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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:

Useful post, thanks a lot
You need to have a clear plan before you start your business. Still there will always be lots of pull backs on the way. The main thing is just to face them and to keep going forward. The failure does not exist. You learn your lessons, you improve and keep going till you succeed.
I am an attorney in San Diego, California who recently opened a firm specializing in California lemon law and aut fraud lawsuits. Based on my experience there is a major omission from this article: namely, anticipating where your industry is heading. Anticipating changes in the law (be it the lemon law or whatever regulation your business is under), the regulatory structure, as well as changes in how your competitors and you reach clients has to be one of your main objectives.
When you first start your business you have to have a detailed plan. Most people have an idea of what they want to do but not a detailed plan. You have to be able to tell if you are accomplishing what you set out to do. And if not you have to know where to correct and where to keep thinks the same. Nothing takes the place of great planning.
I love this web site. I wish I would have found it two years ago. I think that everyone that starts a small business must concetrate on marketing that business everyday. They must have a detailed plan and make sure they follow up. Your time is allways your biggest asset and you have to make sure you are spending it on thinks that will grow your business. This post was edited to remove a link. Please review our Community Best Practices for more information about how best to participate in our online discussions. Thank you.
We are in the "Grow Your Formula" stage now and it is really fun. Once you have some clear cut processes in place you can really adapt them to new market segments with much less additional effort than starting from scratch. Great article.
The one good thing about a business plan, is that it will force the eager entrepreneur to find out who their competition is, what they are doing for marketing and maybe you can replicate that if it is within your budget. Second, as I have learned, the small business owner always need to keep their marketing efforts strong, regardless if it is an up or down economy. If you are consistent with your message and customer service, you will reap the rewards of the great times, and stay consistent during the challenging ones.
The problem with having a business plan is they are seldom followed. I learned that persistence is really key, for some a 3-year plan is still not enough time. Just never quit and you'll surely succeed in your biz
I agree with prepare for the unexpected. I recommend surrounding yourself with loyal employees and making sure that you spend enough time with the customers to ensure as the business owner that you are spending enough time with your customers, so that if a team member leaves on good or bad terms any transition would be as painless as possible for your customer. Put your customers first and make sure that you are accountable for all employers actions.
Caron - great advice comes in 3's!. Thanks. The business plan is critical, as is your recommendation to continually update it in year 1, as well as in each of the subsequent years. As the business grows and the entrepreneur now small business owner gathers staff, learning to manage the people along with delivering the product and services will come into play. I've found some owners are better than others at the managing part - so seeking help from experts makes sense as you suggest.

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