Wednesday October 21, 2015
Starting a new business is exciting, empowering, and fun. But it can also be difficult, confusing, and stressful. Statistics show that only 75% of businesses survive their first year, and only 50% make it to five years.
Here’s the good news about that statistic: it’s not random chance. Patience, planning, and determination can have a big impact on your likelihood of success. Your attitude and decisions can propel you to the five-year mark and beyond!
Here are some of the factors you need to keep in mind to successfully survive the first year as a small business owner.
Create a Flexible Business Plan
It’s hard to chart a good course if you don’t have a clear idea of where you’d like to end up. That’s where a business plan comes in. Even if you aren’t applying for funding or a loan, your business plan keeps you accountable for your goals and aspirations for your business.
But creating a business plan that’s too rigid can cause problems too. Things change fast in the world of small business owners, and a business plan without flex blinds you to opportunities you aren’t ready to imagine when you’re first laying out your course.
"A business plan without flex blinds you to opportunities you aren't ready to imagine" [Tweet this]
Keep your business plan clear and specific, but revisit it often to look for new opportunities and directions.
Carefully Monitor Expenses
Cash flow management can be a major stumbling point for new small business owners, especially when it comes to managing expenses. Watch your expenses like a hawk during your first year in particular, looking for patterns. Try to account for every expense, no matter how minute.
Now it’s time to get strategic. What bills can you move around to make cash flow easier? Can you adjust your payroll schedule to ease the burden when cash is tightest?
Develop a Scalable Sales Process
The other aspect of cash flow is being able to predict and manage revenue. To do that successfully, you’ll need to develop a successful sales process right away.
Your sales process includes:
- Gathering new leads
- Points of contact (virtual and/or in-person) with prospects
- Closing/converting the sale
- Invoicing and receiving payment
- Customer retention strategies
A bottleneck at any point in this process can cause big problems for your cash flow. In particular, don’t overlook the start and finish of the process: gathering new leads, receiving payment, and customer retention.
Make sure your sales process can scale up as you grow. Here’s a hint: if it takes lots of one-to-one labor from you, it’s not scalable.
"If it takes lots of one-to-one labor from you, it’s not scalable" [Tweet this]
Reinvest in the Company
Especially if this is your first time starting a business, and you’re transitioning from a regular paycheck, this can be difficult to get used to. Your “profits” early on in the business are not your paycheck. The smartest way to use them is to reinvest them back in the company.
Carefully consider how best to use those funds:
- Making new hires/outsourcing
- Investing in new equipment
- Training for yourself
Putting money back into your business is especially vital in the first few years of your business. Don’t leave yourself so financially strapped that the stress impedes your ability to think clearly and make good decisions, but plan for a tight first couple of years until your business is on its feet.
Avoid the “Busy” Trap
Business owners are insanely busy people. No one blurs the lines between work and life quite like a new entrepreneur, but just because you’re channeling every spare second into the business doesn’t mean that time you spend is actually productive.
Being “busy” is not the same as being productive. In fact, if every day is crowded with repetitive tasks, meetings, and putting out fires, you’re too busy to be productive.
Growing a business takes focused time and energy. If you find you’re doing the same things over and over again every day, it’s time to delegate so you can spend your valuable time moving the business forward.
Invest in Powerful Software
Many new small business owners don’t think much about the software they use to run their business. They start out using their smartphone and Excel spreadsheets, and add new tools as they need them.
Unfortunately, this approach encourages a reactionary mindset that can stunt the growth of your business long into the future. It’s much easier to grow into a software solution than to force yourself to fit into a system that’s too limited for your needs.
This is why I recommend launching your business with an integrated toolkit of modular business tools. Modular toolkits let you start out with just the tools you need when you’re beginning, but have lots of room to grow and expand as you realize new possibilities and new needs for your business.
I’ve devoted my career to creating a software toolkit that’s specifically tailored to the needs of small businesses. For me, that means a solution that can grow with your business.
Gather a Support Network
Entrepreneurship can be a lonely journey, especially when you’re first starting out. Without a boss, peers, or even employees, it’s easy to feel isolated. Worse, you run the risk of getting caught up in your own thought patterns, with the result that you might miss opportunities that are right before your eyes!
Networking is a great way to build up a community of peers who are at similar stages of the entrepreneurial journey. You can learn from each others’ mistakes and successes, encourage each other, and provide that outside perspective that’s so valuable for new entrepreneurs.
You also get the chance to meet potential customers, as well as possible partners and mentors. All four of these types of connections (peers, prospects, partners, and mentors) are incredibly important for new business owners, and can be the key to surviving past that coveted 5-year mark.
Has your business survived past the 5 year mark? What are your tips for success?