established, which means there will be periods when business is slower. The key is to make good use of that down time by networking, for example. Three networking strategies that may be appropriate, depending on your situation, are:

6. Iron out the technicalities

There are many rules, some very technical, which are absolute requirements for your company’s continued existence. For instance, you must decide what legal form your business will take, design an accounting system, and comply with regulations covering labour practices, occupational health and safety, and training.

In business and industry, you can start a company in your own name. A group can form a registered partnership or an incorporated company with a different set of rules, privileges and responsibilities. If you have several partners, you should draw up a shareholders’ agreement to define a mutual code of conduct. Or you could decide to form a cooperative or not-for-profit organization.

Be sure to patent your ideas, or at least ensure that they are protected by a copyright, registered trademark, or trade secret. There is the possibility you might be infringing on the rights of another company in this regard. To find out, contact the Canadian Intellectual Property Office.

7. Deliver a plan that means business

Be sure that your business plan incorporates all of the above. Your plan must be concise, specific, and describe your business project accurately. Write it yourself, as it is your vision. And expect to do several rewrites before you achieve your final plan. Don’t be afraid to get assistance if you need it. Show it to experts, such as accountants and lawyers or to other experienced entrepreneurs. Keep in mind that a business plan is more than an accounting document; it must sell your idea to a potential financial institution.

Top 10 Reasons to Start Your Own Business

Running your own business offers many perks. Here are ten reasons to start your own business today!

Start Your Own Business

Deciding to start your own business is a leap of faith. It requires pushing out of your comfort zone and trying something new. If that idea excites you, why wait around? You’re ready to take the leap and be the CEO of your OWN COMPANY. It’s a lot of work and there are some risks, but the potential for rewards is huge. If you’re not convinced yet, here are 10 of the best reasons for starting your own business.

1. Each day at the office will be motivating.

When you’re working for someone else, it can be tough to find the motivation to do the best possible work. No matter how much work you put in, the owners of the company will get the ultimate rewards.

When you’re your own boss, you’ll find motivation at work every day. Following your dreams is exciting, and you’re in control of your own success. The day-to-day vitality of your business depends on you, so you’ll be driven to make each day as productive as you can. You’ll know that your own hard work and drive will help you reap the rewards, and that’ll keep the fire burning in your belly to make each day count.

2. You’ll be following your passions.

Many entrepreneurs start their own business to follow their dreams and fulfill their passion. Following your dreams will fulfill you in a way that working for someone else may not do. You are in charge of creating your business from the ground up, so you can shape your company to be something you’re proud of and that you may even be able to pass on to your children as your legacy.

3. You can pursue social justice or support non-profits.

One of the most fulfilling parts of becoming an entrepreneur is setting up your company for social gain. You can opt to support non-profits, charities, or community efforts with your profits. Or you can set up your business to solve a problem in your community or in the world at large – whatever your passion may be.

For example, consider Snowday, a company started by teach-turned-entrepreneur Jordyn Lexton. It’s a food truck, but it’s doing more than just filling the hungry bellies of passersby. Snowday employs young people that have been incarcerated (which makes it harder for them to find work) and helps them gain valuable skills and experience on the job. Starting your own business gives you a unique opportunity to make the world a better place.

4. You can achieve financial independence.

Many people commit to starting a business with the dream of financial comfort. While it’s true that getting your company off the ground can take grit and result in some lean times while you’re getting started, the ultimate goal of being your own boss is cultivating financial independence. With determination and hard work, there’s no cap on how lucrative your own business can be. If you aspire to build wealth, there’s no reason why you can’t achieve that goal.

Starting your own business has several financial benefits over working for a wage or salary. First, you’re building an enterprise that has the potential for growth – and your wallet grows as your company does. Second, your business itself is a valuable asset. As your business grows, it’s worth more and more. You may decide to sell it or you may hold on to it and pass it down to your heirs. Either way, it’s valuable.

5. You can control your lifestyle and your schedule.

Perhaps you’ve spent years in the corporate world and you feel ready to turn over a new leaf after years of reporting to a superior. Starting your own business can give you a more flexible lifestyle and schedule so you don’t feel like you’re running in circles on that corporate hamster wheel. You can opt to schedule meetings around your family schedule or you can opt to work from home – the sky’s the limit when you’re the boss. You still have to get the work done, but nobody’s looking over your shoulder making sure you do it their way on their time.

Starting a business is hard work, and that flexible schedule may not happen right away. Even if you’re working long hours, however, you know that you’re doing it for yourself and your family and not for a distant boss or shareholder.

6. You can start from scratch.

This is your business! You make the rules. You’re not restricted by the standards and procedures of your boss or corporate culture. You can offer a product or a service that fits your vision. You can also build your company according to your own ideas. Maybe you’ve thought of a way to make processes more efficient. Maybe you want to make sure your employees get fair wages and family leave time. Whatever problems you’ve encountered in the working world, you have a chance to do something different with your own business.

Many entrepreneurs say that once they’ve sampled the freedom of being their own boss and calling the shots at running their own company, they’d never want to work for someone else again.

7. You’ll get tax benefits.

Starting your own business takes funding and it may take some time to turn a profit, but you can start taking advantage of some substantial tax breaks right off the bat. Government programs support small business entrepreneurship and seek to reward these endeavors with impressive tax incentives. You’ll want to work with a financial planner or an accountant to make sure you’re setting up your business in a way that will allow you to get the benefit of these government programs.

Note that there are also a variety of programs aimed specifically at business started by women and minorities, so you may be able to get grant funding and other benefits to get your business off the ground.

8. You’ll have true job security.

The stress of climbing the corporate ladder is real. You never know whether you’ll be promoted or whether you may be handed a pink slip – these life-altering decisions are in someone else’s hands and beyond your control. When you start your own company, you know you’re investing in your future and in your own job security. Moreover, should you choose to start a family business, you could be providing jobs for other members of your family, as well. Your destiny is in your own hands – no more layoffs in your future.

9. You’ll become an expert at a broad range of skills.

Part of running your own business is learning to wear a lot of different hats, especially early on. You’ll have to pick up a lot of new skills, from HR decisions to inventory management to customer service. You’ll soon become a pro in your own industry, as well as a pro at a variety of new skills you’ll learn on the job. As your business develops, you’ll continue to pick up new knowledge and abilities. You’ll know how every tiny aspect of your operation works. You can’t get that kind of experience anywhere else.

As your business grows, you may opt to continue manning the helm for those tasks you enjoy – whether that’s graphic design or accounting – but you can outsource those tasks that you dread. You can also turn those skills to new tasks. Who knows? You may even want to start another business!

10. You can be creative.

It’s up to you to decide what your business will produce, sell, or which services it will offer – that’s exciting! Rather than following the formula of those who came before you, you’re looking at a chance to develop a concept or an idea that nobody else ever has. Even if you stay mainstream with your product or service, each day as an entrepreneur allows you to find new, outside-the-book ways to problem solve. Innovation and creativity are necessary traits for a successful entrepreneur, and you’ll hone those skills daily.

Knowing that each day brings new challenges, exciting opportunities, and a chance to engage your passion is reason enough to start your own business. Knowing that you’ve decided to take control of your own future is empowering. What are you waiting for? The time is now!

5 Tips for Success in Starting a Small Business

Starting a small business is a massive but rewarding undertaking. Part of starting a small business is doing things in a way that makes the most sense to you, but a little guidance can help as well. Consider these tips for starting your own company and incorporate them as needed:

1. Recognize your strengths and weaknesses

Every small business owner has certain skills, abilities, knowledge, and experience that give them an edge when it comes time to build up a business and start operating it. However, no small business owner is so adept that they can be an expert in every single process related to developing a new company.

While you’ll have to wear a lot of different hats, especially during the business’s earliest stages, don’t place too much of a burden on yourself for too long or expect yourself to dive into a highly complicated task with no prior training. Develop a strong understanding of your skills and weaknesses so you know where to best focus your attention.

Business Planning

Don’t be afraid to learn how to handle new responsibilities and workloads – it’s essentially a requirement for growing small businesses. You also shouldn’t shy away from working with business partners, family members, employees, independent contractors, and others to address major needs and make sure important concerns are handled successfully.

2. Start with a simple business plan and grow it as needed

One of the first things you should do as a small business owner develops a business plan. It’s vital that you develop this essential document to steer future work and hold yourself accountable, but it’s also important to not go too in-depth during the early stages of developing your concept. ABC News contributor Tory Johnson said a simple business plan is often the best approach when in the beginning stages of developing your organization.

A shorter plan, about one page or 500-600 words, can give you direction without requiring you to answer questions that won’t have solutions presented until later on in the process. Johnson suggested focusing on your products or services, target market and customers, basic prices and costs, and the work needed to turn the concept into a reality.

As work progresses and your idea moves closer to actual operations, you can expand your business plan. Over time, including more accurate estimates, actual costs, longer-reaching projections, mission statement, company summary, and other elements commonly seen in fully developed documents.

3. Focus on something you have a passion for

Having a passion for something doesn’t necessarily mean it’s your all-time favorite activity or type of business. It does mean that you won’t quickly grow tired of running that type of business, that parts of it appeal to you and, ideally, you can use some combination of existing knowledge or skills related to parts or all of the operations to your advantage.

Finding an existing need and targeting it is a major element of starting a successful small business, whether it’s providing accounting services to other companies or setting up a bakery. Pairing that need with something that excites, interests, and motivates you can lead to substantial development and returns.

This piece of advice is relatively basic and most useful when deciding what type of business to start as opposed to getting a specific concept off the ground. Focus on your passion early on and pair it with a strong business plan to give yourself the best chance of crafting an enduring and popular organization.

4. Understand your target customers and existing market

It’s possible to develop an excellent business concept and deploy it in the wrong area. That’s why it’s important to understand the area in which you want to start your small business as well as your target customers. An idea that could work out very well in a large, densely populated area simply may not get the amount of foot traffic or the number of customers it needs in an area with fewer residents.

Assessing the market for your products or services, seeking out the presence of potential competitors, and conducting an assessment of how your business will hypothetically perform can all move your idea in the right direction.

You can also look to competitors and similar businesses for ideas and guidance, although indirectly. Visiting their stores, looking at their websites and marketing materials and other intelligence-gathering initiatives can help you fill in pieces of the puzzle.

5. Don’t be afraid to ask for help

Even when a business is on the right track, unexpected issues and chances for growth and improvement can quickly pop up. Addressing these problems and opportunities is critical for long-term stability and prosperity. As a small business owner, you shouldn’t be afraid to seek out alternative business financing in the form of a small business loan from National Funding. Our fast and easy application process can give your business a quick decision and the funds you need in just days.

Tags: Accounting for Small BusinessBusiness GrowthMarketing for Small BusinessStarting Small Business

How to Start a Business: A Step-by-Step Guide

Starting a new small business? Find out where to begin and how to achieve success.

  • You want to make sure you prepare thoroughly before starting a business, but realize that things will almost certainly go awry. To run a successful business, you must adapt to changing situations.
  • Conducting in-depth market research on your field and the demographics of your potential clientele is an important part of crafting a business plan. This involves running surveys, holding focus groups, and researching SEO and public data.
  • Before you start selling your product or service, you need to build up your brand and get a following of people who are ready to jump when you open your doors for business.
  • This article is for entrepreneurs who want to learn the basics steps of starting a new business.

Tasks like naming the business and creating a logo are obvious, but what about the less-heralded, equally important steps? Whether it’s determining your business structure or crafting a detailed marketing strategy, the workload can quickly pile up. Rather than spinning your wheels and guessing at where to start, follow this 10-step checklist to transform your business from a lightbulb above your head to a real entity.

How to start a small business

  1. Refine your idea
  2. Write a business plan
  3. Assess your finances
  4. Determine your legal business structure
  5. Register with the government and IRS
  6. Purchase an insurance policy
  7. Build your team
  8. Choose your vendors
  9. Brand yourself and advertise
  10. Grow your business

. Refine your idea.

If you’re thinking about starting a business, you likely already have an idea of what you want to sell online, or at least the market you want to enter. Do a quick search for existing companies in your chosen industry. Learn what current brand leaders are doing and figure out how you can do it better. If you think your business can deliver something other companies don’t (or deliver the same thing, only faster and cheaper), or you’ve got a solid idea and are ready to create a business plan. 

Define your “why.”

“In the words of Simon Sinek, ‘always start with why,'” Glenn Gutek, CEO of Awake Consulting and Coaching, told Business News Daily. “It is good to know why you are launching your business. In this process, it may be wise to differentiate between [whether] the business serves a personal why or a marketplace why. When your why is focused on meeting a need in the marketplace, the scope of your business will always be larger than a business that is designed to serve a personal need.” 

Consider franchising.

Another option is to open a franchise of an established company. The concept, brand following, and business model are already in place; all you need is a good location and the means to fund your operation.

Brainstorm your business name.

Regardless of which option you choose, it’s vital to understand the reasoning behind your idea. Stephanie Desaulniers, owner of Business by Dezign and former director of operations and women’s business programs at Convention Center, cautions entrepreneurs against writing a business plan or brainstorming a business name before nailing down the idea’s value.

Clarify your target customers.

Desaulniers said too often people jump into launching their business without spending time to think about who their customers will be and why would want to buy from them or hire them.

“You need to clarify why you want to work with these customers – do you have a passion for making people’s lives easier?” Desaulniers said. “Or enjoy creating art to bring color to their world? Identifying these answers helps clarify your mission. Third, you want to define how you will provide this value to your customers and how to communicate that value in a way that they are willing to pay.” 

During the ideation phase, you need to iron out the major details. If the idea isn’t something you’re passionate about or if there’s not a market for your creation, it might be time to brainstorm other ideas.

2. Write a business plan.

Once you have your idea in place, you need to ask yourself a few important questions: What is the purpose of your business? Who are you selling to? What are your end goals? How will you finance your startup costs? These questions can be answered in a well-written business plan

A lot of mistakes are made by new businesses rushing into things without pondering these aspects of the business. You need to find your target customer base. Who is going to buy your product or service? If you can’t find evidence that there’s a demand for your idea, then what would be the point? 

Conduct market research.

Conducting thorough market research on your field and the demographics of potential clientele is an important part of crafting a business plan. This involves conducting surveys, holding focus groups, and researching SEO and public data. 

Market research helps you understand your target customer – their needs, preferences, and behavior – as well as your industry and competitors. Many small business professionals recommend gathering demographic information and conducting a competitive analysis to better understand opportunities and limitations within your market. 

The best small businesses have products or services that are differentiated from the competition. This has a significant impact on your competitive landscape and allows you to convey unique value to potential customers.

Consider an exit strategy.

It’s also a good idea to consider an exit strategy as you compile your business plan. Generating some idea of how you’ll eventually exit the business forces you to look to the future. 

“Too often, new entrepreneurs are so excited about their business and so sure everyone everywhere will be a customer that they give very little if any, time to show the plan on leaving the business,” said Josh Tolley, CEO of both Shyft Capital and Kavana. 

“When you board an airplane, what is the first thing they show you? How to get off of it. When you go to a movie, what do they point out before the feature begins to play? Where the exits are. In your first week of kindergarten, they line up all the kids and teach them fire drills to exit the building. Too many times I have witnessed business leaders that don’t have three or four predetermined exit routes. This has led to lower company value and even destroyed family relationships.” 

A business plan helps you figure out where your company is going, how it will overcome any potential difficulties, and what you need to sustain it. When you’re ready to put pen to paper, these free templates can help.

3. Assess your finances.

Starting any business has a price, so you need to determine how you’re going to cover those costs. Do you have the means to fund your startup, or will you need to borrow money? If you’re planning to leave your current job to focus on your business, do you have money put away to support yourself until you make a profit? It’s best to find out how much your startup costs will be. 

Many startups fail because they run out of money before turning a profit. It’s never a bad idea to overestimate the amount of startup capital you need, as it can be a while before the business begins to bring in sustainable revenue. 

Perform a break-even analysis.

One way you can determine how much money you need is to perform a break-even analysis. This is an essential element of financial planning that helps business owners determine when their company, product, or service will be profitable. 

The formula is simple:

  • Fixed Costs ÷ (Average Price – Variable Costs) = Break-Even Point

Every entrepreneur should use this formula as a tool because it informs you about the minimum performance your business must achieve to avoid losing money. Furthermore, it helps you understand exactly where your profits come from, so you can set production goals accordingly. 

Here are the three most common reasons to conduct a break-even analysis: 

  1. Determine profitability. This is generally every business owner’s highest interest. 

    Ask yourself: How much revenue do I need to generate to cover all my expenses? Which products or services turn a profit, and which ones are sold at a loss?
  2. Price a product or service. When most people think about pricing, they consider how much their product costs to create and how competitors are pricing their products. 

    Ask yourself: What are the fixed rates, what are the variable costs, and what is the total cost? What is the cost of any physical goods? What is the cost of labor?
  3. Analyze the data. What volumes of goods or services do you have to sell to be profitable? 

    Ask yourself: How can I reduce my overall fixed costs? How can I reduce the variable costs per unit? How can I improve sales? 

Watch your expenses.

Don’t overspend when starting a business. Understand the types of purchases that make sense for your business and avoid overspending on fancy new equipment that won’t help you reach your business goals. Monitor your business expenses to ensure you are staying on track.

“A lot of startups tend to spend money on unnecessary things,” said Jean Paldan, founder and CEO of Rare Form New Media. “We worked with a startup that had two employees but spent a huge amount on office space that would fit 20 people. They also leased a professional high-end printer that was more suited for a team of 100; it had key cards to track who was printing what and when. Spend as little as possible when you start, and only on the things that are essential for the business to grow and be a success. Luxuries can come when you’re established.”   

Consider your funding options.

Startup capital for your business can come from various means. The best way to acquire funding for your business depends on several factors, including creditworthiness, the amount needed, and available options.

  1. Business loans. If you need financial assistance, a commercial loan through a bank is a good starting point, although these are often difficult to secure. If you are unable to take out a bank loan, you can apply for a small business loan through the U.S. Small Business Administration (SBA) or an alternative lender. [Read related article: Best Alternative Small Business Loans]
  2. Business grants. Business grants are similar to loans; however, they do not need to be paid back. Business grants are typically very competitive, and come with stipulations that the business must meet to be considered. When trying to secure a small business grant, look for ones that are uniquely specific to your situation. Options include minority-owned business grants, grants for women-owned businesses and government grants.
  3. Investors. Startups requiring significant funding upfront may want to bring on an investor. Investors can provide several million dollars or more to a fledgling company, with the expectation that the backers will have a hands-on role in running your business.
  4. Crowdfunding. Alternatively, you could launch an equity crowdfunding campaign to raise smaller amounts of money from multiple backers. Crowdfunding has helped numerous companies in recent years, and there are dozens of reliable crowdfunding platforms designed for different types of businesses. 

You can learn more about each of these capital sources and more in our guide to startup finance options

Choose the right business bank.

When you’re choosing a business bank, size matters. Marcus Anwar, the co-founder of OhMy Canada, recommends smaller community banks because they are in tune with the local market conditions and will work with you based on your overall business profile and character. 

“They’re unlike big banks that look at your credit score and will be more selective to loan money to small businesses,” Anwar said. “Not only that, but small banks want to build a personal relationship with you and ultimately help you if you run into problems and miss a payment. Another good thing about smaller banks is that decisions are made at the branch level, which can be much quicker than big banks, where decisions are made at a higher level.” 

Anwar believes that you should ask yourself these questions when choosing a bank for your business: 

  • What is important to me?
  • Do I want to build a close relationship with a bank that’s willing to help me in any way possible?
  • Do I want to be just another bank account, like big banks will view me as? 

Ultimately, the right bank for your business comes down to your needs. Writing down your banking needs can help narrow your focus to what you should be looking for. Schedule meetings with various banks and ask questions about how they work with small businesses to find the best bank for your business. [Read related article: Business Bank Account Checklist: Documents You’ll Need

Before you can register your company, you need to decide what kind of entity it is. Your business structure legally affects everything from how you file your taxes to your personal liability if something goes wrong. 

  • Sole proprietorship. If you own the business entirely by yourself and plan to be responsible for all debts and obligations, you can register for a sole proprietorship. Be warned that this route can directly affect your personal credit.
  • Partnership. Alternatively, a business partnership, as its name implies, means that two or more people are held personally liable as business owners. You don’t have to go it alone if you can find a business partner with complementary skills to your own. It’s usually a good idea to add someone into the mix to help your business flourish. 
  • Corporation. If you want to separate your personal liability from your company’s liability, you may want to consider forming one of several types of corporations (e.g., S corporationC corporation or B corporation). Although each type of corporation is subject to different guidelines, this legal structure generally makes a business a separate entity from its owners, and, therefore, corporations can own property, assume liability, pay taxes, enter contracts, sue and be sued like any other individual. “Corporations, especially C corporations, are especially suitable for new businesses that plan on ‘going public’ or seeking funding from venture capitalists in the near future,” said Deryck Jordan, managing attorney at Jordan Counsel.
  • Limited liability company. One of the most common structures for small businesses is the limited liability company (LLC). This hybrid structure has the legal protections of a corporation while allowing for the tax benefits of a partnership. 

Ultimately, it is up to you to determine which type of entity is best for your current needs and future business goals. It’s important to learn about the various legal business structures available. If you’re struggling to make up your mind, it’s not a bad idea to discuss the decision with a business or legal advisor.

5. Register with the government and IRS.

You will need to acquire a variety of business licenses before you can legally operate your business. For example, you need to register your business with federal, state, and local governments. There are several documents you must prepare before registering.

Articles of incorporation and operating agreements

To become an officially recognized business entity, you must register with the government. Corporations need an “articles of incorporation” document, which includes your business name, business purpose, corporate structure, stock details, and other information about your company. Similarly, some LLCs will need to create an operating agreement.

Doing business as (DBA)

If you don’t have articles of incorporation or an operating agreement, you will need to register your business name, which can be your legal name, a fictitious DBA name (if you are the sole proprietor), or the name you’ve come up with for your company. You may also want to take steps to trademark your business name for extra legal protection. 

Most states require you to get a DBA. If you’re in a general partnership or a proprietorship operating under a fictitious name, you may need to apply for a DBA certificate. It’s best to contact or visit your local county clerk’s office and ask about specific requirements and fees. Generally, there is a registration fee involved. 

Employer identification number (EIN)

After you register your business, you may need to get an employer identification number from the IRS. While this is not required for sole proprietorships with no employees, you may want to apply for one anyway to keep your personal and business taxes separate, or simply to save yourself the trouble later if you decide to hire someone. The IRS has provided a checklist to determine whether you will require an EIN to run your business. If you do need an EIN, you can register online for free. 

Income tax forms

You also need to file certain forms to fulfill your federal and state income tax obligations. The forms you need are determined by your business structure. You will need to check your state’s website for information on state-specific and local tax obligations. 

“You might be tempted to wing it with a PayPal account and social media platform, but if you start with a proper foundation, your business will have fewer hiccups to worry about in the long run,” said Natalie Pierre-Louis, licensed attorney, and owner of NPL Consulting. 

Federal, state, and local licenses and permits

Some businesses may also require federal, state, or local licenses and permits to operate. The best place to obtain a business license is at your local city hall. You can then use the SBA’s database to search for licensing requirements by state and business type. 

businesses and independent contractors in certain trades are required to carry professional licenses. One example of a professional business license is a commercial driver’s license (CDL). Individuals with a CDL are allowed to operate certain types of vehicles, such as buses, tank trucks, and tractor-trailers. A CDL is divided into three classes: Class A, Class B, and Class C. 

You should also check with your city and state to find out if you need a seller’s permit that authorizes your business to collect sales tax from your customers. A seller’s permit goes by numerous names, including resale permit, resell permit, permit license, reseller permit, resale ID, state tax ID number, reseller number, reseller license permit, or certificate of authority. 

It’s important to note that these requirements and names vary from state to state. You can register for a seller’s permit through the state government website of the state(s) you’re doing business in. 

Jordan says that not all businesses need to collect sales tax (or obtain a seller’s permit).

“For example, New York sales tax generally is not required for the sale of most services (such as professional services, education, and capital improvements to real estate), medicine or food for home consumption,” Jordan said. “So, for example, if your business only sells medicine, you do not need a New York seller’s permit. But New York sales tax must be collected in conjunction with the sale of new tangible personal goods, utilities, telephone service, hotel stays, and food and beverages (in restaurants).”

Key takeawayKey takeaway: Register key documents like articles of incorporation or an operating agreement, a DBA, an EIN, income tax forms, and other applicable licenses and permits.

6. Purchase an insurance policy.

It might slip your mind as something you’ll “get around to” eventually, but purchasing the right insurance for your business is an important step to take before you officially launch. Dealing with incidents such as property damage, theft or even a customer lawsuit can be costly, and you need to be sure that you’re properly protected. 

Although you should consider several types of business insurance, there are a few basic insurance plans that most small businesses can benefit from. For example, if your business will have employees, you will at least need to purchase workers’ compensation and unemployment insurance.

You may also need other types of coverage, depending on your location and industry, but most small businesses are advised to purchase general liability (GL) insurance or a business owner’s policy. GL covers property damage, bodily injury, and personal injury to yourself or a third party.

If your business provides a service, you may also want to consider professional liability insurance. It covers you if you do something wrong or neglect to do something you should have done while operating your business.

7. Build your team.

Unless you’re planning to be your only employee, you’re going to need to recruit and hire a great team to get your company off the ground. Joe Zawadzki, CEO, and founder of MediaMath said entrepreneurs need to give the “people” element of their businesses the same attention they give their products. 

“Your product is built by people,” Zawadzki said. “Identifying your founding team, understanding what gaps exist, and [determining] how and when you will address them should be a top priority. Figuring out how the team will work together … is equally important. Defining roles and responsibility, division of labor, how to give feedback, or how to work together when not everyone is in the same room will save you a lot of headaches down the line.”

8. Choose your vendors.

Running a business can be overwhelming, and you and your team probably aren’t going to be able to do it all on your own. That’s where third-party vendors come in. Companies in every industry from HR to business phone systems exist to partner with you and help you run your business better. 

When you’re searching for B2B partners, you’ll have to choose carefully. These companies will have access to vital and potentially sensitive business data, so it’s critical to find someone you can trust. In our guide to choosing business partners, our expert sources recommended asking potential vendors about their experience in your industry, their track record with existing clients, and what kind of growth they’ve helped other clients achieve. 

Not every business will need the same type of vendors, but there are common products and services that almost every business will need. Consider the following functions that are a necessity for any type of business.

Taking payments from customers: Offering multiple payment options will ensure you can make a sale in whatever format is easiest for the target customer. You’ll need to compare options are find the right credit card processing provider to ensure you’re getting the best rate for your type of business.

Managing finances: Many business owners can manage their own accounting functions when starting their business, but as your business grows you can save time by hiring an accountant, or comparing accounting software providers.

9. Brand yourself and advertise.

Before you start selling your product or service, you need to build up your brand and get a following of people ready to jump when you open your literal or figurative doors for business.

  • Company website. Take your reputation online and build a company website. Many customers turn to the internet to learn about a business, and a website is digital proof that your small business exists. It is also a great way to interact with current and potential customers.
  • Social media. Use social media to spread the word about your new business, perhaps as a promotional tool to offer coupons and discounts to followers once you launch. The best social media platforms to utilize will depend on your target audience.
  • CRM. The best CRM software solutions allow you to store customer data to to improve how you market to them. A well-thought-out email marketing campaign can do wonders for reaching customers and communicating with your audience. To be successful, you will want to strategically build your email marketing contact list.
  • Logo. Create a logo that can help people easily identify your brand, and be consistent in using it across all of your platforms.

Also, keep these digital assets up to date with relevant, interesting content about your business and industry. According to Ruthann Bowen, chief marketing officer at EastCamp Creative, too many startups have the wrong mindset about their websites. 

“The issue is they see their website as a cost, not an investment,” Bowen said. “In today’s digital age, that’s a huge mistake. The small business owners who understand how critical it is to have a great online presence will have a leg up on starting out strong.”  

Creating a marketing plan that goes beyond your launch is essential to building a clientele by continually getting the word out about your business. This process, especially in the beginning, is just as important as providing a quality product or service. 

Ask customers to opt in to your marketing communications.  

As you build your brand, ask your customers and potential customers for permission to communicate with them. The easiest way to do this is by using opt-in forms. These are “forms of consent” given by web users, authorizing you to contact them with further information about your business, according to Dan Edmonson, founder, and CEO of Dronegenuity. 

“These types of forms usually pertain to email communication and are often used in e-commerce to request permission to send newsletters, marketing material, product sales, etc. to customers,” Edmonson said. “Folks get so many throwaway emails and other messages these days that, by getting them to opt into your services in a transparent way, you begin to build trust with your customers.” 

Opt-in forms are a great starting point for building trust and respect with potential customers. Even more importantly, these forms are required by law. The CAN-SPAM Act of 2003 sets requirements for commercial email by the Federal Trade Commission. This law doesn’t just apply to bulk email; it covers all commercial messages, which the law defines as “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service.” Each email in violation of this law is subject to fines of more than $40,000.

10. Grow your business.

Your launch and first sales are only the beginning of your task as an entrepreneur. To make a profit and stay afloat, you always need to be growing your business. It’s going to take time and effort, but you’ll get out of your business what you put into it. 

Collaborating with more established brands in your industry is a great way to achieve growth. Reach out to other companies and ask for some promotion in exchange for a free product sample or service. Partner with a charity organization, and volunteer some of your time or products to get your name out there. 

While these tips will help launch your business and get you set to grow, there’s never a perfect plan. You want to make sure you prepare thoroughly for starting a business, but things will almost certainly go awry. To run a successful business, you must adapt to changing situations. 

Be prepared to adjust,” said Stephanie Murray, founder of Fiddlestix Party + Supply. “There’s a saying in the military that ‘no plan survives the first contact,’ meaning that you can have the best plan in the world, but as soon as it’s inaction, things change, and you have to be ready and willing to adapt and problem-solve quickly. As an entrepreneur, your value lies in solving problems, whether that is your product or service solving problems for other people or you solving problems within your organization.” 

FAQs about starting a business

How can I start my own business with no money?

You can launch a successful business without any startup funds. Work on a business idea that builds on your skillset to offer something new and innovative to the market. While developing a new business, keep working in your current position (or “day job”) to reduce the financial risk.

Once you’ve developed your business idea and you’re ready to start on a business plan, you’ll need to get creative with funding. You can raise money through investments by pitching your idea to financial backers. You could also gather funding through crowdsourcing platforms like Kickstarter, or set aside a certain amount of money from your weekly earnings to put toward a new business. Finally, you can seek out loan options from banks and other financial institutions as a way to get your company up and running.

What is the easiest business to start?

The easiest business to start is one that requires little to no financial investment upfront, nor should it require extensive training to learn the business. One of the easiest types of new business to launch is a dropshipping company. Dropshipping requires no inventory management, saving you the hassle of buying, storing, and tracking stock. Instead, another company will fulfill your customer orders at your behest. This company will manage the inventory, package goods, and ship out your business orders. To get started, you can create an online store by selecting curated products from the catalog available through partners.

When is the best time to start a business?

Each person’s ideal timeline for starting a new business will be different. First and foremost, you should start a business when you have enough time to devote your attention to the launch. If you have a seasonal product or service, then you want to start your business a quarter before your predicted busy time of the year. For nonseasonal companies, spring and fall are popular times of year to launch. Winter is the least popular launch season because many new owners prefer to have their LLC or corporation approved for a new fiscal year.

5 Things to Do Before You Franchise Your Business

As a business owner with multiple years of success and a value proposition that resonates with your target audience, growth and expansion are likely top of mind. You may already have multiple locations — also doing quite well — and you’d like to explore how to scale. Your concept might be an ideal candidate for franchising, where you can maintain the brand continuity and quality that’s helped you make a name for yourself, while recruiting additional owners to expand your market share. It can be a heady time, full of excitement and possibilities. But it doesn’t mean you should rush headlong into this decision without first doing a proper amount of research and due diligence.

To assist with your dream of replicating your successful business model, here are five things to know before you franchise your business.

1. Firm up your brand identity

Owning a successful business that’s now a candidate for franchising is already an accomplishment. But before you reach out to a franchise attorney who bills by the minute, make sure you firm up your brand identity. This should be an open-ended, rhetorical exercise in which the ownership, staff and customer base can participate. The goal in mind is to not only define your business concept but also communicate the value proposition responsible for your success to date. What problem do you solve for our customers? What makes your brand successful? How are you unique from the competition? Is your product or service currently in demand? Would this brand attract interest from ownership candidates? Why or why not?

Discover how you can firm up your brand identity, as this will become the nucleus of your franchise offering.

Related: Franchising Your Business, Part 1: Making the Decision to Franchise

2. Compare and contrast

With more than 3,500 franchise concepts on the market today, there are plenty of examples for you to research and study. Look at franchise business models that operate in your industry or specific business sector. But don’t be afraid to also look at a few that operate in other categories. You can read about the highly-rated concepts that earned a spot on the 2022 Franchise 500 list, but it’ll also be wise to investigate the business models of brands of which you haven’t yet heard. After all, you’ll also be one of them when you first start. Focus on how these concepts communicate their value proposition to prospective owners. Ask yourself, “Would I be interested in owning this franchise?” Research about 50 or so. Then make a list of reasons why certain concepts are appealing, and why others aren’t. You can learn from both examples when it comes time to franchise your brand.

3. Create your brand’s owner persona

From the research you’ve conducted above, develop your brand’s owner persona — a three-dimensional look at your ideal franchise owner. Using the culture, values, mission and value proposition of your brand, create a profile that describes not just who is a match to own a franchised version of your business, but also why. What would their motivations be? What is the best way to reach them? Using your brand attributes, what personalities and leadership characteristics would be crucial for owning a successful franchise operation? The research you’re doing for these first three tips will pay off in the next two steps.

Related: Am I a Good Franchise Candidate?

4. Draft your franchising assets

Using the information and conclusions from the research you’ve conducted so far, develop the first drafts of the franchising assets you’ll need to have on file before you can begin. This includes your business plan, franchising agreement, an operations manual and all 23 sections of your proposed Franchise Disclosure Document (FDD). You’ll want to model your assets from the best examples found in your research phase. These first drafts are just that — initial attempts at putting together the assets for franchising your business concept. These drafts are your opportunity to put your brand on a pedestal and communicate your vision for establishing a successful franchise system. These assets will be your starting point when it’s time to call in the professionals.

5. Call in the experts

You’ll notice this is the final tip included in this roundup of advice. That’s on purpose — you want to be as prepared as possible when you solicit expert advice from the professionals. It’s recommended that you bring in a franchise consultant who works on the brand side of the business, and a good franchise attorney. Get a good referral and find those who have an established track record of franchising a brand and concept. Set up separate appointments to allow each of these experts to offer their best advice in a one-on-one setting. You’ll learn quite a bit from both, so be prepared to take copious notes. Expect that you’ll be given direction on refining the franchise assets you’ve put together in draft form.

If it still makes sense to use franchising as the vehicle for your brand’s growth after careful planning and thoughtful consideration, it may be time to begin the capital and financing portion of the journey.

Local Business

Any company that provides goods or services to a local population is considered a local business. Often denoted by the phrase, “brick and mortar,” a local business can be a locally owned business or a corporate business with multiple locations operating in a specific area.

Despite the growing popularity of online shopping, more than 90% of sales still occur in brick and mortar locations. While some local businesses may not have ecommerce channels, web presence is critical for local businesses hoping to increase foot traffic and compete with chains and larger organizations. Digital media and online listings have changed the game for local businesses by providing them with avenues for greater online visibility.

The customer journey often begins with an online or mobile search and ends at a local business’ storefront. According to a recent Google study, 76% of local mobile searchers visit a store within a day of their search, and 28% of those visits result in a purchase. With a strong digital presence, local businesses can not only increase their online visibility, but can also drive more consumers to their physical locations.

The best way to improve a local business’ digital presence is to claim, correct, and enhance online business listings. Incorrect or outdated listings disproportionately hurt how a local business shows up on a search results page. Inaccurate and incorrect listings also provide a poor user search experience and can cause irreparable damage to a business’ reputation. For example, if a consumer conducts an unbranded search for “pizza near me” and finds a local pizza shop’s information, travels to that location, and then finds out that the business is closed when they said they would be open — that local shop just lost a potential customer due to poor and mismanaged facts about the business.

With the increasing number of online business directories, and the changing local SEO landscape, having accurate and consistent data online is imperative for local businesses. Whether you’re a local business that has one location or 100 locations, Yext’s industry-leading Knowledge Manager software can help you maximize your home field advantage.

Why Your Business Needs to Build Better Relationships

As a business owner, building relationships isn’t optional. You should be building relationships with customers, other employees and members of your community. Read our post to learn why you should (and how to) build better business relationships.

Why Business Relationships Are The Key to Successful Growth!

Relationships are important in life. They make us feel safe and help us deal with stress. Relationships aren’t only important in your personal life, though. As a business owner, you should also build professional relationships. Relationship building from a business standpoint can help you get new customers, retain current customers and manage your reputation. What kinds of relationships should you build?  The three most important types of relationships you should build are with your customers, employees, and members of your community. Read on to learn how to build each type of relationship.

Building Customer Relationships

You’re probably already doing this, but first and foremost, you should be building relationships with customers.  Customers will be more comfortable continuing to use your business if they feel they know you personally. They will probably also be more likely to talk to you if they have a problem, rather than telling everyone they know (or turning to Yelp with a one-star review) if they have an experience they perceive as negative. Sixty-five percent of your business probably comes from existing customers. How can you keep those customers? Build a relationship with them! The average business loses 20 percent (and some can lose up to 80 percent) of its customers because the business fails to cultivate and nurture relationships with customers.  And repeat customers are extremely profitable. They spend more, and they are 60-70 percent more likely to convert (take an action you want them to take, such as filling out a form on your website).

How can you build relationships with your customers?

Talk to them and ask for feedback. If your business is a restaurant, walk around to the tables and ask customers if everything was okay. But go a little further and ask them how they’re doing. Don’t pry into their lives, but do show genuine interest in their experiences at your business. And make it easy for customers to complain. I know; it’s frustrating to hear negative comments about your business, but encourage that conversation. Let customers know they can come to you with problems. You might just save your reputation by receiving fewer negative online comments and by being known as the business owner in your city and industry who is easy to work with. Negative online reviews in search results can cause you to lose up to 70 percent of potential customers. While you have no control over what consumers say about your business online, you can at least make them feel more comfortable coming to you with their problems, giving your business a better chance of avoiding those negative reviews. If a customer does leave a negative review, be sure to reply and make it right for the customer. Online reviews are important, and consumers read your reviews. If you reply to negatives and attempt to make amends with the customer, you could salvage that relationship (and your online reputation). Make sure your customer service is excellent, as well. If your interactions with customers leave something to be desired, customers won’t feel comfortable talking to you or your employees, and it will be that much harder to build customer relationships.  Zappos is known for its customer service. The company goes above and beyond. Once, when a customer’s shipment was delayed, Zappos sent them a unicorn. They gained a customer for life by doing this. You don’t need to send all your customers life-size stuffed animals every time something goes wrong, but resolve complaints quickly and efficiently so that customers are happy enough to return to your business.

Building Employee Relationships

It’s important that your employees feel safe talking to you about their thoughts and problems. Make sure your employees know they can come to you when they are having a problem or they need help with anything at work. We talked about listening to customers, but don’t forget about your employees in the process. Welcome employee input. Listen to their ideas. Let them know you value their feedback.  And protect them. A trait of successful leadership is that you protect your team. If you do this, they’ll feel comfortable coming to you with problems rather than leaving issues unresolved (or leaving the business altogether). Keep open communication with your employees. Check-in and see how they’re doing every once in a while. Ask if they need anything from you. Be there for them, and they will be more likely to continue working at your business. This will not only help build your reputation, as your employees will want to tell friends and family (and all their social media friends) that they love their job. Employee retention could also save you money:

  • One-third of new hires quit a job after the first six months
  • Employees who feel engaged at work are less likely to look for a new job
  • Employee engagement can lead to an 18 percent higher customer retention rate

Keep employees engaged, and keep open communication with them so that they feel valued (and more likely to stay). And if you need help getting your team to be on the same level, you may want to try some team-building exercises.

Building Relationships with Members of the Community

Of course you want to nurture your current customer base, but what about meeting new people? Here’s why local business owners should build relationships with people who aren’t (and might never become) their customers: The obvious answer is that it’s possible that they will become a customer, but there’s more than that to building a relationship with a stranger. I’m not saying you have to become best friends with everyone you meet, but meeting new people and networking can do a lot for a local business. Any time I meet someone who owns a local business, I want to visit the business and tell my friends about it. If people in your community meet you personally, they will probably want to use your business the next time they are in need of a service or product you provide. Members of your community can be one of your most valuable resources. If you are in need of help, and you’ve been networking at local events, you’re more likely to have met someone who can help you out.

How to Build Relationships in Your Community

Building relationships takes patience. You will have to invest time in building those relationships. You can’t just walk up to someone and say, “Hey, want to have a business relationship with me?” (Well, you could, but you probably shouldn’t. You wouldn’t just walk up to someone and say, “We’re friends now.” Approach business relationships the same way.) Take the time to cultivate those relationships. You don’t have to invite everyone you meet at a networking event over for dinner, but get to know people. Talk to them. Give them your card and/or your email address.  As a busy business owner, it’s going to be hard to take the time to meet new people, but here are some places where you can meet others:

  • Chamber of Commerce and other local organizations
  • Local networking events
  • Charity events
  • LinkedIn 

Final Thoughts on Relationship Building

When you’re working to build relationships with members of your community, keep these three ideas in mind:

Be willing to reciprocate. Remember that there is a give and a take in all relationships. If you aren’t willing to be there for someone who has been (or even who would be) there for you, that person will be less likely to help you out if you need it.

It’s not all about the benefits. Don’t be so focused on the end goal that you forget that it’s possible you won’t benefit from the relationship. And hey, that’s okay. You have friends who won’t help you move into a new home, but you still think of them as friends. Similarly, sometimes your business relationships won’t turn a profit or bring in foot traffic.Be genuine. Treat others as you’d want to be treated, and welcome conversations, feedback and new ideas. You’ll make new friends and maybe even get new customers in the process!

Choosing the United States

A location decision is, in many respects, a referendum on a nation’s competitiveness. When a company decides, say, to build a factory with good jobs in China or Poland rather than in the United States, it is effectively voting on the question of which country can best enable its success in the global marketplace. Those votes matter: Each location decision translates into jobs, investments, tax revenues, and economic development. Governments, especially those of the most dynamic countries, compete fiercely for each vote.

The question “Where should we locate?” is more prominent in the minds of executives than it has ever been. Over the past three decades, business activities have become increasingly mobile, and more and more countries have become viable contenders for them. As a result, the number and significance of location decisions have exploded. Considerable evidence, including new data we unveil below, suggests that the U.S. is not winning enough of the location decisions that support healthy job growth and rising wages.

U.S.-based companies and America benefit when some activities—for instance, those tied to scarce natural resources or to customers—are placed in other countries. This boosts growth prospects in the United States. But other activities, such as R&D and advanced manufacturing, are essential to America’s competitiveness as a sophisticated economy. High-end activities have been a traditional strength of the country, but today the U.S. is struggling to attract and retain them.

Our research identifies two sets of avoidable causes. First are poor policies. The U.S. government is failing to tackle weaknesses in the business environment that are making the country a less attractive place to invest and are nullifying some of America’s most important competitive strengths. The government has also failed to eliminate distortions in the international trading and investment system that disadvantage the United States.

Second, in the rush to globalize, companies have overlooked the current and latent advantages of a U.S. location. Many factors affect the profitability of operating in a certain locale: wage levels, skills availability, utility rates, taxes, subsidies, shipping costs and reliability, local productivity, supervision costs, and many more. These factors are complex, interrelated, and dynamic. Locating an activity in one country often has ripple effects on activities elsewhere. Because many companies are still learning how to weigh these factors—indeed, processes for making location decisions have lagged behind those for virtually all other major investment decisions—companies can fall prey to biases that work against the U.S.

Is the U.S. Winning?

According to our survey of HBS alumni who made location decisions in the previous year, the majority of decisions …

For one, companies sometimes overlook or underestimate the hidden costs of locating activities outside the United States, as we heard in interviews we conducted with senior executives of multinationals. Many benefits of locating elsewhere, such as low wages or taxes, are visible and immediate, whereas the drawbacks are frequently subtle and apparent only over the long term. Also, companies often mistakenly view circumstances in U.S. locations as fixed, failing to consider how they might upgrade the productivity of existing U.S. sites or find more appropriate sites within America. Companies move out of U.S. locations when they could improve them. The implication is not that U.S.-based companies should always stay home but that they can make location choices better.

If the U.S. can tackle some of its weaknesses as a business location, there are grounds for optimism. Important trends are beginning to favor a U.S. location, such as rapidly rising wages in emerging economies, increasing transportation and logistical costs, and shortening product life cycles, which makes “near-shoring” attractive. Companies are also starting to understand the hidden costs of offshoring and to see and act on their ability to improve business environments in their U.S. communities.

What Is the U.S. Competing For?

A generation ago, most location choices boiled down to the question “Which countries do we want to serve?” Today improvements in information, communication, and logistics technology allow firms to serve many markets from a distance, spread discrete activities around the globe, and coordinate them in a global system. Thus, managers must increasingly decide not only which countries to serve but also where to locate each activity in the value chain.

To understand the kind of location choices that matter most for the U.S., we must distinguish among types of business activities with very different characteristics. Some activities require scarce natural resources and must be located near them. Other activities are tied to customers and markets—for instance, direct sales, on-site customer service, and physical delivery. For instance, if you want to sell cars in Vietnam, you must have showrooms there. When U.S.-based firms place such activities outside America, they are better positioned to tap foreign demand, gain insights into local customers, and adapt products to local markets—all of which boost company revenue, the demand for supporting activities at home, and U.S. competitiveness overall.

Customer-tied activities tend to gravitate to large, growing, and profitable markets. As the largest and often most sophisticated market, the U.S. has been a magnet for such activities. However, the rapid growth of markets such as China is weakening the pull of the U.S., while regulatory delays and other barriers are nullifying American market attractiveness.

Many activities in the value chain, however, are tied neither to customers nor to resources but instead are mobile: They can be placed in any of numerous locations and moved as circumstances change. Research, software development, and production of goods with modest transport costs, for example, can be located almost anywhere. Mobile activities gravitate toward the location that allows them to be performed the most effectively at the lowest total cost.

More activities have become mobile over time. Technological advances make it economical to develop and produce goods and services far from the final consumer and to coordinate activities at a distance. In fact, specialized companies have emerged to help others create and manage globally distributed supply chains; consider Li and Fung in apparel, for instance, or Flextronics in electronics production.

At the same time, the range of location options for mobile activities has expanded dramatically as many countries have stabilized their macroeconomic policies, opened their markets, improved their infrastructure, strengthened their economic institutions, and upgraded the skills of their workforces. Countries that used to attract activities only on the basis of natural resources or cheap labor can now vie for activities that rely on more skill and involve more-complex manufacturing or services.

Some mobile activities are truly footloose and can be relocated easily when conditions change—for example, a low-skill assembly operation with little fixed capital. Others, often those requiring highly skilled staff or sophisticated facilities, can be placed initially in any of several locations, but once located they are hard to move. In addition, one mobile activity in the value chain often pulls others to its location over time. For instance, a company may enter a new market with customer-tied activities, such as direct sales, but then add mobile activities like product development to build a larger presence and penetrate the market further.

Not all mobile activities are the same from the perspective of national prosperity. Those that generate the most value per worker—R&D, sophisticated manufacturing, and skill-intensive traded services, for instance—are the most desirable. They not only support attractive wages but also often lead to follow-on investments as well as technology and skill spillovers to other parts of the local economy. Low-end activities, such as simple assembly (of PCs, for example) or routine remote customer service, provide far lower wages and are more prone to relocation if local costs rise.

Sophisticated, skill-intensive mobile activities are the key battleground for advanced economies such as the United States. An acid test of U.S. competitiveness lies in questions such as: Do managers select America for their high-end mobile activities? Do they tackle their toughest R&D challenges, their most sophisticated manufacturing, and their most challenging managerial functions on U.S. soil or elsewhere?

How Often Is the U.S. Chosen and Why?

Solid answers on how the U.S. is doing at the level of individual location choices are hard to come by. The U.S. government tracks the number of companies that open an establishment in America but does not record whether the activity could have been based elsewhere. Nor are there official statistics that document what other locations, if any, were considered or why one location was chosen over another.

Evidence on location choices by multinationals has been largely anecdotal or based on limited surveys. We know that during the 2000s, hundreds of multinationals, including General Electric, Boeing, and Pfizer, set up R&D centers in China and India. A 2011 Deloitte study reported that 83% of all R&D sites opened by global multinationals from 2004 to 2007 were in China or India. Also during the 2000s, China enjoyed a boom in advanced manufacturing investments, and Eastern Europe saw an influx of labor-intensive scientific and technical activities. Senior executives attributed many of those location decisions not to low costs but to better availability of skilled labor, faster product development, and more government support.

To develop more-comprehensive data on U.S. success in location choices, we surveyed nearly 10,000 Harvard Business School alumni about their experiences with location decisions involving the United States. Of the respondents, 1,767 had been directly involved in such a decision in the prior year. The activities in question were relatively sophisticated: 38% involved some element of research, development, and engineering; 49% were production-related.

Of the respondents, 57% said that the decision at hand was about whether to move existing activities out of the U.S., whereas 34% reported that the decision was about whether to locate new activities in the U.S. or elsewhere. Just 9% said that the decision was about whether to move activities currently located outside the U.S. into the country. In other words, survey participants were six times more likely to have considered moving activities out of rather than into the U.S. (even though U.S. respondents were only twice as numerous as non-U.S. respondents).

Across all types of decisions, the U.S. was chosen as a location just 32% of the time. For decisions about moving existing activities out of the U.S., the U.S. retained those activities in just 16% of cases. We asked respondents to identify the countries that were considered in such decisions and were struck by the diversity. The most commonly considered alternatives were China, India, Brazil, Mexico, and Singapore. But the list included 146 nations, many that are hardly major offshoring hubs (such as Turkmenistan, Suriname, and Senegal). The U.S. is truly competing with the entire world to retain and attract investments.

The most common reason that activities left the U.S. was lower wages elsewhere, which is not surprising. Other reasons were better access to skilled labor and a faster-growing market. (For more survey results, see the exhibit “Rationales for Location Choices.”) More unsettling, however, was evidence of serious weaknesses in the American business environment.

Rationales for Location Choices

In deciding whether to move existing business activities out of the United States, our HBS alumni respondents reported, …

Survey respondents (not just those who made location decisions) expressed considerable concern that business conditions are eroding in the U.S. relative to other countries. As shown in the exhibit “Evaluating the U.S. Business Environment,” respondents pointed to a complex tax code, and ineffective political system, a weak public education system, poor macroeconomic policies, convoluted regulations, deteriorating infrastructure, and lack of skilled labor.

Respondents also identified the greatest impediments to locating and creating jobs in the U.S. (in order): regulations, talent, taxes, macroeconomic conditions, and politics. Respondents framed many of these impediments in terms of uncertainty about the future, not just today’s conditions. For instance, uncertainty about future regulations and taxes was mentioned nearly as often as current regulatory burdens and tax rates.

Evaluating the U.S. Business Environment

How do U.S. locations stack up? Our HBS alumni survey respondents evaluated in which areas the U.S. is falling …

Overall, our findings are sobering. For many business activities, the U.S. was not seriously considered as a location. When the U.S. was a finalist, it won less than a third of the contests. The message was clear: The U.S. is losing business investments and good jobs in no small part because of a failure to address fundamentals of the business environment. To be sure, subsidies and market distortions by other countries play a role in some cases, but according to our survey, those factors were far from the most important.

How Managers Choose Locations

Our research reveals another troubling pattern: The very nature of location decisions may lead some companies to move more high-end activities out of the United States, or locate fewer new activities in the U.S., than would maximize firm value. To examine more closely how managers choose locations for their business activities, we interviewed senior executives at more than a dozen multinationals. Like the surveyed HBS alumni, the executives pointed to skills shortages and government policies that make America an expensive, slow, and uncertain place to do business. But they provided an additional insight: Location-decision processes are so complex and dynamic that they are often made on the basis of simple rules of thumb (“we follow our customers” or “we focus on wage rates”), rough estimates (since “the numbers can be made to say anything”), or history (“mergers have left us with five R&D centers spread around the globe rather than two larger ones in the U.S. and Germany”). Although the best-run global firms have developed rigorous processes for location choices, such sophistication is far from universal.

Why? It is important first to realize that most location decisions are not large-scale movements of entire facilities requiring a detailed investment justification. In fact, large-scale relocations make up a tiny fraction of all American job losses. From 2008 to 2010, mass layoffs (50 or more jobs) involving relocations outside the U.S. resulted in the loss of only 27,145 U.S. jobs, government statistics show. In contrast, mass layoffs not involving foreign relocations resulted in nearly 5 million jobs lost.

The reality is that jobs typically leave America a few at a time, and sometimes in subtle ways. Imagine a bucket with a large number of pinpricks: A software maker promotes its American programmers to higher-end product development positions and hires junior programmers in Eastern Europe for lower-end work. Or a U.S. manufacturer gradually outsources portions of its product line to an OEM with production partners in China. Small decisions like these often are made after only incremental analysis, not a full-blown study that takes into account system-wide consequences.

Location decisions also confront limits on data and depend on accounting systems that make economic comparisons difficult. For example, the CEO of a leading consumer products company generously offered to share data with us on how his firm’s costs varied in factories around the world. It took his team two months to extract the data from a variety of databases, some tied to country operations and others to global functions, and from incompatible ERP systems on different continents.

It is perhaps no surprise, then, that we found few companies revisiting old location choices to see if they had lived up to projections. This may reflect the idiosyncratic nature of location choices, in contrast to more-replicable decisions such as acquisitions, where ex-post assessments are relatively common. Yet retrospective analysis is critical because the impact of poor location choices can cascade over time. As we have seen, location choices often build on one another, with an initial decision leading to more investments in the same location.

Finally, dispersing value chains around the world is a relatively new practice for many firms, one that has ramped up rapidly in recent years. The bias a decade ago may have been to do things locally, but the pendulum has swung the other way as awareness of offshoring has spread. Today many companies seem to believe that most activities can be carried out more economically outside the U.S. Indeed, an entire industry has emerged to support offshoring, promising near-term cost savings.

These findings suggest that the geographic configuration of activities in many companies might not be optimal. When a company chooses to move an existing job out of the United States or to create a new job somewhere other than the U.S., this may be bad news not only for America. Such decisions can reduce value for the company itself.

The Hidden Costs of Offshoring

One of the primary reasons that location choices may turn out to be less effective than expected is because managers sometimes overlook the current and future hidden costs associated with operating outside the United States. For instance, a recent report from AMR Research found that 56% of companies moving production offshore experienced an increase in total landed costs, contrary to their expectations of cost savings. According to a 2010 Ernst & Young survey, more than a third of CFOs reported that the overall costs of entering rapid-growth markets like Brazil, India, and China turned out to be higher than expected.

Common savings from offshoring, such as lower wages, benefits, energy costs, or taxes, are visible and immediate. In our interviews, we found that hidden costs are both direct and indirect. Some arise quickly, while others emerge only over time (see the exhibit “The Economics of Offshoring”). Costs are sometimes masked by the subsidy trap—when companies disregard higher direct and indirect costs of doing business in a location because of tax breaks or outright subsidies offered by the country.

The Economics of Offshoring

The economics of moving business activities out of the U.S. to another location can be thought of in terms of a …

Some hidden direct costs are becoming better known. The rush to arbitrage wage rates, for instance, is giving way to a deeper understanding of the need to take into account total wage costs. If lower-wage workers in emerging economies are less productive or less skilled, firms wind up hiring more workers. They also end up using raw material less efficiently or experiencing lower first-pass quality levels and higher scrap rates.

More subtle, and more often overlooked, are the indirect costs of moving an operation out of the United States, including the effect on costs in other parts of the value chain. An offshore location often requires extra supervision and training, more product inspections, more local security, and higher costs of freight (base and expedited) to deliver products to customers in the U.S. or elsewhere. The firm may incur extra capital and obsolescence costs from carrying greater inventory in the supply chain as well as higher packaging, travel, and telecommunication expenses. Higher costs associated with developing distant suppliers are also possible, in addition to increased overtime charges at headquarters because of time-zone differences.

Moreover, companies have found that distant operations—which involve longer delivery lead times—make it difficult and costly to respond rapidly to shifts in customer demand. Offshore makers of fashion apparel, for instance, can find themselves marking down substantial portions of their goods even as they run out of popular items.

Both direct and indirect costs change over time, sometimes radically. Dramatic wage inflation in some emerging economies has shrunk the labor savings that many managers hoped to enjoy. Hourly wages of a typical line production worker in Shanghai, for instance, rose roughly 125% between 2006 and 2011. Middle management salaries in India reportedly surged 13% in 2011 alone. High rates of personnel turnover (often reported in the range of 10% to 20% per year in China) reduce productivity and raise hiring and training costs. In addition, the trade-weighted basket of emerging-economy currencies has appreciated against the dollar since 2006, further raising costs in dollar terms. At the same time, the cost of transporting goods back to U.S. customers has risen with increases in fuel prices.

Intellectual property rights are also significant, and often underestimated, source of long-run costs. Firms operating in countries with weak IP protection can wind up losing their secrets or taking costly measures to protect them. One executive we interviewed described how his firm, fearing the loss of production know-how, has removed units of measure on the gauges in its Chinese factory. Another bemoaned the expense of defending a trademark in India’s byzantine legal system.

Finally, management teams that have moved some functions offshore, but not others, have struggled with costs of coordination across activities. For example, when manufacturing facilities are moved abroad but research and development centers remain in the U.S., innovation can suffer (see Gary P. Pisano and Willy C. Shih’s article “Does America Really Need Manufacturing?”, HBR March 2012). And when managers take on local partners to move offshore—sometimes a precondition for entry into a country—they can find themselves mired in drawn-out, time-consuming negotiations. Such costs can quickly turn what appears to be a worthy investment into a money loser.

Improve, Not Move

As companies have globalized, they have focused less on their home location or any one location. Conventional wisdom has been to migrate from one location to another to capture the greatest near-term benefits. Some athletic-shoe makers, for example, moved production activities to follow low wages—from Japan in the 1960s, to South Korea and Taiwan in the 1970s, and then on to China, Indonesia, and Vietnam. There is certainly logic in this approach, especially for low-end activities in mature product categories where innovation is limited, few skills are required, and input costs are paramount.

When companies shift locations, however, they can overlook two things. First, productivity improvements are often rooted in investments in individuals, innovation teams, and infrastructure as well as in long-term relationships with local suppliers and supporting institutions. It is difficult to cultivate such assets while moving from place to place. Second, the local business environment is not fixed. Acting individually and collectively, firms in a locale can improve the economics of undertaking activities there. So managers have an alternative: Improve rather than move.

Consider Corning, a leading maker of specialty glass and ceramics, including optical fiber and liquid crystal display (LCD) glass. The firm is best known for patient investment in innovation, success in pioneering breakthrough technologies, highly sophisticated production processes, and manufacturing costs among the world’s lowest.

Less well-known is the company’s commitment to Corning, New York, a town of 11,000 located about four hours from New York City. The region is home to five Corning plants as well as the company’s main research center, where employees generate some 250 patents each year. Corning develops new products in its U.S. plants, close to the research center, and then rolls them out globally. The company has a long history of investing in local infrastructure and talent. Some recent grants made by the Corning Foundation include $3.7 million to the Corning school district and $110,000 to a regional science and discovery center. Such investments, sustained over decades, have helped turn a rural town into a prime location for developing world-class technologies.

But Corning does not do everything at home. In 2010, nearly three-quarters of its revenue came from outside the U.S., where it has 60 plants in 14 countries and almost two-thirds of its fixed assets. Internationalization has been particularly far-reaching in product areas such as LCDs, whose customers (consumer electronics makers) are clustered in locations outside the U.S. Interestingly, the company has replicated its pattern of deep local investment in its major international locations, including in communities near LCD plants in Taiwan, Japan, and China. Instead of dispersing activities or migrating from place to place, Corning has concentrated its investments to build a handful of centers of excellence.

Efforts to upgrade a local business environment often are most effective when firms collaborate to make investments in collective assets that no single firm can justify. Since 2004, for instance, chief executives in the Minneapolis-St. Paul region have worked with Minnesota’s governor, local mayors, and university leaders to identify priorities and deploy teams to investigate issues, make recommendations, and “unite public, nonprofit and business interests behind common goals and solutions for faster, better results.” This “employer-led civic alliance,” known as the Itasca Project, has sparked an initiative to give businesses better access to University of Minnesota technology, a summer jobs program for Minneapolis students, and distribution of “Close the Gap” tool kits to help employers reduce socioeconomic disparities within the workforce. (See Bill George’s Harvard Business School case on Minneapolis-St. Paul as well as Rosabeth Moss Kanter’s article, “Enriching the Ecosystem,” HBR March 2012.)

Sophisticated business leaders understand that a company can benefit by building local clusters and upgrading the business environment. In our HBS alumni survey, we asked each respondent whether his or her business would be more, equally, or less successful if it were to undertake more activities to benefit its local community. Twenty-two percent believed that such activities would make the company itself more successful, and 71% said that such activities would be neutral to company success, suggesting that they would pay for themselves. Only 7% thought that additional activities would make a company less successful. Cultivating the business environment in a company’s locations, the survey suggests, is not charity but self-interest.

Making the U.S. More Competitive

America has much work to do to address the fundamental causes of declining competitiveness that are driving location decisions outside the United States. The government must tackle business environment weaknesses and the trade distortions introduced by other countries. At the corporate level, managers must learn to make location decisions better and invest to upgrade their U.S. (and foreign) communities.

Agenda for policy makers

Our findings on U.S. location decisions point to an agenda for American policymakers at federal, state, and local levels.

Address U.S. business environment weaknesses.

American policy makers must tackle the weaknesses in the country’s business environment summarized earlier. Most pressing, in many ways, is the corporate tax code, which is highly visible in location calculations. The code sets a high statutory rate but collects at a low effective rate because of loopholes and subsidies, and is complicated in ways that serve only the interests of accountants, lawyers, and bureaucrats. Lowering the tax rate, while eliminating loopholes and subsidies, could attract investment without reducing government revenue.

Then there’s regulation. Although sound regulation is essential to level the playing field among competitors and protect society’s interests, our research uncovered examples of complex or distortionary rules and administrative procedures that raise the cost of doing business in the U.S. without benefiting society. Whereas state governments get good marks for being responsive to business, the U.S. federal government often does not work collaboratively with businesses to reduce obstacles to investment and growth.

Survey respondents also told us repeatedly how much more time it takes to align government officials across agencies and jurisdictions in the U.S. than in, say, Eastern Europe or China. We do not want to copy China, whose speed comes partly from a political system unacceptable to Americans, but we do welcome recent efforts by the Commerce Department and others that make it easier for would-be job creators to navigate multiple government entities.

Protect core U.S. strengths.

Many of America’s unique strengths center on the creation and commercialization of new ideas. The country enjoys well-endowed universities with close connections to business and strong property rights that encourage people to invest in new ideas and facilities. The U.S. also offers an entrepreneurial system that funnels capital and talent to promising ventures, capital markets that reward success, and social norms that forgive failure. These strengths attract talent from around the world and, with talent, high-end mobile activities such as R&D.

U.S. policymakers must reinforce rather than nullify those strengths. Three threats stood out in our interviews with senior executives. First, immigration restrictions are preventing innovative, highly skilled individuals from entering the U.S. to work or from staying in the U.S. after earning advanced degrees. Second, some regulations hold up innovation without generating offsetting benefits to the country. In medical devices, for example, slow FDA approvals in the U.S. are driving clinical trials, production, and even research to Europe, where regulatory standards are equally stringent but more expeditiously applied. Third, the U.S. system of intellectual property protection is slow to prevent foreign IP infringers from selling in the attractive U.S. market and is vulnerable to abuses such as patent trolling. (See “Reviving Entrepreneurship,” by Josh Lerner and William Sahlman, HBR March 2012.)

Should Companies Undertake More Activities to Benefit Their Local Communities?

Nearly all the respondents in our HBS alumni survey believe that companies can do more to improve their local …

Eliminate trade and investment distortions that unfairly disadvantage the U.S.

At a federal level, U.S. government officials must work, bilaterally and multilaterally, to reduce or eliminate the distortions that some countries introduce into location choices. Countries can bias decisions, for instance, by holding down exchange rates artificially, suppressing wages below market levels, not allowing foreign ownership or control in certain sectors, or denying companies access to the local market unless they locate high-end mobile activities within the country. All of these measures encourage or pressure firms to locate activities in places other than where they can be performed most economically. Companies have little ability to resist such pressure individually; the U.S. government has largely abdicated its leadership in this area and can do much more to level the playing field. (See “Shattering the Myths About U.S. Trade Policy” by Robert Z. Lawrence and Lawrence Edwards, HBR March 2012.)

Avoid the subsidy trap.

When seeking to bring capital, jobs, and expertise into a region, many policymakers resort to large tax breaks and cash incentives. In using subsidies as the primary strategy to attract a company’s activities, policymakers “train” business leaders to think of locations as interchangeable, and they draw to their regions the companies that are least likely to put down deep roots. Local leaders should aim to attract businesses not by outbidding rival locations on tax subsidies but by offering a compelling value proposition, such as access to talent, technological knowledge, supporting institutions, or a local market that fits the firm’s strategy and cannot be matched elsewhere. Incentives should focus on investments in local infrastructure, in workforce training, and in other assets that will be valuable to other firms and citizens even if particular companies relocate.

Work collaboratively to enhance local competitiveness.

Government organizations can take a variety of steps to encourage companies to invest in their local business environments. For instance, they can match corporate funds for skills training, make supporting investments in infrastructure, streamline regulations, realign workforce development, and take any other steps. This support is often best handled at the local or regional level, where government and business have a common agenda, business leaders can provide effective leadership, and the connection with political leaders is greatest.

“If they have to pay you to move to their location…I consider that a danger sign,” one executive told us.

In Charlotte, North Carolina, for example, city and state governments collaborated with local businesses to create an innovative program to reduce energy consumption in the central business district by 20% by 2016. Duke Energy and Cisco covered the initial cost of wiring 65 buildings with digital technology to track energy use, while the state approved an energy efficiency program that added a fraction of a cent per kilowatt-hour to nonresidential customer utility bills—and helped the two companies recover their upfront investments.

Agenda for business leaders

Improving the competitiveness of the U.S. as a business location is often seen as the job of the government. But we cannot expect the government to solve the problem on its own. Businesses must lead the way through initiatives within individual companies and joint actions across companies.

Capitalize on changes in business conditions that favor the U.S.

Some of the economic trends that led many companies to relocate outside the U.S. are shifting, as we have discussed. This is creating new opportunities to reexamine a U.S. location, especially for activities that supply or serve the U.S. or nearby markets.

Near-shore instead of offshore.

In thinking about moving activities out of the U.S., managers have often overlooked the opportunity to “near-shore”—that is, to find another location in the U.S. with economics better suited to the activities involved. This capitalizes on the substantial economic heterogeneity within U.S. borders. A firm looking for inexpensive electricity, for instance, can find it in Idaho, while a company seeking low wages will discover hourly rates in Mississippi and South Dakota that are a third lower than in New York or Massachusetts. There may be locations within the diverse United States that are more attractive for certain activities than offshore locales once hidden costs and the ability to improve local conditions are taken into account, especially for activities serving the North American market. Near-shoring can reduce some hidden costs of distant locations—for instance, by reducing transportation costs, management oversight costs, and the risk of lost intellectual property. Also, executives we interviewed emphasized that some of the benefits of offshoring come not from the foreign location per se but from the opportunity a move brings to reexamine and improve processes—an opportunity that a move within the U.S. might afford.

Avoid the subsidy trap.

Firms should be wary of choosing a location simply because local authorities offer direct subsidies. As one chief executive told us, “If they feel they have to pay you to move to their location, there’s probably a reason. I consider that a danger sign.” Instead, companies should work with policymakers to face tough choices about spending priorities, educational reform, tax overhauls, and other controversial issues that affect the business environment. Business leaders should convey to policymakers that improving the economics of locating in the U.S. is crucial for the nation’s long-term prosperity.

Upgrade U.S. communities.

Business leaders must stop taking their local business environments as given. We have discussed how improving a location, rather than moving, can benefit a company. Of course, investing at home does not mean that firms should stay there exclusively. Globalization has important competitive benefits. But most companies should invest deeply in fewer sites around the globe rather than moving repeatedly, proliferating sites, and spreading local investments thin. For many if not most multinationals, one base should be in the United States, which offers many advantages, including a world-class university system, strong intellectual property protection, sophisticated managerial talent, ready access to capital, and a huge domestic market. Investing in local communities will improve the legitimacy of business and garner more support for government policies that boost competitiveness.

Improve the quality of location decision-making processes.

As managers learn to recognize the hidden costs of offshoring as well as the benefits of making investments to improve U.S. locations, some activities will flow back to the U.S. and others will be retained in the country.The days when every major multinational had a substantial share of its activities in the United States are long gone. U.S. and non-U.S. companies alike must compete globally, and this requires global networks of activities. For America to prosper in a world of truly global firms, the U.S. must address some serious and unnecessary weaknesses in its business environment and tackle distortions to the trading system that are driving investment out of the country.

Nonetheless, we come away from our examination of corporate location choices hopeful about America’s prospects. Sophisticated management teams are reevaluating their rush offshore and, in some instances, are beginning to move high-end mobile activities back to the United States. To a degree, these choices reflect the trends we noted, such as rising wages in emerging economies. But they also reflect conscious efforts by some executives and policy makers to understand better, and to change, the economics of location in a global economy. We are optimistic that with concerted action by government and business, more and more companies will find that for many high-end mobile activities, the right choice is the United States.

Tips For Growing A Successful Business

9 Tips For Growing A Successful Business - Manager's Office

1. Get Organized

To achieve the business success you need to be organized. It will help you complete tasks and stay on top of things to be done. A good way to be organized is to create a to-do list each day. As you complete each item, check it off your list. This will ensure that you’re not forgetting anything and completing all the tasks that are essential to the survival of your business.

2. Keep Detailed Records

All successful businesses keep detailed records. By doing so, you’ll know where the business stands financially and what potential challenges you could be facing. Just knowing this gives you time to create strategies to overcome those challenges. https://b63d28669842f6e662c59bf163d3287f.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

3. Analyze Your Competition

Competition breeds the best results. To be successful, you can’t be afraid to study and learn from your competitors. After all, they may be doing something right that you can implement in your business to make more money.

4. Understand the Risks and Rewards

The key to being successful is taking calculated risks to help your business grow. A good question to ask is “What’s the downside?” If you can answer this question, then you know what the worst-case scenario is. This knowledge will allow you to take the kinds of calculated risks that can generate tremendous rewards.

Understanding risks and rewards include being smart about the timing of starting your business. For example, did the severe economic dislocation of 2020 provide you with an opportunity (say, manufacturing and selling face masks) or an impediment (opening a new restaurant during a time of social distancing and limited seating allowed)?

5. Be Creative

Always be looking for ways to improve your business and make it stand out from the competition. Recognize that you don’t know everything and be open to new ideas and different approaches to your business. 

6. Stay Focused

The old saying “Rome wasn’t built in a day” applies here. Just because you open a business doesn’t mean you’re going to immediately start making money. It takes time to let people know who you are, so stay focused on achieving your short-term goals.

7. Prepare to Make Sacrifices

5 Tips For Starting A New Business

The lead-up to starting a business is hard work, but after you open your doors, your work has just begun. In many cases, you have to put in more time than you would if you were working for someone else, which may mean spending less time with family and friends to be successful.

8. Provide Great Service

There are many successful businesses that forget that providing great customer service is important. If you provide better service for your customers, they’ll be more inclined to come to you the next time they need something instead of going to your competition.

9. Be Consistent

Consistency is a key component to making money in business. You have to keep doing what is necessary to be successful day in and day out. This will create long-term positive habits that will help you make money in the long run.

The Bottom Line

According to 2019 data from the U.S. Bureau of Labor Statistics, approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.1 If you want to be among that 25%, rigorous attention to these nine tips is the smart way to get there.