Making it through year one as a new business is great. But the ultimate goal is to sustain success over a much longer period of time. Fortunately, there are some big lessons that you can learn in the first year that can take you far.
Statistically, about four out of every five businesses started within the last year should still be running strong today. Although that might seem pretty encouraging for a budding entrepreneur, don’t let that low failure at the one-year mark fool you. It is making it to year 5 that you should be shooting for. In fact, according to Bureau of Labor Statistics, half of all businesses fold before their fifth year.
Luckily, failure rarely happens overnight. For most of the businesses that don’t make it, the seeds for their downfall were sown early, with warning signs dating all the way back to that first year. On a more positive note, businesses that make the effort to carefully weed out their first year mistakes stand a much better shot of not being among the 60 percent of startups that never turn a profit.
To help prepare you for success, we have here four incredibly important lessons that successful business owners learned in their first year. Learn these for yourself early to put your business on track for success too.
Lessons from Year One
Lesson 1: Don’t Lose Sight of the Bigger Picture
The first year can be overwhelming. The picture is in your head and needs to be painted onto a blank canvas. Most likely, you have all the major tasks of building a business still ahead of you: growing a customer base, creating a brand identity, managing orders, employees, payroll, etc. Trying to keep up with all these details without getting lost in the shuffle can be frustrating, and probably feels like everything needs to happen all at once. Entrepreneur Magazine recommends that you just remember that every masterpiece ever painted was created one brush stroke at a time. Step back and see every detail you attend to in the context of your larger goals.
Pro Tip: Plan on daily details getting in the way
Being “caught in the weeds” of daily operations is the quickest way to lose sight of the bigger picture. For startups, this is particularly dangerous because they generally operate with a small team that wears many hats. However, using a virtual receptionist is a great, economical way to stay focused on the most important tasks. They handle all your calls so you and your team don’t get distracted every time the phone rings. Plus, it gives your young startup a polished, professional impression.
Lesson 2: Create a Process for Self-Evaluation
More key decisions are likely to get made in the first year of business than in any other, and they all affect the future success of your business one way or the other. It is difficult, in the chaotic whirl of the first 12 months, to correlate a decision to its effect. Did you gain more new clients in the last two weeks of the month than the first because a new marketing campaign started, or because your sales team cultivating leads in the first two weeks paid off in the second two? Every decision you make matters, but knowing the consequences of your decisions matters just as much.
Lesson 3: Stay Flexible, Not Stubborn
Ever heard of the sunk cost fallacy? Say, for example, you’ve been following a strategy you spent a week creating and researching to increase sales, but after a month sales stayed flat. If something is not working, businesses– and people– are liable to make the mistake of doubling down instead of cutting their losses. One of the most common reasons for a new business failing is inexperienced management. Don’t make rookie mistakes by sticking with ineffective ideas.
Lesson 4: Revenue, Revenue, Revenue
Your product or service might be your passion, but revenue is what will transform that passion into a successful business. More than 80 percent of new businesses were started with personal money invested by an owner, partner or entrepreneur. The average new business will not break even for at least three years, according to Forbes magazine. Ultimately, only 40 percent of businesses actually end up making a profit. You may want to spend all your time thinking about your product or business, but staying in business and succeeding means focusing on the numbers. Like with time, how you decide to spend each dollar requires careful review. Approach each financial decision by asking yourself how it contributes to your success.
Learning From Year 1 Can Carry You Far Into The Future
The first year can set a pattern for the future of your new business. But don’t let that scare you into analysis-paralysis. You WILL make mistakes. If you accept that to be true instead of worrying about being perfect, you can use each setback as a teachable moment that can help position you for success in the future. Establish ways to measure your performance, so you can tell what works and what doesn’t. At the end of the day, half of new businesses will disappear before their fifth year. Being adaptable to the lessons you learn in the first year could be the key to keeping you from being one of them.