How to survive your first year of business.
Let me throw some numbers at you, according to the 2019 edition of the Business Population Estimates released by the Departments for Business, Energy & Industrial Strategy , there were a whopping 5.9 million businesses registered in the UK. Perhaps more overwhelmingly, 5.8 million of those (that’s 99.3%!) were classed as SMEs or Small and medium sized enterprises (These companies have fewer than 49 employees)
Not only that but the number of ‘sole proprietorships’ has grown and now accounts for 76% of all UK businesses – meaning more people than ever are running their own businesses. In this blog post we discuss how to survive your first year of business.
The FSB has found that small business confidence has fallen to its lowest ever recorded level in Q1 2020 across the nation. While we’ve had the usual concerns such as policy changes in the form of a new ‘national living wage’, the pensions auto-enrolment, tax and “regulatory burdens” that could be responsible for the lack of investment, hiring and the large number – the greatest since 2012 – of firms looking to downsize or close in the next quarter, as if that wasn’t enough to give you sleepless nights, 2020 saw a global lock-down due to the COVID-19 Pandemic. It wouldn’t be an exaggeration to say that the pandemic brought the country to a standstill like nothing else in living memory.
Are you rethinking your life choices yet?
As a small business owner, you are in the majority of businesses in the UK, that’s a lot of competition. So while the statistic that in 2018 there were 381,000 business ‘births’ as well as 336,000 business ‘deaths’ may not be surprising, it is certainly a sobering thought. However, that statistic you keep hearing – that 90% of businesses fail in the first year is, thankfully, wrong. It’s closer to 42.4% lasting until their 5th birthday (Office of National Statistics, Nov 2019). Despite this, it is still arguable that your first year really is the most important one for your business. Consequently it can be hard to know how to survive your first year of business.
If you’re not yet overwhelmed by the figures, that believe it or not I’ve condensed for you, you can find my resources at the bottom of the blog, there’s an incredible amount of information out there, it may not be all that useful for you but it’s interesting reading if you’ve got the time.
In your first year, you set everything up – it’s the basis for the rest of the business. That’s not to say you can’t change things later, but if you’ve been working on your business plan or your filing system for a good week and used it for 4 months, the likelihood of you going back to fix it is not high! Which brings us to our first, and possibly most important tip in our list to business survival Keep Going! or, for all the Douglas Adams fans out there, “Don’t Panic!” Things will be tough, you will make mistakes, and that’s OKAY! Mistakes happen, we learn, we improve, and we move on. Pack up your towel (see: “Don’t Panic!”) and keep up the good work!
Do your Homework
It’s important not to rush into your business without knowing all you need to – you may have the most fantastic idea ever, one that will change the course of humanity, but it doesn’t matter how great your idea is if you’ve not backed it up with decent research. Look into good business practices; protecting your ideas; check out the competition; how to look after your finances, etc, and you’re halfway to having a solid business. Make a plan. Every business, no matter how small – yes, even if it is just for a bit of ‘pin money’, needs a plan. This consolidates the ‘homework’ you’ve done and provides you with all the information you need in one place. You can also utilise it as a record, allowing you to look back to see if you are meeting your expected targets. You can even use our free template to make it easier!
Know the numbers
Not the most inspiring part of running a business for most of us, but they are important nonetheless. Knowing your financials inside and out will enable you to make informed decisions without constantly running back to your spreadsheets. You will know your profit margins, your overheads, expenses – all useful numbers, especially when applying for funding. This links in nicely with…
Keep excellent accounts
Again, not the most fun part of owning a business, but another very important one. Keeping your accounts up to date from the start can help avoid the inevitable meltdown come tax return season. However, if you are guilty of accounts avoidance, don’t worry – Virtual Bird can help!
Have a support network
Whether it’s your best friend, your family, or even a bunch of strangers on the internet – a support network is essential for small business owners. There will be rough days, even rough months, and you will need that support to help you through to the great things that come after a stormy patch. In terms of business support, a study by o2 has found that businesses that have support through incubator and accelerator programmes (essentially advice, support, and a mentoring service) have a 92% survival rate. So seek out help and advice where you can – you could even start with a Virtual Bird Business Consultation, or browse our freebies for some extra help.
Have Systems in place from the beginning
Ensure you are business savvy and don\’t hit any snags down the road by making sure you have policies and procedures in place before you even think about opening the shop doors. This includes making sure you are legal, having policies that meet government legislation and setting up good accounting systems, ordering systems, stock taking systems, etc.
Believe in yourself and your business
This means not undervaluing your time or work – charge the price you need to! This is particularly relevant to artisan businesses who, in a crowded market, seek to stand out by pricing lower than the perceived competition. In this case – use your USP to make yourself visible, pricing too low is a hard habit to break and will only lead to frustration and disappointment (we’ve been there, we know!). In general, though, it is important to remember why you began your business and relocate that self-belief, especially at those lower points – you can do this! If you need a boost, you can always check our Pinterest board for inspirational quotes and images.
Have you got any other hints and tips that have helped you succeed? Or are you struggling and need some more advice on how to survive your first year of business? Let us know on our Facebook page 🙂
Department for Business, Energy & Industrial Strategy Statistical Release Available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/852919/Business_Population_Estimates_for_the_UK_and_regions_-_2019_Statistical_Release.pdf
National Federation of Self Employed Small Businesses (2020) Small Business Index Q1 2020. Available at: http://www.fsb.org.uk/media-centre/latest-research-and-results [Accessed 29/06/2020]
Office of National Statistics information on SME survival (Data published 2019) https://www.merchantsavvy.co.uk/uk-sme-data-stats-charts/ [Accessed 29/06/2020]