For most people, the first year of business is unlike anything else. Naturally, everything is new at this stage, meaning many are unprepared for unpredictable situations and challenges.
The First Year of Business Is the Most Challenging
Most business owners feel overwhelming optimism when they are just starting. After all, they are at the beginning of an exciting adventure. However, things sometimes go differently than they planned. Unfortunately for some, the journey will last less than a year.
Realistically, some people will have to shut their doors permanently soon after they begin — it is the unfortunate truth of the profession. Roughly 20% of small businesses fail within one year of opening.
Still, this does not mean everyone has to stand by and add to the percentage of businesses that do not succeed. With enough drive and preparation, individuals can stay open and shrink the failure rate. Truthfully, all they need is the right strategy.
Why Is the First Year of Business So Challenging?
The first year of business is often the most challenging. Although people can fail because of unavoidable circumstances — like a pandemic or natural disaster — the owner usually plays a large part.
1. Financial Management
When navigating the first year of business, almost everyone deals with financial management issues. When they have difficulty securing loans or lack consistent cash flow, unexpected expenses can be damaging.
2. Recruitment
The recruitment process is one of the most significant pain points for new brands since it is costly and time-consuming. Naturally, it can be challenging for them to find skilled staff when they have few resources.
3. Marketing
Many people do not know their target demographic when they start marketing. While casting a wide net might seem like a good plan, it becomes more expensive and less helpful than if they had narrowed their scope. This fact is especially true if they pay for advertising.
4. Customer Service
It can be challenging for professionals to communicate with consumers, especially when responding to a negative review or resolving a complaint. Realistically, poor customer service makes people less likely to return.
5. Management
In the first year of business, many individuals are reactive instead of proactive. As a result, they miss out on opportunities to make strategic moves. Generally, too much or too little oversight is not acceptable.
Strategies for Success in the First Year of Business
More often than not, the owner is responsible for the business’s success. While it can seem like a gloomy concept to some people, it is actually a good thing. After all, it means success is achievable as long as they use the right strategies.
1. Get a Business Mentor
A mentor is the ideal partner for someone still learning how to run a business. They can provide unique insight, an extensive professional network and expert advice. Since most do not ask for compensation, they are accessible even to those with limited resources.
Instead of paying for costly online courses or trying to figure things out alone, owners can reach out to networking groups or their local chamber of commerce to find a mentor. This relationship will help them navigate their first year of business.
2. Create Clear Communication Channels
Above all else, business owners need to listen to the people around them. After all, feedback is crucial to long-term success. If they want to be able to see and react to others’ insights, they must first establish clear lines of communication.
For consumers, these communication channels may look like email surveys, public contact information on a website or in-person feedback forms. With employees, it is best to use professional messaging applications, anonymous comment boxes and scheduled one-on-one meetings.
Small business owners must take a slightly different approach with vendors since most operate on their own terms. When dealing with a third-party servicer or supplier, they should request clear communication upfront and ask for routine check-ins. The goal is to track shipments, increase inventory accuracy rates and get consistent updates on delays — the specifics depend on each person’s preferences.
3. Look for Like-Minded Employees
Employees are much happier when their passions and beliefs match their employer’s. According to one study, value alignment has the same impact as a 40% raise.
While employers cannot force employees to be passionate about their jobs, they can try — there are ways to make open positions more attractive to like-minded individuals. Incentives like high pay, great benefits, flexible schedules and a positive company culture will draw them in.
Retaining current staff is much more cost-effective than hiring someone new. At the very least, small business owners avoid paying thousands of dollars during recruitment.
4. Prepare to Scale Operations
Every brand must plan to scale before they need to if they want their output to outpace orders. Even if they do not plan on expanding their operations anytime soon, they should have a contingency plan for when demand spikes.
For example, a small flower shop should have enough flexibility to scale its output during Mother’s Day. To accomplish this, it would need adaptable agreements with its suppliers and employees to ensure supplies and schedules align with demand.
5. Budget for Every Circumstance
Most people begin their first year of business with limited capital and cash flow, so budgeting is vital. Of course, they must put money aside for uncommon situations. For example, they should account for refunds, merchandise damage and shipping delays.
Even if people already have a budget, they should also establish a backup plan. If something unexpected impacts their finances, they need to react quickly. For example, they could adjust inventory or raise prices. Knowing how to respond can save them time and money.
6. Market Organically
Organic marketing revolves around natural consumer outreach instead of paid advertisements. For example, it could involve social media posts or word-of-mouth communication. This strategy is more cost-effective than alternatives and can make a brand look more honest, making it ideal for those just starting out.
7. Enhance the Customer Experience
For most consumers, interactions are everything. Because of this, the chance of success increases once professionals focus on improving the customer experience. After all, around 95% of people will remain loyal to a brand if it makes them feel valued.
Return customers are willing to pay higher prices and make more purchases. If a brand shows customers appreciation and kindness, it effectively guarantees higher revenue. This strategy is an easy path to success.
Tips for Navigating the First Year of Business
New brands wanting to succeed past their first year need to adapt to change. Even if they start their journey with a comprehensive plan, they will have to deal with many unexpected situations — it is the nature of the profession. Being able to react quickly and appropriately ensures they can handle any hurdle.
It is also essential to use criticism as a growth opportunity. Although negative feedback from customers and employees can feel like a personal attack, owners need to be able to shrug it off and move forward. Every bad review simply highlights a gap — if they address it, they prove to themselves and consumers they are willing to and capable of doing better.
Success in the First Year of Business and Beyond
Even though the first year of business can be challenging, success is within most people’s reach. As long as they focus on overcoming the common pain points, they will automatically have a much higher chance of reaching their second year.
