Millions of people across the world dream of launching their own business. And every year, hundreds of thousands of these entrepreneurs do just that. In fact, more than 450,000 businesses are launched in the U.S. annually, according to CNN.
Many entrepreneurs start their own business because they want to be their own boss, build a legacy, and increase their earning potential. Launching a business is great, but the real goal is to succeed. Surviving as a startup is much more difficult than launching one. It’s estimated that roughly one-third of all businesses fail within two years and less than 5% make it to ten.
With the survival rate of entrepreneurs being so low, it’s important to optimize businesses as much as possible. If you’re a first-time entrepreneur, here are a few tips to increase the survival chances of your startup.
1. Don’t Fall into a Culture Trap
Startups are known for their casual dress code, flexible work hours, unlimited coffee and snacks, and relatively laid back atmosphere. Don’t get me wrong, I love a shot of espresso as much as the next guy, but there is more to a company culture than shallow benefits.
As an entrepreneur, you will play a vital role in forming your company’s culture. You should relish in this opportunity. Before you ever launch a business or start hiring employees, you need to create a clear and descriptive vision for your company. With your vision in mind, create values and practices that align with your vision.
With these core principles in place, you can start finding employees that share your vision and build a workplace environment that is cohesive with your values and practices. A company’s culture doesn’t just happen overnight. It needs to be iterative and molded over the life of your business. Don’t get caught up chasing the idea of what a startup’s culture should be.
2. Don’t Grow Too Quickly
Obviously, growing too quickly is a good problem to have. With that said, you need to focus on growing smarter rather than faster. There are a lot of startups who failed because they couldn’t sustain their early success.
Some examples of growing too quickly:
- Accepting an order that puts you above or near your output capacity
- Launching a product before it’s ready
- Hiring more employees than is absolutely necessary
- Expanding into new, unfamiliar markets
Sujan Patel wrote about the dangers of growing too quickly and described a company, Crumbs Bake Shop, which saw tremendous growth in its early years as a specialty cupcake shop. As a result, it expanded operations into several new markets, focusing entirely on cupcakes.
Unfortunately, cupcake sales have seen a steady drop in recent years and so too has Crumbs’ value. If Crumbs had taken a slower approach to expansion or a more strategic look at consumer trends, they might have made better growth decisions.
If your startup experiences immediate success, enjoy it, but also take a step back before making any crucial decisions. Growing too quickly can be the ultimate wolf in sheep’s clothing.
3. Keep a Focus on Finances
This may seem obvious, but maintaining healthy accounting practices can vastly improve your startup’s success rate. Whether this means updating your books regularly to find clients with outstanding payments or using tax deductions to save your business money, a financially-minded business partner can help keep your startup afloat.
Karl Swan is a tax specialist at Rivero, Gordimer and Company, a Tampa CPA firm. He says:
Small businesses and new entrepreneurs must take advantage of the opportunities for tax deductions in their businesses. From claiming a home office to understanding how to depreciate office furniture, there are many ways to prepare business taxes for optimal deductions. Entrepreneurs can save a lot of money with appropriate tax strategies, but many fail to take full advantage of their deductions.
Practicing financial management as a startup will help build positive habits that will keep your business thriving long after its infancy.
4. Practice Smarter Marketing Habits
Most newly launched businesses are bootstrapping, meaning they don’t have a lot of excess resources to devote to marketing. This is a catch-22 because marketing is how you generate leads, leads are how you generate revenue, and revenue is what keeps your business alive.
Therefore, it’s critical that entrepreneurs practice smart marketing.
Marketing smarter means asking the right questions before you engage in a marketing initiative. Some important questions to ask yourself are:
- How will this marketing activity lead to more conversions?
- Are we highlighting our core competencies?
- Does this marketing message align with our brand image?
- Will this generate an ROI that I’m satisfied with?
Marketing smarter also means recognizing when it’s time to outsource. If your team isn’t familiar with email marketing, SEO, content marketing, direct mail, or other marketing initiatives, then you’re likely to see a relatively low ROI compared to outsourcing. Companies like CopyPress have specific packages for startups, targeting optimal ROI.
5. You Can’t Make Everyone Happy
There’s an adage in business: “The customer is always right.” That simply isn’t true. Yes, it’s important to focus on customer satisfaction, but not at the expense of your company’s greater good. Look at every customer service complaint independently and create a process for tracking repeated complaints or flagging frequent complainers.
The sooner you realize you can’t please every customer, the more stable your customer service will become. Alexander Kjerulf writes on the Huffington Post that practicing “the customer is always right” can lead to an unfair advantage for abrasive customers, worse customer service, and dissatisfied employees.
It’s not just customers that you can’t always please, but it also relates to employees. Startups are inherently tough environments. From long hours and stressful deadlines to late paychecks or lofty promises, life at a startup can be difficult. This flux isn’t for everyone and entrepreneurs running a startup need to prepare for dissatisfied employees. It’s important to be transparent with your employees and outline expectations during the hiring stage. Startups that can get buy-in and commitment from their employees are the ones that stand the best chance.
Being a successful entrepreneur isn’t easy, and if it’s your first business, your chances of success are even slimmer. That doesn’t mean it’s impossible to succeed. Rather, you must cautiously grow your business. It’s important to learn from the mistakes of other startups as you try to maneuver the minefield that is running a startup. Opinions expressed here by Contributors are their own.