7 Tips for Surviving Your First Year as a Business Owner
As an entrepreneur of over thirty years, I know how hard it is to survive the first year of business. My first startup faced many bumps in the road, and it wasn’t profitable until the fourth year of operating.
To help on your startup journey, take advice from business owners who have been where you are and made it through the first year.
How to survive your first year as a business owner
Starting a business is tough. Use these tips for surviving your first year as a business owner before launching a startup.
#1. Have a plan
Diving straight into entrepreneurship with no direction is extremely risky. You need a business plan that is strong enough to guide you through your first year but flexible enough to change.
Whether equipment breaks, you take on a large project, or your home furnace goes out, the unexpected happens in business and life. When you’re the boss, you have to be prepared as well as ready to change.
Make sure your plan covers these details:
- Company description: This is a summary of your business’s mission and describes how you will meet customer needs.
- Market analysis: Do market research to get key info about your industry, target customers, and competitors.
- Offerings: Talk about what services or products you will sell.
- Marketing strategy: Discuss your plan for generating sales.
- Funding needs: Outline a budget and your need for outside funding.
- Financial projections: Estimate your future costs and revenue.
Your business plan does not have to be a formal document. Instead, write it in a way that makes sense to you. Then, clean up the document when it’s time to talk to lenders. Update the plan as variables change in your first year of business.
#2. Prepare your finances
If you don’t have the means to finance your idea, your business isn’t going to get very far. And, miscalculating costs could cause you to run into some serious trouble with your personal finances.
Generally, the rule of thumb is to have enough cash to cover six months’ worth of expenses. To know if you’re ready to launch your company, you need to know how much it costs to start a business.
Make sure you account for all expenses that will go into starting and operating. Some costs might include:
- Marketing materials
- Professional fees
- Business registration
It’s a good idea to add up the costs you think you’ll have, and then double that number. Business expenses usually end up being more than you anticipate. It’s better to over-prepare than come up short.
Another thing to keep in mind is your personal expenses, such as your mortgage, groceries, and utilities. When you start a business, you can’t rely on a steady paycheck from an employer. You might have to reduce personal spending to survive the first year of business.
#3. Create a customer-centric brand
Without customers, you won’t make sales. To gain interested buyers, you need to create a brand that focuses on your customers’ needs. A consistent and recognizable brand will help you get the word out about your new business.
A strong brand makes it easier for customers to connect with your business. When consumer values align with your company’s message, they are more willing to buy from you.
Create brand awareness to bring in more sales. Your brand should be clear about the problem you solve and stand out from competitors. Make sure your brand is present and uniform across all channels of communication.
#4. Build a network
When you start a business, you have to wear a lot of hats. You’re the manager, sales team, production worker, and bookkeeper. That said, you can’t build a business alone.
You need a network of people to help you. Lawyers can help you work out the legal requirements for registering your business. Insurance agents can tell you what kinds of coverage you need. Third-party recruiters can help you develop sourcing strategies for finding your first employees. And, bankers can provide you with the right funding options.
Build relationships with the people who can get your business idea off the ground. Connect with individuals who will give expert advice and save you from making startup mistakes.
#5. Automate tasks
Just because you do it all doesn’t mean every task has to be difficult. Automation will help you get things done faster and more efficiently. When you automate certain tasks, you can focus more on building your business.
Software can automate some business tasks. For example, small business accounting software helps you keep track of business transactions. The software will automatically calculate totals for you, improving accuracy in your books.
You can also set up recurring payments with automatic bill pay. The amount you owe is taken out of your business bank account each month on a specified day. And, you might want to automate marketing tasks, such as sending emails and posting on social media.
#6. Track progress
To know if your business idea is successful, you need to measure progress. Use quantifiable metrics to track how well your business is doing. You can record metrics on a simple spreadsheet or with a software program.
You need to track profits to survive your first year in business. Know how much money you make compared to how much you spend. When you start out, you’ll probably have expenses but no sales. That’s OK. Keep measuring until you reach the break-even point.
Other metrics to track include how much it costs you to get a new customer (cost per acquisition), how many customers return to your business, and how many customers refer you to others. The more you know about your performance, the more you can improve.
#7. Reinvest in your business
One mistake new business owners make is keeping all the profits as a paycheck. If you don’t reinvest in your company, it won’t grow. Put about half of the money you earn back into the business.
Use your metrics to see which parts of your business you need to reinvest in. For example, you might need to upgrade to more efficient equipment. Or, you might want to spend more on marketing.
It can be difficult to take your hard-earned dollars and put them right back into your business. But, investing back into your company will help you scale up faster. After you’ve survived the first year of business ownership, you could find that reinvesting made you more profitable in the long run.
Mike Kappel is the president of Patriot Software, LLC., which develops online accounting and payroll software for small business owners. He has also founded four other successful small businesses, and he is passionate about helping other entrepreneurs find their way to successRead Full Bio