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The Early Years of Entrepreneurship: A Step-by-Step Approach to Surviving and Thriving

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The Early Years of Entrepreneurship: A Step-by-Step Approach to Surviving and Thriving

By Caron_Beesley, Contributor
Published: April 12, 2012 Updated: August 1, 2012

Entrepreneur and founder of The Body Shop Anita Roddick once said: “Nobody talks about entrepreneurship as survival, but that's exactly what it is and what nurtures creative thinking.”

The first few years of small business ownership are undoubtedly the toughest, a huge test of entrepreneurial character.  And data proves that getting it right is as challenging as ever. According to the SBA Office of Advocacy (PDF), the survival rate for new employer firms stacks up as follows:

  • Seven out of 10 new employer firms survive at least two years
  • Half survive at least five years
  • A third last 10 years
  • A quarter stay in business for 15 years or more

So, what strategies and tactics can you employ as you venture through the early years of business ownership? Below are some year-by-year approaches to consider:

Year 1 – Be Prepared for the Unexpected

Whatever your field of business, one of the first things you’ll probably encounter in your first year is that things rarely go as planned. While you can do a lot to set up your business carefully (like these 10 Steps to Starting a Business), be prepared for the unexpected.

You may find you need to diversify your product line or that your true niche is something else. 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.

Predicting shifts in market forces and business strategy isn’t easy, but you can prepare by having a plan and sufficient cash reserves to allow adjustments to your year one strategy. Many of us put off writing a business plan until we need to secure financing. However, a well-prepared plan that is revisited often will help you steer your business on its course, and help you navigate bumps in the road. Try to think of your business plan as a living, breathing project, not a one-time term paper.

SBA guest blogger and planning expert Tim Berry calls this the “plan-as-you-go” approach and he offers advice in these two blogs: 10 Quick and Easy ways to Start Planning Better and 4 Steps to Keep Your Business Planning Simple and Useful

Part of your planning strategy should focus on maintaining cash flow and having reserves. The following tips from SCORE offer good advice for building a six month cash reserve:

  • Add up all your monthly expenses, so you know what your true personal expenses are.
  • Still in a day job? Set aside five percent of your net pay each paycheck and build savings.
  • Sound like too much? Start with a goal of setting aside $100 week equals $5,200 a year, a nice cushion.
  • As an entrepreneur, you want to be sure that whenever you take a cash draw from the company, you set aside money to pay taxes. Don't be surprised by a nasty tax bill.
  • Start now. The most important thing is to create a habit of saving each week.

Year 2 – Reflect On and Advocate Your Business

At the end of year one, reflect back on your first year in business – your successes, failures and shortcomings. What would you have done differently? For tips on how to take stock of your business performance, read Taking Stock of the Business Year - How to Conduct a Year-End Review & Plan for the Year Ahead.

Year two is also the time to work ON your business, as opposed to working IN it. Becoming a fulfilled and successful business owner involves positioning yourself as a true advocate for your business, not just a salesperson. 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 – think Richard Branson or Steve Jobs.

Becoming an advocate isn't difficult, but it involves relinquishing control of some day-to-day business operations that you have gotten used to as a startup. This blog offers more tips: Five Tips for Building your Small Business Brand Using its Best Advocate - You!

Year 3 – Grow your Formula

Year three is often when small business owners really feel they’ve found a formula and a niche that works. Business fluctuations still happen, but by now you likely have a good view of your financial projections, so you can better prepare for market and seasonal fluctuations.

If your niche is working for you, keep focused and stay true to it. Stay customer-centric, look for opportunities to grow in that niche, and refine your business and marketing strategy to stay ahead of the curve.

How has your business evolved and adjusted its strategy to succeed and get through the difficult early years? Leave a comment below!

About the Author:

Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Comments:

I just started my business and it's pretty hard to succeed or at least stay in the business, good customers are hard to get. These numbers are scaring me though: Seven out of 10 new employer firms survive at least two years Half survive at least five years A third last 10 years A quarter stay in business for 15 years or more Hope that I get to the last quarter. Thanks for sharing some secrets :)
I totally agree. Without energy, no business can grow. Thanks for that great post!
it's sort of a small company but very difficult to control with these tuhen as more and new problems
Well when i look at these rates: Seven out of 10 new employer firms survive at least two years Half survive at least five years A third last 10 years A quarter stay in business for 15 years or more Thats not that much; well you have to have a clear and strict plan forsurviving in you Business; make a Business Plan; look at your Competition and learn from you faults; and so on. Thanks for this helpfull post.
I know from factoring companies receivables that the companies that stick to their budgets, hire only when they absolutely have to and make the extra effort when everyone else is kicking back are the ones that make these transitions much faster and easier.
I would caution to never underestimate the tax impact on our personal and business life. If you are going to take a draw you need to set it up so all the taxes are accounted for. Tax problems are one of the major killers of small business dreams. Wayne Melton
Great post, highly recommended!
a Business is not just a business it would be your life if you really feel it , you will like it , love it , as a son . if you respect your business the business would respect you back , and don't leave it , cause a father will never leave his son !
As I enter my second year in my new business I found so many points ringing true for me. The challenge is to keep the energy flowing, when you feel like you're not getting anywhere quickly and keep focused on those things that get the most bang for the buck. Distraction is the number one enemy! Thanks for a great post!
As every businessman - current or aspiring should know is that you will know if your business is going to make it or break it within the first two years. It is not sufficient to just want to start up your own business. Everryone wants to be their own boss. You need to know every little detail however big or small it may be.

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