Foolproof Ways to Survive Your First Year in Business
by Carrie Hinkel on March 3rd, 2008
It’s often been said that a business’ first year is the hardest. There are issues with money, management, competition and a slew of other pitfalls just waiting to sink a new business. But, don’t get discouraged, being aware of these common stumbling blocks and learning how to avoid them will help you to be better prepared to survive the growing pains of your business’ first year.
Insufficient capital – It’s no surprise that this is one of the top reasons new businesses fail. And, for most, this problem could have been prevented by preparing a thorough business plan back when the business was still just an idea. A business plan forces you to work through each step of your future company, and do the research to come up with realistic estimates for both start-up and monthly costs. Many failed businesses simply took a guess at how much money their business would need. With new businesses, it’s best to expect the unexpected – and that means being prepared for hidden and larger-than-expected costs. Having quick access to a sizeable amount of cash is absolutely essential in your business’ first year. Without a source for backup funds secured, your business could see an early demise – even if it seems to be doing well.
Doing it all yourself – Small business owners and entrepreneurs are notorious for being a "jack of all trades" and doing everything from answering phones to packaging orders. However, for the jobs that require a trained skill – like marketing, advertising, web design, etc., it’s best to hand the job over to a professional. Trying to save money in the first year is great, except when it comes at the cost of your business’ welfare and growth potential.
Inadequate research – Not doing enough research on costs, competition, target market, products, pricing etc. has proven to have dire consequences for many first-year businesses. Too many business owners don’t want to bother with the extra work of creating a business plan or researching the details, but it’s that information that can literally prevent a new business from failing.
Lack of experience – It’s important not to get caught up in the "dream" of owning a business. Be realistic about your actual experience in the particular industry you are interested in. If you don’t have much experience then work towards getting some before you start your business. Become an apprentice or take classes – gaining that experience will help you to avoid unforeseen circumstances and create a more detailed and realistic business plan.
These are just some of the most common reasons why new businesses fail – of course there’s still other hurdles to watch out for, like over-investing in equipment, not controlling personal use of business funds, not enough money spent on marketing, and still more. The best preventative measure you can take to keep your business from becoming a statistic is doing research, research and then more research about every little aspect of your business before it’s actually open. You’ll eliminate most of the guesswork, surprises and unexpected costs that unprepared business owners will inevitably have to face.