An 8 step guide to surviving your first year in business
Becoming successful in your first year of business is such an exciting but challenging prospect.
Your first twelve months as a small business owner will be a rollercoaster; filled with exciting milestones as well as times of frustration as you try to make your great idea a reality.
In this guide, we’re going to share everything we know about surviving the first year of business and making it a success.
- What is the first year of business like?
- Prepare for a rainy day
- Get your accounting in order
- Get your legal logistics in order
- Build your network
- Don’t try to offer too many things at once
- Be patient and commit to the long-game
- Expert insights
- An FAQ for your first year in business
- Wrapping up
What is the first year of business like?
Running a business can feel like fighting fire. Apart from all the great experiences you’ll make, things you’ll learn and successes to look forward to, you’re taking on a risky job, fixing problems and, quite frankly, you’ll probably never get enough credit. But what matters is how you walk through that fire.
Quick-Tip: Just like athletes, you need to harness your mindset to make your business a success. Here’s why you should have a game plan.
Chris Weeks and Alastair Byrne designed Bounce, an instant access, automated mental health-focused chatbot. The pair was so committed to making it through their first year of business, that they had their own share of anxiety:
“It’s quite funny because we run a mental health business, but it’s very stressful!…It challenges your confidence and self-esteem. Some weeks you feel great – you feel like everything’s going well and you can take on the world. Other weeks you feel like you’ve got this massive boulder on top of you and everything you’re trying to do is really hard.” – Chris Weeks, co-founder Bounce
There are many things that could go wrong when starting a business. Sales might begin to slow or a team member might let you down. The truth is, there are countless challenges that could completely break your business. However many can be prevented if you set things up correctly from the outset:
1. Have a business plan
Having a plan for your business can give you strategic focus, allow you to make cash flow forecasts and keep an eye on key priorities.
Use a business plan template
A business plan doesn’t need to be an overwhelming 20-page document! It would be wise to include sections about your target market, finance you think you’ll need, and an implementation timeline. Take a look at GOV.UK’s hub of business plan resources including templates and examples to get you started.
Get your accounting in order from day one
Planning ahead and getting your financials in order early on can save you financial headaches down the line. We’d recommend registering your business and setting up a business current account (such as Tide!), getting an accountant and using a cloud accounting software, before you open for business.
2. Proactively take time out to rest
When you’re setting up a business, it can be easy to get swept away and work 80-hour weeks. Not only is this detrimental to your health according to a study by Occup Environ Med, it can also reduce your productivity (Stanford University and IZA). Here are some ways to mitigate this:
Try 10-minutes of meditation a day
Meditation is proven to reduce anxiety levels, particularly so in those who have the highest levels of stress. Using a meditation app like HeadSpace or Calm for as little as 10 minutes a day can help keep stress and anxiety at bay.
Aim to get 7-8 hours sleep
According to the National Sleep Foundation, changes associated with sleep loss include ‘decreased short-term memory, poor performance on newly learned or complex tasks, and difficulty maintaining attention’. Not ideal if you’re starting-up a business! Having a ‘screens-off’ rule from 9pm or making your bedroom a ‘no phone zone’ can help you wind-down in the evening and ease temptations to work late.
Block out holiday days you want to take for the year in a calendar
When running your own business it can be tempting to neglect taking time off. Here’s some advice on holiday leave from entrepreneur Daniel Priestly from his book Entrepreneur Revolution:
“Take out a yearly planner (I like giant Sasco wall planners) and put in the holidays you want to take. Blank out the time you’ll be taking off in the coming year. Rule out the long weekends you plan on taking and the mid-week lazy days you want off” – Daniel Priestly, author Entrepreneur Revolution
3. Prepare for a rainy day
We’ve all heard romanticised stories of people starting businesses in their garden sheds. These rags-to-riches stories are something many budding business owners aspire to create.
Quick Tip: During the first year in business, people rarely talk about the thing- that don’t turn out as expected! Watch out for these 5 unexpected things when launching your business.
Most of the time, reality is a little more messier than this. To get up-and-running, it’s likely you’ll need some capital to get started. Below are some recommendations on how to use your money to grow in the smartest way:
Have a runway fund
It’s useful to have a ‘rainy day’ pot of savings to last you at least 6 months without any income. It can take longer than you imagine to get your first customers! Ideally, you’d have this fund saved up before you quit your day job.
Cash flow can be tricky in Y1. Think about ways you could save money when funds are low. Even the simplest things can help. Could you work from home and cafes or choose a flexible co-working space instead of leasing an office?
Could you use public transport for your business travel instead of taking Ubers? Bring in a packed lunch twice a week instead of eating out?
Use proven time management principles
Between meetings, planning, managing budgets and executing on your work, being an entrepreneur takes a huge amount of dedication. Make these tasks easier to manage by setting up a calendar system.
Reduce distractions by batching common tasks at the same time each day. Check your email the same time/s everyday, prioritise your most important tasks and create clear boundaries between your work and personal life.
Be honest with friends and family
Speaking of boundaries, it’s important to make these clear with those closest to you. Let them know that you’ll be making sacrifices to go all-in on your venture and achieve your goals. Reassure them you have contingency plans in place if you run into hurdles along the way.
For example, the day after Stephen launched Tress Clothing, his first child was born. He’s had to juggle being a father to a newborn daughter with being the father of a newly-founded business.
“Being an entrepreneur is brutal,” says Stephen. “I’d be lying if I said I was able to emotionally shut myself off, and then come home and be the most cheerful and jumpy partner and dad. I’d be lying, because that’s how much the brand means to me.” – Stephen Skeete, founder Tress Clothing
4. Get your accounting in order
Once you have your business plan in order, it’s time to focus on your numbers.
You should be able to answer questions such as:
- Will I need to buy stock/inventory?
- How much inventory should I keep?
- Will I have employees to pay?
- How long does it take to get payment from clients?
As a new business owner, you should establish a system for organising your receipts and records. Tide allows you to add comments and photos to transactions (for example, a photo of a receipt) to help you keep track of your expenses. Moreover, Tide’s accounting integrations allow you to automatically upload transactions into your accounting software.
Make sure to keep track of your overall balance, your income and your expenses. This will allow you to minimise risks and know where you’re headed.
It will serve you well to back up your business vision with numbers, especially when it comes to your finances.
Here is a quick accounting cheat sheet to get you up and running as quickly as possible:
1. Track your expenses
An expense is any amount spent or cost incurred in your efforts to generate revenue. In other words, it’s your cost of doing business.
Business expenses (i.e money spent on the running costs of a business) can be subtracted from a company’s income before it’s subject to taxation. You should keep an eye on your subtractable business expenses in order to avoid overpaying on your taxes.
2. Set up an invoicing system
An invoice is a document sent by the provider of a service or product to the purchaser. The invoice works as a verification of the agreement between buyer and seller, establishing an obligation to pay on the part of the purchaser.
3. Set up a bookkeeping or accounting system
Bookkeeping is the process of recording financial transactions whereas accounting is the process of interpreting, classifying, analysing and summarising this financial data. Bookkeeping is the first part and the foundation of accounting.
No one wants to leave money on the table when doing small business accounting, so check out these free Excel bookkeeping templates from Business Accounting Basics.
Quick-Tip: What gets measured gets managed! To make sure your business numbers add up, have a read through our guide to small business accounting.
5. Get your legal logistics in order
When starting a new business, things can go against plan. Prevent any unnecessary setbacks and avoid legal headaches by getting your legal logistics in order upfront.
The following checklist will help you organise your legal responsibilities:
- Investigate the different types of business structures: sole trader, partnership, LLP or limited company. If you’re unsure which one to go for, head to Companies House and find out which option is best for you.
- Investigate your rate of Corporation Tax: the rate of Corporation Tax you pay depends on how much profit your company makes. There are various thresholds that you should be aware of.
- Choose an available trading name: check that your desired company name isn’t used by another company and that you’re allowed to take it. You can check its availability here.
- Contact HM Revenue & Customs to organise tax and National Insurance: and don’t forget PAYE if you plan to become an employer. If necessary, register for VAT with your VAT office.
- Organise insurance and check if you need any licenses: especially if your business has to comply with health and safety regulations. Not too sure if you do? Find out which licenses you’ll need for your business over here.
“If it’s your business and a one-person operation, you have to motivate yourself…I had to learn everything from scratch, like accounting and legal stuff…The biggest challenge is figuring out the future. You build up to the launch of your business and then you get there and it’s like ‘okay, what happens next?’.” – Abi Nolan, founder Supply Yoga
Quick-Tip: Here are our top tips to avoid legal headaches in your first year in business.
6. Build your network
People do business with people they know, like and trust. The professional network that you build in your first year can open doors for you that otherwise couldn’t be opened. So go out there and start mingling!
Use LinkedIn to reach out to professionals in your industry or others who, just like you, have started their own business. The more people you connect with, the more opportunities you’ll create for yourself, and the more support you’ll have when you need it.
You can search for people by industry, location and title on LinkedIn:
Utilise offline communities
Be creative with your networking and step outside of your lane. If you’re a graphic designer and you join a graphic design meetup, you’re mostly going to be meeting other graphic designers.
While this is valuable for keeping up with industry trends, you probably wouldn’t generate new clients that way. A better business development method could be to get involved in communities where your ideal client can be found.
7. Don’t try to offer too many things at once
One mistake entrepreneurs make is trying to be everything to everyone.
It might seem contradictory, but you’re better off appealing to a small group of loyal customers than trying to attract everyone. Especially when you’re beginning to build your business. Nail down your offer and business processes to a core target audience.
Start by setting realistic goals and milestones. Focus on achieving small incremental goals rather than building a multimillion pound empire from day one.
By trying to be everything to everybody, you’ll end up being nothing to nobody. In an attempt to please everyone, you’ll just end up watering down your business proposition, your brand and what your company stands for.
But that doesn’t mean you shouldn’t experiment and switch things up if something isn’t working.
“We take a lean approach…Release quickly, get feedback very quickly, iterate and change. Startups aren’t just about how quickly you grow, per se, but about how quickly you learn. In our case, when we come up with something, we track it, measure it, and see if it works or not.” – Ismail Jeilani, founder of Scoodle
Quick-Tip: Understand why 95% of newly launched products fail. Lack of preparation. Here is how to build a go-to-market strategy that attracts your ideal customers.
8. Be patient and commit to the long-game
Rapid growth can be attractive to many founders. But more often than not it results in problems down the line. By jumping to conclusions too soon, you risk overlooking important details and missing opportunities.
By attempting to grow too quickly, you risk under-serving clients and hurting your brand and bottom line in the long run. This is especially true with service-based businesses, who take on more clients than they can handle.
Impatience can also alienate the people you’re working with. And what’s an entrepreneur without a solid team behind them? Be ready to face challenges and keep your cool when things don’t go according to plan.
Deborah started her Brighton-based design and marketing consultancy, catchily named Tell Me Something Good. She has one but important advice for you to succeed:
“Your business plan will change in the first year, so don’t get too attached to it.” – Deborah Benson, founder of Tell Me Something Good
💡 Expert insights
Insights author: Suds Singh is the founder of Interesting Content, they are a specialist video production agency that only works with predominantly SME’s and B2B brands. Since being established they have worked with scores of companies including Tide! They are also one of our proud members.
What is a common mistake first-time business owners make in the first year?
Looking back at my first year of business, the most common mistake I made and have seen fellow entrepreneurs make has to be: not saying the word NO enough!
Most first time business owner will be in the in the learning and figuring things out mode. Everything will be shiny and new and it’s very easy to get sucked into playing the role of a “Wannapreneur”.
“The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffet
There will be so many networking, speaking, marketing opportunities that you will encounter and it’s very tempting to say yes to everything but you must be careful not to spread yourself too thin and loose focus away of your main goal.
An FAQ for your first year in business
There won’t always be straightforward answers to your biggest business questions but we’ve tried to address frequently asked questions from new small business owners:
Should I take on any client that comes my way?
When starting out it can be tempting to onboard the first client that offers you money, even if they’re outside your ideal niche. However, the quicker you can do work for your ideal client type, the quicker you’ll be able to show off your results and therefore attract similar clients with similar goals.
Think early on what your ideal type of company is in terms of sector, size, and culture.
Ben and Rob founded Provius, a Leeds-based website and app design agency. You’d think that they’d be happy to onboard every client that comes their way to grow their business but the pair has decided otherwise.
“We choose companies that try to help others, not only those who pay the most…For example, we work with Calderdale Council, which is between Leeds and Manchester, helping with their work with mental health in young people. They’ve been spot-on as a client. We could have chased more lucrative clients, rather than gone down the altruistic road, but the approach has turned out well.” – Rob Gill, co-founder of Provius
How can I get a trademark?
Getting a trademark means you can take legal action against anyone who uses your brand without permission. It also means you can:
- Use the ® symbol next to your brand
- Sell and licence your brand.
The official fees for a UK registration are £200. The registration process takes around 4 months (assuming there are no objections) and trademarks last for 10 years. See more information here about applying to register a trademark.
Where can I get investment?
Your options aren’t as limited as you think. From seed funding and Angel investors, to crowdfunding and grants, make sure you’ve done your research and come up with a plan to suit your own needs. Borrow from friends and family with caution! As tempting as it may be, relationships can be strained if your business doesn’t succeed.
As we’ve covered above, there are plenty of logistics and potential pitfalls to consider when starting a small business; from running out of runway cash to avoiding burnout. Being well prepared will put you in the strongest position during your first business year and beyond.
Photo by BBH Singapore, published on Unsplash