The first year of starting up your business is usually the toughest in the lifespan of the business and many quit before the period is over. Here are a few tips to help you survive that wild year of the business
Be patient
When you start up your own small business, you are excited about it. Because you are determined to make it a highly-profitable and successful company, you expect it to show profitable results from day one but that’s probably not going to happen as most small businesses fail to realise a profit in the first year. Sometimes, it can take as long as three years before more money starts rolling in than flowing out. The reason is that small businesses need to be well established, find their niche in the market, and become known. Such a process can take time. It is important, therefore, to realise that failure to make a profit at the outset or even in the first year does not indicate that the business is failing. You need to have the patience to work hard at building up the company so that in time, it does score a profit.
Don’t get too excited about profits
Money is coming into your business and you are doing cartwheels but do not forget that you will need to pay taxes to the government and your state on any profits made. Unless you are not going to owe any taxes for the year, you need to budget to pay taxes. Depending on your business structure, this could mean payroll taxes as well as income taxes. Many localities also base business licence fees on how much money you make. Have a profitable year and your business licence could cost you more next year.
Pay yourself
The most important start-up cost to consider is your own salary. Many business owners are willing to work for free, or at a reduced salary while they establish their businesses. However, you will still have personal expenses and bills to pay outside of your business expenses. If you do not have personal funds set aside to cover months where the business is not bringing in enough income to pay yourself, you will quickly find yourself in a difficult place.
Have a back-up
If you form a sole proprietorship, you and the business are essentially one legal entity. If someone sues the business, they can collect from you personally. If the business has debts, they are your debts. If you start a corporation, you limit your financial liability. However, you could also be booted out of your own business if your board of directors rallies to fire you. To protect your long-term personal and business future, be sure to research the various types of business structures to choose the one that makes the most sense for you. Just because your friend chose one type of business structure does not mean it is right for you. Ask yourself in advance: What happens if the business fails and you have already quit your job? The unexpected will not catch you off guard if you plan ahead. Losing a business is hard enough to deal with. Losing your home because of a failed business is far worse.
Persevere
Along with patience, you need to display perseverance. Even large corporations start small. There are many founders of highly-successful businesses who worked extremely hard to sell their products or service in the first year. You will encounter obstacles, but you must persevere, gaining clients or selling products steadily, often one at a time, until you establish a foundation that builds on itself. Winning entrepreneurs are determined people; they persist against all odds. It takes courage. Perseverance is particularly important in the first year of a business. It is in those first months that the challenges are greatest.
Be your own book-keeper
An essential element of running any small business is to know precisely where you are coming from, where you stand and where you are going. You can achieve this goal by keeping careful track of your money, your income and your expenses. The best way to accomplish this goal is to keep your own books. Rather than relying on a book-keeper to assess where you are financially, you will benefit greatly from knowing that information yourself. Also an analysis of your financial situation will help in enabling you to know when to buy assets and, if called for, when to sell them. Again, your financial analysis will point to the problem. When you find what the problem is, adjust what you are doing and find your way around the obstacles. It’s critical to make sure your money and time are being spent in the right places. Never assume you know what’s going on in your business; back everything up with numbers.
Build your network
Generally speaking, the more people you know, the better. Anyone could be a potential partner, customer, source of inspiration, or sounding board. Reach out to professionals in your field or others who have started their own businesses. The more people you reach out to, the more opportunities will come your way and the more supporters you will have when you need them. Go with the flow.
Be willing to adapt
Understanding when you need to make a change is very important in any business. For example, if your business might be more robust on the internet, make it an online business. If your business is better in a certain location, change it. Cater to your audience’s needs and be willing to take honest criticism and accept change.
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