A Small Business Survival Guide: The First Three Years

Guest Post by Sarah Levy

The survival rate for new companies, as reported by the U.S. Small Business Administration (SBA), is as follows:

  • ·         Seven out of 10 new employer firms survive at least 2 years
  • ·         Half last at least 5 years
  • ·         One-third make it to at least 10 years
  • ·         One-quarter stay in business 15 years or more.

How do you get your small business to and beyond the 15-year mark? The SBA has the following suggestions that focus on laying the groundwork during the first three years:

 Year One: Be prepared for the unexpected.
Things rarely go as planned, no matter how carefully you set up your business initially. “You may find you need to diversify your product line or that your true niche is something else,” notes the SBA. “Maybe demand for your product goes through the roof and you can’t cope or you find your suppliers aren’t as reliable as you’d hoped.”

Rule #1, then, is to have a plan and sufficient cash reserves to make adjustments to your strategy during the first year and beyond. Writing a business plan and revisiting it often can help you keep your business on course while navigating unexpected bumps in the road. The SBA advises that you think of your business plan as a living, breathing project, not a one-time term paper.

One important part of your focus should be maintaining cash flow and financial reserves. These five tips for building a six-month cash cushion come from SCORE, America’s small business mentors:

1.      Add up all your monthly expenses to calculate what a month of personal expenses really are for you.

2.      If you’re still working a day job, set aside 5 percent of your net pay each paycheck to build savings.

3.      Start with a goal of setting aside $100 week, or $5,200 a year, to form the basis of your cushion.

4.      Be sure to set aside money for taxes whenever you take a cash draw from the company to avoid the surprise of a nasty tax bill later.

5.      Start now to create a habit of saving each week.


Year Two: Reflect on and advocate for your business.
At the end of your first year in business, reflect back on your successes, failures and shortcomings. Ask yourself what you would have done differently. Find out how to get started here.

Year Two is the time to work on your business, as opposed to working in it. That means positioning yourself as a true advocate for your business, not just a salesperson.  To do this, you’ll have to relinquish control of some of the day-to-day business operations you’ve handled since day one.

“Some of the most successful brands in the world are where they are today because the entrepreneur behind the brand is out front advocating its products, its successes, and its core values,” says the SBA, which offers ideas for doing so here.


Year Three: Grow your formula and niche.
This is the year when small business owners feel they have a good handle on their financial projections, enabling them to better prepare for market and seasonal fluctuations.

“If your niche is working for you, keep focused and stay true to it,” advises the SBA. “Stay customer-centric, look for opportunities to grow in that niche, and refine your business and marketing strategy to stay ahead of the curve.”
This is a guest post submitted by Sarah Levy of MerchantExpress.com.

Advertisements

Comments Off on A Small Business Survival Guide: The First Three Years

Filed under Entrepreneurs & Startups

Comments are closed.