Growing your business
How To: Survive Your First Year of Business
Starting your own business can be an incredibly challenging task and any business owner can tell you that the first year is far from easy. Not everything will go to plan, you may experience a few setbacks and there will be plenty of things that you wish you’d known earlier. However, it’s also a really exciting time, giving you the chance to learn valuable lessons whilst doing it all on your own terms - not to mention the experience and opportunities you’ll gain!
According to statistics from Ormsby Street, business survival rates are as high as 91% after one year of trading, but after five years only four in ten of these businesses will still be standing. While the data looks promising for the first year, many do still fail or set themselves up for failure further down the line which is why it’s so important to make that first year count.
Here are a few tips on how you can survive your first year as a business owner:
Write A Business Plan
Having that initial business plan in writing is fundamental in your first year, as it will allow you to set clear goals and objectives that you can share with your whole team. It also gives you the opportunity to create a defined business strategy, and make sure you’re allocating your funds to the right places. And while plans will inevitably change as you progress, having a strategy in place still means you can look back and measure what you’ve achieved against milestones.
Every business plan is different but some of the things that you could include are specifics around the target audience, how you’re going to cater to them as a business, a company description along with details of the products or services you’re offering, some competitor analysis, a marketing and sales strategy, and a financial plan including details of funding and investment. When it comes to visibility, accounting for the next three to five years is a good place to start and means you have more chance of foreseeing any problems areas that may arise.
Manage Your Expenses
When it comes to managing expenses, the first year can certainly be a roller coaster as you experience ‘good’ and ‘bad’ months. There are likely to be all sorts of expenses coming out of your account, people to pay and incoming payments to stay on top of. With the added task of setting processes up for all of this, cash flow and credit management can often take a hit.
Managing Director of Ormsby Street, Martin Campbell says: “Poor cash-flow is mostly caused by late payment of invoices and this is certainly something that can be addressed by any small business. Measures include being strict and upfront about payment terms initially and using the right tools to provide insight into how they should trade with customers and what action to take to reduce risk of non-payment.”
As well as managing cash flow, it’s also a great idea to have a financial cushion in the form of backup savings. Many business owners believe they have accounted for everything only to find an unexpected expense come up which, in some cases, could make or break a business. Obviously not everyone is fortunate enough to have access to backup savings. In this case, alternative sources of funding can be considered such as a Business Cash Advance. This flexible way of accessing funds means you’ll only need to pay the money back when you start getting customers, whilst averting a potential crisis.
Keep Costs Low
Saving money where you can and keeping costs low is a good habit to get into early on. Instead of cutting corners and compromising on the important things, make a list of things that you can cut back on or don’t need right away. Some ways to cut costs could be to employ staff on a job-to-job basis, hire interns, or rent out expensive equipment for one-off jobs.
It’s also worth noting that often time really does equal money. Think about where you could automate processes or find more efficient ways of carrying out manual tasks. This way, you’re freeing up resource to concentrate on growing and expanding your business.
Benchmarking your cost base to find out what you should be paying is another essential task, and pretty-straight forward to do these days. Stephen Hart, CEO of Cardswitcher, says: "For most business services, there are plenty of easy to use price comparison websites to make sure your business gets best value.
Create A Brand
During your first year of business, establishing a brand identity is a must. And it goes way beyond having a nice logo - although this is a good place to start! Your brand is what your customers will think of when they see your name, and when they consider your products or services. It’s can also mean the difference between your customer choosing your business over one of your competitors.
Nick Ellis, Creative Partner at creative agency Halo, says, “Your brand is the single most valuable asset you own. Understanding your purpose; reason to exist, reason to believe, the single minded proposition of your brand, is vital if you're going to withstand the slings and arrows of outrageous fortune created by market fluctuations and the unforeseen future we face.
You must nurture your brand, invest in it as you would talent or technology. It's the emotional connection between your business and your consumer. It's the difference between a sale and a missed opportunity. It's a conversation between business and audience.”
Do A Few Things Really Well
In the early stages it can be easy to get swept up with wanting to do everything, reach everyone and be everywhere. However, businesses are much better off focusing on doing just a few things really well. This will not only give you more focus but will also allow your customers to experience products or services that have had lots of thought and energy put into them.
For example, if you run a pub, you might want to specialise in serving homemade pies and local ales instead of trying to offer a menu full of different cuisines. Or if you’re retailer, perhaps you want to focus on stocking a few core brands before branching out.
It’s also worth considering the competition. Look at what nearby businesses are offering and make sure you differentiate your own products or services to provide something unique. Although you may want to branch out once you’re more established, focusing on your core product or services range and doing that really well is sure to pay off in the long run.
Surround Yourself With The Right People
Surrounding yourself with the right people early on can make all the difference. Not only with the people that you decide to go into business with but also the people that you decide to hire. These are the people that are going to be sharing the vision from the beginning and providing the right service and experience for your customers. Working for a new business isn’t always easy so you’ll want to make sure they have the right mindset and drive for the job.
You could also provide training that includes enforcing a defined set of company values to make sure everyone is working towards the same goal. Those that are involved from the beginning can also feel more invested in the business so make sure you celebrate all your achievements - even the small wins!
It’s also a great idea to build up a support network right from the beginning. This could be other business owners and entrepreneurs in your area for example. Setting up a monthly meetup will give you the chance to share success stories or talk about what you’re struggling with. Having this added support can help you stay motivated and feel less alone during those hard times!
Surviving your first year of business is going to have its ups and downs but it’s a valuable journey that needs to be taken. After all, you’ll come out of the other side with plenty of first-hand experience and lessons which are sure to lend a helping hand to the years ahead!