If your small business can survive the first year, you have already achieved a lot. Most businesses fail within the first two years. Of course, every founder’s journey will be different, but there are a few fundamentals that will improve your chances.
5 Tips to Help Your Small Business Survive the First Year
- Align with your values: You’ve probably been told at least a dozen times that your company might fail. Even if it succeeds, the process will be excruciatingly difficult, and early on the monetary rewards will seem small. It’s crucial that you pursue a mission statement that aligns with your personal values. Otherwise, you may struggle to put in yet another sleepless night for a company that isn’t profitable yet. Ask any of the top founders in Silicon Valley how they made it, and you are bound to hear the word passion more than once.
- Understand scope: It’s important to aim big. Venture capital firms love it when your total accessible market is massive, but in the early days it’s wise to limit the scope of your company to a small area where you can win. Consider Apple, the world’s most valuable company. The goal was eventually to put computers in every home, but their first model mostly sold out of one local business.
- Reinvest profits: In the early stages, you’ll most likely need more capital than you can earn. That’s why you’ll turn to venture capital firms or angel investors. It will help you find the money to grow without taking debt. If you turn around and spend the profits on yourself, that won’t reflect very well on the company. Large paychecks might come later, but right now you need to put every penny back into the company. Nobody likes an early-stage founder with a high salary.
- Don’t be your own lawyer: Last week we talked about the disasters that come from founders who think they can skip out on professional legal counsel. It’s a great way to get diluted out of your own company, create an employment scandal or lose your home. You can’t cut corners on this. You need a real business lawyer.
- Risks are part of life: One of the biggest risks you can make is never to never take any. Avoiding risk is a great way to guarantee that your business never does anything to differentiate itself. Of course, don’t create risks without reason, but never forget that taking chances is part of being an entrepreneur.
The first year can be one of the hardest. It can take time for the new company to get funding and find its customer base. Knowing the common mistakes and doing your best to avoid them will go a long way towards a successful future.