6 Tips for Staying Afloat in Your First Year of Business
There’s a good chance that your business will die before you hit the one-year mark.
Shocking, right? Out of all the small business started in the US in 2011, only 4% made it to the second year. Your chances of survival in the brutal world of business are bleak. But did you know what the leading cause of death is? It’s running out of cash. It doesn’t matter whether you’re breaking even or profitable, a cash crunch will send you tumbling down the path of failed businesses. No number of tips for starting a business will save you if you don’t get this right. To give yourself the best chance of survival, you need to do the following:
- Master the Ebb and Flow
When do you get paid? This is one question you need to answer before you get into business. You can get this information from others in your industry. Do cash flow projections with this period in mind. For example, if you get paid in 90 days, you will need money to keep the business afloat before the D-day. If the business is seasonal, you will also need to make the most of the peak seasons. Have a concrete plan on how you are going to survive the dips.
- Get Smart People on Your Team
This sounds somewhat cliché, but it’s important nonetheless. When starting out, you’re on a tight budget and probably can’t afford to rent an office. However, if you can find a way to free up the funds, then paying for a co-working space would be a boon for your business. Not only will you get office space, you’ll also have access to business advisory services. You will also be able to access mentors and learn from your peers.
- Fire Bad Clients
When you’re starting out, it’s easy to fall into the trap of putting up with bad clients. These are money-losing clients who are not willing to pay on time and are always bargaining and complaining. If a client doesn’t pay you enough for your time and you can’t use their name to win you more clients, then it’s best to part ways.
- Only Use Credit Cards When Necessary
Try to fund your operations using revenue to avoid taking on unsustainable debt. Pay your overheads using cash flow or savings and postpone big-ticket purchases until you have the money. More often than not, you will be required to give a personal guarantee when you take out a credit card for your small business. If you’re unable to pay, the bank will recover your money by selling off your personal property. If you must use a credit card, use it for small purchases and make sure to pay it off every month.
- Market Your Business Constantly
Your number one job as the business owner is to market your goods or services. Take every opportunity to prospect for new customers and have measures in place to keep current ones happy. Set up online marketing campaigns on Facebook and Google Adwords to keep customers streaming in.
- Manage Cash Flow
Many businesses struggle with cash flow. You must find a way to maintain the balance between getting cash through sales and covering your overheads. Make sure all your accounts receivable are paid on time by invoicing and following up constantly. You should also incentivize customers to pay on time by giving discounts and charging penalties.