The first year is crucial for any new business. So many variables come into play and even then, you may not survive your second or third year. The good news is that you have a fairly good chance of surviving the first year, since 75% of new businesses survive past the one-year mark. However, those percentages decline with each subsequent year, dropping to a 50% chance of reaching the five-year mark.
There are things you can do, however, to give yourself an advantage. As you work hard the first year to build your new business, you are laying the foundation for the years that will follow. This guide will help you build a business that can weather even the most turbulent storms, allowing you to continue going long after your competitors have failed.
1. Get a Support System
The first thing you should do before you even hang the “Now Open” sign is to surround yourself with people who will help you along the way. This can include a networking group, a mentor or a great group of friends. Once this support system is in place, you’ll have the resources you need whenever you have questions or just need advice.
In addition to friends, colleagues and mentors, you’ll also need someone who can help with your financials. When you’re just starting out, accounting software is a great resource for handling bookkeeping, processing payroll and preparing taxes, but as you begin to scale, you may need more help. Even a brief consultation with an accountant who specializes in startups can make a big difference. The accountant may identify mistakes in your budget that would have otherwise emptied your bank account within the first year.
2. Know Your Customers
Even the greatest idea will fail if it does not resonate with your target customer base. Before you turn your idea into a startup, conduct careful research into your customer base and get feedback at every step of the process. As you develop your prototype and gather funding, find a way to meet with your target audience on a regular basis. Use their insight to tweak your design or craft an effective marketing message.
Determine the best place to market your product, and begin with a small group that grows. You might find that buying a booth at a community crafts fair is a great way to reach your target audience. An online business may discover that user testing is most effective over the internet. As people help, be sure to collect their contact information for future feedback opportunities if they are interested.
3. Know Your Strengths
It’s important to know your strengths and weaknesses from the onset so that you can gear your business in the right direction. According to Jim Clifton, chairman and CEO of Gallup, successful entrepreneurs have common core strengths. These strengths include extreme determination and a desire to create successful business models. Beyond that, the traits that contribute to one’s own success are highly unique and individualized.
By knowing your strengths, you can play to them. If you are a great public speaker, for instance, you should take opportunities to connect with others through conducting workshops or speaking at conferences. If public speaking terrifies you, find another way to network with others in your industry, through attending those events as an audience member and networking through social media, perhaps.
4. Plan to Be Unprofitable
Some business owners fail because they expect they can launch their small business and begin raking in dollars right away. As many early entrepreneurs have heard, however, the first few years are very rarely lucrative for new business owners. Unfortunately, it is difficult to work a full-time job while also putting your efforts into a new business, which means you’ll have no reliable salary to rely on during those early days.
If possible, you should make plans to survive during those early days without a salary at all. If you can set aside money before you launch your business, do so. If you can live on a shoestring budget and take as minimal a salary as possible during your early days, you might be able to do it. You can also keep costs low through such efforts as:
- Working from home to avoid paying for office space
- Sharing conference facilities with colleagues
- Sharing booth fees at a local craft fair with a fellow entrepreneur
- Crowdsourcing specialized skills like logo design
- Using videoconferencing to cut down on travel costs
- Marketing through social media to reach customers on a budget
5. Measure Results
Sales professionals use the term “always be closing,” but entrepreneurs should adapt an, “always be measuring” approach to their work. Everything you do should be constantly measured and analyzed, with the results informing your future efforts. This includes product development, marketing, website visits, social media and sales efforts.
In order to effectively measure your results, you’ll need the right analytics tools in place on each of your systems. Some solutions have analytics built in, while you’ll have to set others up yourself. As you put technologies in place to power your business, be sure analytics tools are included in the plan you choose.
If you are launching a new business, you have a good chance of surviving your first year. However, it’s important to lay the groundwork for the following few years to help ensure you make it past that all-too-crucial five-year mark. With the right tools and the perfect attitude, you’ll be able to accomplish this.
If you’re ready to start a business continue on to learn the 13 steps you need to follow to start a business.