Statistics show that up to 20% of businesses fail in their first year, and as many as 60% have gone bust within three years. So what can be done to prevent yourself from becoming one of the many startup businesses that fail during that crucial first year? Let’s take a look.
Things to do in the first year of your new business start-up
The most obvious and basic thing you need to do is to have a sound idea and a competent business plan. It might sound obvious, and that’s because it is. But anecdotal evidence would say that the majority of failing businesses don’t have a sound plan. But what exactly does a good business consist of? It’s an easy line to throw out there, but what exactly does it mean?
The basics of a good business plan would involve having a top-quality product or service that’s in demand, finances in place, a good workforce, a professional-looking website, and unless virtual or working from home, adequate business premises.
Other aspects of your business plan would be how you are going to use your budget if things start slowly, or if your new start-up has unexpected issues within the first year. You would need a plan for what you intend to spend your finances on during these events.
Eliminating as much risk as possible would be another good area to focus on. Virtual credit cards can help here, as they have numerous benefits. For example, they can’t be lost, and they are more secure than physical ones. They would also enable a business owner to keep better track of staff spending, and in the process keep on top of critical business spending in those crucial first months.
In short, a ‘safety first’ approach to spending and looking after finances should give any aspiring business a better chance of surviving those first treacherous 12 months.
Things to avoid doing in the first year of a new business
To further expand on that last sentence of the previous section, one of the most basic things to avoid doing in the first year of a new business has to be unnecessary overspending.
This could cover a whole host of areas such as a fancy website, staff, equipment, branding, and even events. It’s likely to be impossible to totally eliminate spending on all of the above, but caution needs to be exercised. Yes, a website is necessary, but it doesn’t have to be the most flashy extravagant one available – unless your business is web design that is!
Elsewhere, you can hold back on hiring extra staff. Delegate roles better between your start-up staff. Also, don’t be flashy. You may have a good first month and decide to invest in some flashy new equipment, only to see sales fall off in the second month, and quickly regret the unnecessary outlay.
In short, play safe in that first twelve months. If things are going well at the end of the first year, then it could be time to re-evaluate and work out a new budget.