7 Things to Do in Your First Year of Business
Taking the leap into entrepreneurship can be scary. There's a lot to manage and learn and you've spent a lot of time and money to open the business without a guarantee of success: approximately 20% of businesses fail in their first year,1 and half of businesses fail by the five year mark.
But some of these failures could likely be avoided with intentional effort and focus on some key activities during your first year in business. Here are some things you should plan to do during the first 12 months.
Fine-tune your business plan
Before starting your business, you should spend time crafting a business plan. A business plan is your written road map to starting and growing your business. But a business plan isn't something you should write once and never touch again. As you work through challenges and successes during your first year of business, use these learnings to reassess your business plan — and fine-tune it so it can help you make better decisions as you grow.
Test out marketing tactics
Getting your product or service in front of customers who are willing and ready to buy from you takes time and effort. When you created your business plan, you should have included a marketing plan.2 Now that your business doors are open, it's time to see what works and what doesn't.
Plan to spend this year tracking your marketing efforts, including how much you're spending and what the results were. That knowledge will help you craft even better marketing plans for future years.
Create separate financial accounts
From day one, it's important to treat your business like a business. That means opening and maintaining a separate business checking account as well as a separate business credit card. Yes, you may need to use some of your personal funds to start your business, but you shouldn't pay business expenses from your personal account and vice versa. Not only will this help when it comes to bookkeeping, but it's also essential to keep things separate from a tax and legal perspective.
Save for the unexpected
During your first year of business, things will likely be a little tight. As your business starts to earn money, don't consider this an opportunity to take a bigger paycheck. Instead, set money aside in your business for unexpected expenses that will undoubtedly pop up. Even if you're only able to put aside a little, make it a priority. You may need it to buy more equipment, make an emergency trip, or to cover bills as business ebbs and flows.
A business plan isn't something you should write once and never touch again. Instead, reassess your plan periodically to better guide you as you grow.
Monitor your cash flow
One of the keys to success as a small business is appropriately managing your cash flow. As a business owner, one financial statement that you should get used to reviewing regularly is your cash flow forecast. A cash flow forecast monitors cash that is received and spent by your business. Even if your business is profitable, there can still be points where you aren't able to pay your bills; for example, if you have invoices that you expect will be paid next week but you don't have the money to make payroll tomorrow.
You can use this forecast to predict what cash flow will look like — when money will be received and when it will be spent — to see if there are any points at which you won't have the cash on hand to cover your bills. Knowing your cash flow forecast can help you make better spending decisions and help put plans in place to avoid having a bank account that hits $0.
Listen to your customers
While you may have spent years dreaming up the perfect business that you're incredibly proud of, it's vital that you listen to customer feedback. Learning what customers like and dislike can help you continue to refine your product or service. You may also get insight into other problems they experience so you can continue to grow your business by offering new products and services to meet their needs.
Being a business owner is exciting, but it can also be lonely and stressful. All of the decisions to make for your company are your responsibility. It can be helpful to find mentors that you can go to for advice. Business owners who know what you're going through and can give you advice and offer a different perspective to challenges you're facing. If you don't know anyone who can fill that mentor role, consider working with SCORE.3 They have volunteer mentors that can help you as you guide your business.
The first year of your business will be exciting and challenging. But the actions you take during this first year can set a solid foundation for strong business growth in the years to come.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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