When you have a business that’s in its infancy, the challenges really begin. People who want to start a business mistakenly believe that the first challenge is getting the business off the ground, but anyone with experience knows that this is wrong. Business survival comes before business success because it must first survive long enough to create a viable path for longevity. Without that, the enterprise was doomed from the start regardless of how inspired the initial idea may have been.
Here are a few tips to help entrepreneurs to survive the early going.
Know Your Entrepreneurial Type
There are at least four types of entrepreneurs. The traditional entrepreneur opens a business that is recognizable (a salon, a garage, a restaurant). The lifestyle entrepreneur either has a passion for a product type or for a better work/life balance and creates a business to facilitate that. The growth-oriented entrepreneur is looking to create a fast-growing startup; think: Twitter, Facebook, etc. The project-oriented entrepreneur has usually taken their day job and turned it into a business.
Each of the types have their pros and cons. When you know what type of business person that you are, it’s easier to navigate your path to success. You’ll know, for instance, whether putting in 10+ hour days and working weekends for a couple of years to create a flurry of activity to grow rapidly fits in with your business ethos; Lifestyle entrepreneurs probably will dislike the idea! When you are clearer about your intentions, you are more likely to create a business in your image that you can be proud of.
Whether taking a loan and/or initial investment capital from friends and family, the tendency with a new venture is to spend like crazy. If you’re not careful, just arranging the first office, buying in new enlarged desks, plush chairs, coffee tables for the reception area and fancy lighting will drain what little money was available to last until profitability.
The rule of thumb in the first year is:
- The initial expenses will exceed what was planned;
- The revenue will be slower to come and lower than expected
When underestimating both startup expenses and running costs while also expecting revenues too soon and being overly optimistic about total sales too, this is a recipe for disaster. Far too many businesses don’t survive the first year because they fail to run lean enough to make it through. It’s essential to avoid your business becoming another statistic.
The first goal of any business is: To stay in business. High levels of profitability come later.
Freelancers and Work from Home Arrangements
Look at whether its viable to use freelancers or have full-time staff who are willing to work from their home office to reduce or avoid office expenses in the first year. Some employees will prefer to work from home, even temporarily, to save on commuting time and transportation costs in exchange for a lower salary.
Avoid Using Set Work Hours
Set remuneration around productivity, not hours worked for as many employees as possible. Many employees are only productive 3-4 hours each day with the rest of their work time being consumed by non-productive activities (meetings, social media use, email). When their day is complete once a certain amount of work has been completed (deals done, sales contacts made), employees are motivated to be far more efficient and no longer watch the clock.
Getting through the first year as an entrepreneur challenges the best of us to become better. We test our reserves of patience, develop improved perseverance, and learn to manage ourselves and others with care. It’s a rewarding journey but also one that ensures every day is different and brings fresh challenges with it.