These 7 Factors Will Influence The Success Of Your Small Business In Its First Year Of Activity

Whether you have a brilliant product idea or you’re just looking for a way to be financially independent, entrepreneurship is an option worth considering. After all, small businesses make up the overwhelming majority of US companies. There are over 31.7 million small businesses in the US, generating more than 1.5 million jobs and bringing a massive contribution to the national economy. Most of the corporations around today started out as small, family businesses, and consumers themselves seem to show a preference towards them. According to recent data, up to 91% of US customers will choose small businesses when convenient because they associate them with increased reliability and better customer service.

At the same time, it’s important to have realistic expectations. Every business starts with a dream, but according to data from the Bureau of Labor Statistics, 20% of small businesses don’t make it past their first year. The choices you make when you start your company are critical for its long-term success, and, as excited as you might be to get the ball rolling, first you have to make sure your new brand has what it takes to withstand the market’s challenges.

The experts at Biz Op have put together a list of the most common reasons why small businesses fail after the first year and how you can prevent that from happening to you:

Lack of market research

Market research should be at the core of every business, regardless of its size and industry. No matter how brilliant your product/service may sound in theory, if there isn’t a market for it or you don’t understand where you stand on the market, your venture will be short-lived. Market research is required to answer questions such as:

• Is there a real demand for your product?
• How big is the market, and what is the outlook for the following five years?
• Who are your target customers?
• Who are your competitors, and what do their numbers look like?
• What strengths/weaknesses do you have compared to your competitors?

By answering these questions and more, you’ll know where exactly you stand on the market, create plans that are grounded in reality, estimate your revenue, and what potential threats lie ahead.

The wrong business model

Even if there is a market for your products or services, your business might still have trouble taking off if it’s based on the wrong model. In short, the business model lays the groundwork for how you will be selling your products, to whom, and how you’ll generate revenue. There are many types of business models: subscription-based, freemium, crowdsourcing, product-to-service model, just to name a few. There’s no such thing as an ideal business model that guarantees success. It all depends on the company and market, so this is something that you should discuss with a professional business consultant. Some of the biggest companies we have around today (Facebook, Google, PayPal, YouTube) succeeded because they adapted and changed their business model, which shows that your initial idea might need some tweaking to reach its full potential.

Low understanding of your financing needs

As an aspiring entrepreneur, you need to have excellent money management skills and take finance very seriously. Unfortunately, there are countless examples of promising ventures that failed because the founders didn’t know where to seek funding, invested in the wrong things, or failed to prepare for times of crisis. Although calculating finances may not be as exciting as designing innovative products, renting a fancy office, or planning team building initiatives, it needs to be done. You need to have a clear overview of your business costs, sources of revenue, and profit. Otherwise, not only will you have a hard time finding investors, but you’ll also risk running out of cash.

Lack of clear goals

Every business owner wants to achieve a general goal: make a profit, help the world, give back to the community, solve a problem that the market is facing. However, if you want to succeed, you’ll also need to have smaller, more specific goals. For example, you can make it your goal to boost sales or profits by a certain margin, to gain a certain amount in funding, or grow your team. These goals will boost your motivation and focus your team’s attention in the right direction so that everyone works together to achieve the same thing. Needless to say, goals should be measurable and you should track progress regularly to see how close you are to reaching them.

Lack of a branding strategy

Branding is what sets your business apart from competitors, making clients remember you and associate you with certain values. Without branding, a business is simply dull and forgettable. So, while it’s important to have a good product to begin with, you also need to work with a branding strategist to discuss elements such as your logo, slogan, company colors, website design, and communication style. Depending on your industry and unique vision, you can build a brand that’s innovative, high-tech, professional, or youthful. Above all, be authentic. Don’t be a pale copy of someone else when your business has its own spirit.

Relying on word-of-mouth promotion

One of the biggest mistakes made by small, family-owned businesses is that they rely on word of mouth from local customers and don’t take advantage of modern advertising strategies. While word of mouth remains a valuable way of getting new customers, on its own, it’s not enough to help you compete with big competitors. Don’t be afraid to leverage the power of digital marketing strategies such as social media, SEO, and PPC. They’re affordable, and they’ll help you gain exposure.

The wrong attitude

Last but definitely not least, your attitude plays a major role in how your business performs in the first year. Unfortunately, the world of business can be unforgiving, and it will bring you down if you don’t approach it with the right mindset. Being lazy, easily scared, and unmotivated will trickle down to your employees and eventually affect your bottom line. Instead, you should be driven, aggressive, proactive, and approach challenges as an opportunity to grow, not as insurmountable obstacles.