Launching a small business isn’t easy. In fact, most fail. That’s not meant to discourage anyone. It’s simply stating facts. The survival rate of new small businesses is horrifyingly low.
While there are a lot of outside factors that can be the final dagger in the back of a new business, there are some things that you can take into consideration that improve the chances of surviving the first few years, which are often the most difficult.
Who better to ask than entrepreneurs and business owners that have been there and done that and survived the early stages. It never gets easier, and there are always things to be aware of, but the first few years of a new business are the most important when it comes to long-term survival chances. Improve the odds of increasing survival rate by following these suggestions.
Bootstrap Instead of Taking Funding
A lot of businesses think they need an investor that brings funding or that they need to secure a huge small business loan. But sometimes the debt that they take on causes stress and pressure that prevents them from building the business the right way.
This can lead to making decisions that are not really the best for the business, but best for repaying the debt to stay above water. “While bootstrapping growth takes longer it also eliminates debt from the picture which can help make the right decisions based on what is best for the business,” says Chris Moberg who bootstrapped his best mattress review website Slumber Search.
Don’t Sell Off Too Much Equity
Giving up too much equity in the beginning can cause a problem especially if you need to do another round of funding down the line or take on an investor. If you dilute yourself too much you not only lose control of your business but your equity position can become so small that your financial gain is small in the event of an acquisition or exit.
“Try to give up as little as possible. Also, if you must take on debt, consider traditional financing that you can comfortably pay back rather than giving up a large percentage of your business,” offers Andrew Tran, who retains full ownership of his weighted blanket company, Therapy Blanket.
Your business will only be as successful as your employees and team. The people that you hire in the early stages play a huge role in whether your business is successful or fails. Never rush a hiring decision and always make sure you put the right person in place.
“Hiring is so important,” says Irene McConnell of job interview coaching company Arielle Executive. “You have to make sure you take the time to identify the ideal candidate for every position within your organization.”
If that means you having to handle more roles and responsibilities in the beginning while you keep searching, then so be it. Putting the wrong person in a position simply to fill it can be a disaster.
Someone with the wrong attitude or someone lazy can be a cancer within your organization. Be very careful and always be 100% sure you are making the right hire. You can also consider third-part services for your employment needs, like AnswerFirst’s service, which provides virtual receptionists.
The wrong hire may cripple or destroy a new small business, so be prepared to let them go if they don’t fit in. Holding on too long will have a very negative effect on survival rate.
Don’t Mix Friends and Family With Business
A lot of business owners will get hit up by friends and family looking for jobs, and naturally we want to help those that we care about. But business and family or friends doesn’t mix well. This is for several reasons.
First, they will think they will get special treatment or don’t have to work as hard because they aren’t afraid of being fired. They think they have a longer leash, so to speak, and they will often try to test it.
The business owner won’t be as strict on them because of that previous relationship, meaning he or she will not always make the best decision for the business. It’s a good idea to simply have a ‘no friends or family’ hiring policy in place from day one.
Be Prepared to Fail
“There are going to be a lot of ups and downs when starting a business. It’s a grueling journey and there will be failures. You have to be mentally prepared to fail. It’s going to happen. Those that are aware and ready are able to quickly react and adjust,” says personal injury attorney Tad Thomas.
Those that think they won’t ever fail are caught off guard and they often cannot react fast enough to save it and the business crumbles right out from under them. Part of being a business owner is being humble enough to know that you are not immune to failure.
Long-Term Mentality Improves Survival Rate
Building a business is a marathon, not a sprint. You have to always have a long-term thought process. Little things like establishing partnerships, hiring, branding, marketing, etc.
Everything you do in the beginning will dictate how the future unfolds.
From an online news publication like Schwaebische Post to an e-commerce consumer brand like Vaporizer Vendor; always think long-term. No business with ever be successful if you, yourself, don’t believe it has staying power.
You don’t want to cut corners in the early stages. Put in the work and know that doing everything the right way contributes to building a strong foundation that you can build from. You can’t cut corners and expect to build a long-term business.