Startups: What to Expect in Your 1st Year
Startling figures suggest that more than half of all startups fail within their first year, whilst ninety percent don’t make it beyond five years. Given this, your primary objective in your first year as a startup should be survival. Put your dreams of success, recruitment and expansion aside – for now – and focus solely on what you need to do to make it through your first year, as this is likely to be the most difficult time for any modern small business. In this article, we advise what to expect in your first year as a startup and offer some top tips for survival.
Expect low pay
Dreams of earning six figure salaries are what motivate many to start up their own business. This is, sadly, far from the reality for the vast majority – at least in the first few years. In the first year running their own business, most entrepreneurs find that they earn anything between 0-25% of what they may previously have earned as an employee in someone else’s company. It’s important to be prepared for earning very little, with periods where you may have to take home nothing at all in order to keep the business afloat. Don’t be too hasty to quit your current job, many people find that they have to continue working full time, whilst juggling the workload from their new business during evenings and weekends, in order to cover their living costs. Even if you have managed to raise a significant sum in your first round of funding, it might not be wise to decide to pay yourself a decent salary out of this, as funds will soon deplete and your business may fold as a result.
Expect long hours
This point is related to the first. If you have to retain your full time job just to make ends meet, then you will probably find yourself working long into the night on your business. Every night and at weekends. Even if you don’t work another job, you will still find that you have to work longer hours than you may previously have expected, and with little pay. During the early stages as a startup, it is likely that you will have no, or very few, employees to assist you with the workload. Most people find that they are always bogged down with admin tasks and feel the pressure from effectively being the accounts, sales, customer service, admin, marketing and HR departments all rolled into one. As a result, you should expect less sleep and your family and social life to be compromised in the first year or so.
Expect the unexpected
Most people experience a number of setbacks and unexpected barriers in their first year. After all, if this is your first business there will be a lot that you don’t know and will have to learn as you go, and quickly if you want your business to survive. The setbacks that you experience will, of course, often depend on the nature of your business. Those launching a new product may have to deal with legal and bureaucratic challenges before the product even makes it to launch. Then, they may find that the market for their product isn’t as strong as they assumed it would be. This is a major reason why many startups fail. Those providing services, whether to the public or other businesses, may struggle to compete with larger, established companies and find that they have to work doubly hard and reduce their rates in order to keep hold of clients. Almost everyone, regardless of the nature of their business, will run into unexpected costs. It’s a learning process and the better able you are to adapt to the currents that flow your way, the more chance your business has of surviving the first year.
Top tips for survival
This may all sound like doom and gloom but the better prepared you are for the challenges you will face, the more chance you will have of overcoming them. On a more positive note, here are our top tips for survival…
- Keep an eye on your overheads – every penny saved counts in your first year, it could add up to thousands over the course of the year and this could be the difference between survival and failure. Regularly review your outgoings on essentials like utilities, broadband and phone packages.
- Know your competition – make sure that you research your competition thoroughly, so that you can effectively market your USP in order to draw customers’ attention away from your competitors.
- Have a plan B – take the time to think of all of the things that may go wrong in your first year and devise strategies for overcoming them so that you are prepared for many eventualities.
- Develop a watertight business plan – having a thorough business plan that is well researched and thought out will help to steer you in the right direction. It will also be a valuable resource to return to when things start to go wrong, helping you to see the bigger picture and keep the business on track.
- Know your target market – it’s important that you understand what your target market is as this will help you to devise effective marketing strategies. Once you understand who your target market is, you need to focus on making your company or product visible to this demographic.
Knowing what to expect and how to overcome the challenges you may face will prepare and equip you for survival in your first year as a startup. At Midland Networks, we help startups to reduce their overheads and communicate effectively with their target market, by providing cost-effective and tailored communications solutions. If your starting up a business is the West Midlands, why not contact us today on 0800 849 8585 to find out about low cost business telephone systems, affordable business wifi and more.