Running a small business is often compared to riding a rollercoaster, with twists and turns interspersed with varying emotions that are unpredictable and uncertain. This considered it’s hardly surprising to learn that around 20% of all UK startups go bust within the first 12 months, with around 60% failing within three years.
So with the odds seemingly stacked against small business owners, for many, it’s a case of survival in those formative years whilst the company seeks to become more established. In this article, we’ll discuss what those who have taken the plunge and started their own business can do to best navigate the maelstrom of the first year of trading.
Create a Business Plan
Benjamin Fraklin once said “failing to plan is planning to fail” and whilst some business-related adages are sometimes so often repeated they become tiresome, this mantra cannot be repeated enough. A business plan can sound grandiose to someone who has never written one before but it really does not have to be overly complicated.
Moreover, there are plenty of free templates available on the internet for those who are unsure how to structure their business plan. In addition to providing a central document that you can refer to throughout the first year, a business plan can also be a requisite part of securing funding for your business such as via loans or grants.
Get your Accounting in Order
If you are one of those people who like to use spreadsheets for financials and do everything manually then it’s time to do an abrupt volte-face. The reason for this is you can reduce the amount of time you spend on accounting tasks by investing in accounting software, such as Sage or Quickbooks.
This will in turn allow you to be more productive and spend less time on administrative tasks and more time on doing things that will help you grow your business. Moreover using accounting software will ensure your financial affairs are accurate and secure, unlike a spreadsheet which is prone to human error and could be lost or accidentally deleted.
There are software solutions for every accounting task from payroll to online VAT returns, meaning you can ditch the .XLS files and instead focus on expanding your business.
Create Your Own Network
Building a professional network can yield multiple benefits for those starting out in business including new business leads, mentorship, recruitment, feedback, advice and even friendship.
You really have nothing to lose and everything to gain. Remember this – every successful business owner had to start somewhere so don’t be afraid to reach out to people who you think might be able to help you on your business journey. More often than not people will respond positively as everyone remembers how hard that first year in business can be.
Below are some of the ways you build up your own personal network in year one…
- Search for relevant people to connect with on Linkedin,
- Attend local industry events or meetups
- Join your local BNI (or similar)
- Offer free training
Research Your Competitors
Although you might regard your nearest competitors as the enemy, in terms of gaining valuable insights, they can be your friend. There are almost endless amounts of useful information you can glean from studying your competitors. In terms of what area you choose to focus on really depends on your own individual business.
One thing that is universal however is understanding how you will set yourself apart and create USP (s) that will make your business proposition more attractive than other companies who offer the same (or similar) products/services.
Save for a rainy day and be frugal
One of the most uncertain aspects of running a business is knowing how much money you will have coming in each month. It is for this reason that having a contingency fund in place is important because you never know what is around the corner.
Ideally, you will have saved up a reasonable amount of money before you quit your full-time job, with six months worth of salary often used as a yardstick of how much you should have saved. Cash flow has repeatedly been found to be one of the most common factors which leads companies to fail, so the more you can put aside at the start, the better.
Of course, one way to improve your cash flow is to spend less of what you’ve already got. Whilst some business expenses are unavoidable it does make sense to be frugal where you can, particularly in the early stages of trading.
Master time management
Initially, you may be a team of one, often juggling a myriad of tasks including new business, accounting, recruitment, invoicing, and marketing to name but a few. With so many varied tasks throughout the day, you can easily get distracted from one task by focusing on another.
One way to overcome this is by strictly managing your time and (where possible) planning your day/week. Checking emails at set times of the day and batching similar tasks together is one way to become more structured. Moreover prioritising the most important tasks is vital, even if they are the least enjoyable.
Finally, it’s imperative to try and ensure you always make time for yourself and manage your own personal time, health and relationships. Working yourself into oblivion may feel like the natural thing to do when you start out but it really is counterproductive, as being overworked/tired/stressed can lead to poor decision making which can end up costing you financially.
Final Thoughts
As discussed above, starting a business comes with many potential pitfalls and there is nothing that can guarantee absolute success. However, having a clear plan and being prepared for all eventualities gives you the best possible chance of surviving your all-important first year of trading. Good Luck!
