While it may be a bit of an exaggeration to say that most new businesses don’t survive past the first two years, government data does show that seven out of 10 new employer firms last at least two years, with only half surviving for five years (source).
Statistics aside, there is no doubt that steering a fledgling business venture through the startup phase and the immediate years that follow is likely to be a huge test of entrepreneurial character.
Here are some strategies and tactics to consider as you struggle and stride through the first few years of entrepreneurialism.
Year 1
One of the first things start-ups learn is that very few things in business go quite to plan.
While there are many things you can do to take care of setting up your business (take for example these 10 Steps to Starting a Business) – you will always encounter the unexpected.
From un-forecasted demand that you can’t yet cope with; new tax laws that you had no idea applied to you; unreliable suppliers; unruly business partners; or clients that don’t pay on time – the unpredictable lurks around every corner.
And while you may not be able to predict the pendulum swings of running a business, you can prepare for them and this means having a plan and plenty of cash reserves.
A business plan is one of the most important tools in your business arsenal . Yet, many start-ups put writing a business plan on hold until they find they need to get a business loan. A well-prepared plan (that is revisited often) will help you steer your business on its course, and even help you navigate any bumps in the road. Try to think of your business plan as a living breathing project, not a one-time document that gathers dust on a bookshelf once you’ve secured your first customer.
Tim Berry, a guest blogger on Business.gov, and renowned business planning specialist offers practical advice about the principles of business planning. In his article – 10 Quick and Easy Ways to Start Planning Better – Berry offers strategies that can help entrepreneurs to: “…get past the myth of the business plan as a document, to be completed before anything happens, and then followed regardless of what happens“.
Part of your business planning strategy should be a focus on maintaining cash flow. Here are some articles that can help you build and maintain your cash reserves during the early years:
- Understanding and Expanding Cash Flow
- The Basics of Revolving Lines of Credit
- What to do When a Customer Won’t Pay
- Manage My Money – Government Resources for Financial Management
Year 2
While Year 1 is an education for new business owners, it should also be a year in which your business grows. But looking back, what would you have done differently?
Year 2 is a great time to reflect on your business successes, failures and shortcomings. For tips on how to take stock of your business performance, read Taking Stock of the Business Year – How to Conduct a Year-End Review & Plan for the Year Ahead.
Year 2 is also the time to emerge from the start-up weeds and work ON your business, as opposed to working IN it. Revisit your business plan, evaluate the year objectively, and don’t overlook your personal goals (are you happy with your new life as an entrepreneur, what would you do differently to help you enjoy the fruits of your labors?).
Becoming a fulfilled and successful business owner involves positioning yourself as a true advocate for your business, not just a salesperson. Some of the most successful brands in the world are where they are today because the entrepreneur behind the brand is out-front advocating its products, its successes, and its core values – think Richard Branson or Steve Jobs (both of whom founded empires from start-ups).
Becoming an advocate isn’t difficult but it involves relinquishing control of some of the day-to-day business operations that you have gotten used to as a start-up. Find ways to make sure that your customers’ know the face behind the business while maintaining the right balance between “being there” and having the business run without you. Read these five tips for becoming a better advocate for your business: Five Tips for Building your Small Business Brand Using its Best Advocate – You!
Year 3
Woo hoo! You made it to Year 3. You’ve found your niche and are hopefully doing well. It’s an exhilarating time. And while the highs and lows of business still apply, by now you should have a good view of your financial projections, which can help you prepare for market and seasonal fluctuations.
If your niche is working for you, stay true to it. Talk to your loyal customers about their needs and whether you are serving them effectively, assess emerging threats, consult your closest advisors regularly (accountant, partner, marketing team, etc.) and refine your business and marketing strategy to stay ahead of the curve.
Year 4
Congratulations, you are well on your way to defying the odds. What’s your secret to making it through the start-up years? Leave a comment below!
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