The first year of owning a business can provide a variety of frustrations and setbacks, but you’ll probably be pleased to hear that few businesses fail in the first 365 days. The US Department of Labor finds that 75% of businesses survive the first year, with 50% making it to five years. Sustaining a business isn't as impossible as some are led to believe.
However, there are certain fundamentals you should emphasize in the early stages of business. One of these is a low-expense business plan that emphasizes productivity over hyperactivity while placing a focus on the customer and network development.
In your first year as a business owner, there are plenty of things to anticipate. The anticipation of potential mishaps can result in an effective response. Here are some important aspects of a first-year business to look for.
Your Business Plan Won’t Cover Everything
In an ideal world, you could look into the future and develop your business plan around imminent mishaps. Since that's not the world we live in, you have to craft a business plan as best you can by trying to solve problems before they arise.
While it may be tempting to create hundreds of pages of planning to account for every potential snag, creating a business plan with too much excess can detract from what matters. Specifically, launch timeframe and sales/profitability goals should be a focus, as should methods for customer relations, employee productivity, network development and competitor analysis.
While your business plan won't cover everything, it can still prove to be an essential foundational element for your overall plan, with procedures in place for more generalized mishaps. Some issues will require you to think quickly on your feet, but a business plan can help you anticipate them to a degree.
Reinvesting Back Into the Business Can Be Essential
For the first year of your business, don’t expect to be swimming in profits. In fact, for new businesses, the owners are often the last to be paid in a given year. Many new business owners accustomed to a salaried position find it difficult to give up the stability of paychecks, though these owners would be wise to have a year's salary in the bank due to the common refrain of new businesses running out of money.
If you're starting a new business with no emergency funds in your account, the business is operating on a razor-thin margin for error. Since new businesses often need to try a variety of things and evaluate what works, it's prudent to have some financial wiggle-room and to prioritize staff over the owner when it comes to payday.
Tempting Superfluous Payments and Expect the Unexpected.
To increase their chances of survivability, new businesses should strive to keep their expenses low. While it can be tempting to nurture company culture or impress new clients with expensive sushi platters or pricey nights out, new businesses should only spend on the essentials.
Consider freelancers or contractors for certain positions if they aren't essential or long-term and be sure to comparison-shop for the best options.
Also, consider alternatives if you're truly not in need yet. Tracking company expenses on a weekly basis can help identify potential problem areas, cut the financial fat and save up for major renovations or expenses.
Get ready for unexpected expenses as much as you can. Things will break and need replaced, and it’s often the things that you don’t think about. If you have a loading dock area, your doors may need replaced to keep your area safe and operating smoothly. Or your AC could be worn out and need a few thousand dollars in repair. You’ll have some of the same issues you have in owning a home, just bigger and more expensive.
Value Productivity Over Hyperactivity
With a limited budget, first-year business owners need to be aware of what all employees are doing. Even if several are working hard each day, their actual tasks may not be contributing much. As a result, business owners should value productivity over hours spent on the job, with this ideology also relating to client requests.
Too many clients can result in a poor reputation and loss of profits, just as an unfocused work ethic can. It can be tempting to take in every new client, but certain ones just aren’t a good fit for a first-year business with a strapped budget.
These tips can help first-year businesses naturally and positively build their network by taking on the clients they can provide good results for and cutting down on hyperactivity and waste. Also, measuring and adapting to issues that arise is always easier with an effective business plan that promotes low expenses and a customer-first ideology.
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