When it comes to launching a new business, most founders are initially focused on one thing: not failing. Entrepreneurs who share the news that they’re planning to start their own business are often met with a response that warns them of how many new businesses fail in their first year. Fortunately, the reality is a bit less grim. According to the U.S. Bureau of Labor Statistics, 45% of businesses fail in their first five years.
Businesses close their doors for many reasons, but a few are especially common. Poor market research and a lack of planning can doom the company before it even has a chance to get off the ground, which is why it’s so important to begin every endeavor with a solid business plan. Many businesses fail due to insufficient capital, poor management, or a lack of business experience. Other companies fail due to overexpansion as they try to take on too much and too fast. (Check out our latest article on growth strategies to ensure your expansion is sustainable.)
If you’re hoping to outperform the statistics and survive your first five years in business, here are a few foundational priorities to get right early on.
Manage Your Cash Flow
Having a thorough understanding of your finances is crucial as you embark on a new business journey. Get clear on how much money you have to spend, then create a budget that allocates your funds across your initial priorities. It’s easy to get carried away with new business spending, so put a system in place to regularly review your expenditures and align with your budget plans. The quickest route to business failure is draining your available funding with nothing to show for your efforts.
Invest in the Right Areas
Next, make sure to focus your limited resources in the right areas. There simply aren’t enough hours in the day to prioritize every detail of your business from the start, so it’s crucial to develop a strong business plan to guide your efforts. Include a breakdown of how you intend to reach your audience where they are and outline your path to profit. Marketing and HR will be essential in your first five years since marketing helps drive sales, and HR empowers you to attract and retain top talent and prioritize compliance. Then, as you make decisions day-to-day, your business plan should act as your North Star.
Create Strategic Partnerships
Lastly, don’t underestimate the power of strategic partnerships to take your business to the next level. You may choose to explore partnerships for many functions of your business depending on where your internal resources fall short or lack efficiency. For example, many new businesses benefit from partnering with a co-employment provider to save time and money, allowing them to reinvest in their long-term success. Learn more about how partnering with a co-employment provider can save you time and money here.
At the end of the day, these tried-and-true strategies will save you from making the most common start-up mistakes. To take the first step by exploring an HR partnership, connect with our team today!