How to survive your first year in business
Did you know that 20 per cent of small businesses don’t survive their first year?
From there, the number falls sharply — only 50 per cent of small businesses will make it past the five-year mark.
Yet, many new entrepreneurs have the misconception that they’ll make money quickly. They underestimate how much hard work it takes to survive the first year and give their business a fighting chance for long-term success.
They start their business with excitement, only to be disappointed that their target customers are not as enthusiastic about their products and services.
The hard truth is that most businesses don’t make money in their first year. The first year is the most arduous in business. A lot of your money will go into establishing the business —permits, research and development, advertising, rent, inventory, website, equipment and so on.
At the beginning, you’ll also have to plough back your profits into the business to help it grow. Investing your profits back into the business is the best way to expand products and services, finance moving into new geographic territories and paying more employees.
The old business saying rings true: It takes money to make money! In addition to money, building a successful business takes time, patience and hard work. With that in mind, here are some tips to help you survive the first year in business:
Create a solid business plan
In the first year, you’re setting the foundation for your business—which will determine its success in the long term.
Don’t go in without a business plan—it’s an important tool to confirm and perhaps reassess the purpose of your product or a service.
A business plan also comes handy when you’re looking for funding for your start-up. It shows potential investors that you’ve done your due diligence in researching the industry, including the competition. This gives them confidence that your business will be a good investment.
Devote your time and effort to explore your business plan. Learn its strengths, weaknesses, risks, and opportunities. This is the time to research further on your industry and the competition. What makes you different?
To have a fighting chance, you must understand your competitors to know your unique value proposition and to gauge how successful you’re likely to be.
With the information you’ve gathered in your first year of business, tweak and refine your business plan until it tells your story clearly and convincingly.
Minimise operating expenses
One of the biggest reasons that small businesses don’t make it to the first-year mark is poor spending. Even if you have a seemingly endless line of credit, you should be frugal with your business expenses.
Resist the urge to throw money at every challenge that you encounter. Before spending, analyse the problem and come up with possible solutions —some of which might not require spending a lot of money. Be very smart with your cash allocation.
For example, you don’t have to hire dozens of employees. In the first year, it might make more sense to rely on outsourcing and freelancing to get the work done. Instead of hiring an in-house accountant, you can easily and affordably get your books done by a freelance accountant.
You can also hold off on renting offices at high-end locations. Instead, you can go for cheaper offices in less expensive locations, pay for co-sharing office space, or set up your office at home.
Get the right mentors
Having a mentor can determine if your business will survive its first year. The insight from someone who’s walked the path before you is invaluable.
A good mentor can point out pitfalls and help you figure out solutions, connect you to the right people, encourage you when you feel like giving up, and even inject more capital into your business.
When entrepreneurs are mentored by a top-performing entrepreneur, their businesses are three times as likely to become top performers themselves.
Although some successful entrepreneurs don’t mention having notable entrepreneurs, plenty of business titans partly owe their success to great mentorship. Bill Gates was mentored by Warren Buffet while Steve Jobs was mentored by Ed Woolard and John Sculley, and Mark Zuckerberg was mentored by Steve Jobs.
To find the right mentor, you first have to understand what you’re looking for. Do you want someone with lots of connections? Do you want a mentor with specific expertise in the industry?
Different individuals will bring different skills and insight to the mentoring experience. Create a checklist of what you need from the ideal mentor before you reach out.
After landing an ideal mentor, remember to be a good mentee. Don’t be demanding while not giving them anything in return—relationships are most effective when they’re mutually beneficial.
Think of ways to also help your mentor achieve their goals. It can be as simple as helping them find the right employee for a vacant position.
Look out for your health
When you’re setting the foundation for your business, its easy to burn the candle at both ends. You’ll wear many different hats—you’re the CEO, the social media manager, the head of sales, and the office cleaner!
But beware of entrepreneur burnout—statistics show that 30 per cent of entrepreneurs live with or experience depression.
While bringing your business idea to life is important, don’t overlook work-life balance. Make time to be with your family and friends, exercise, get enough sleep and rest, eat healthily, and take care of yourself. After all, you’re your business’ most valuable asset.