Getting a small business up and running is an impressive achievement, but it’s also just the first of many hurdles you will need to clear.
By Dave Gilbert
Research shows that 20% of small businesses fail within the first year. Beyond that, only around half survive past five years, and just a 1/3 make it a decade or more. Clearly, sustaining a new business is even harder than starting one up.
To avoid becoming just another statistic, track your progress carefully. Establishing and sticking to some key milestones will guide your growth and give you a metric to measure success against. Meeting certain milestones will reveal when your business is growing in a dynamic way, while missing milestones will alert you to the risk of your business standing still or shrinking. As soon as you open your doors, make these your overarching goals:
1. Prove Your Business Model is Profitable
There are countless ways to forecast whether a business model is profitable. However, until the business model is put into action there’s no way to know for sure. Creating a comprehensive business model is the first step. It should describe in detail who your target client is, what their needs include, and how you provide value. That business model may not be profitable at first, but that doesn’t mean it’s not viable. Once you begin turning a profit it’s a clear sign your model works. Conversely, if profits prove to be elusive, you may need to tweak the model.
2. Form Relationships with Repeat Customers
The vast majority of small businesses rely on repeat customers over one-time customers to survive. Retaining customers has also been shown countless times to be more cost-effective than finding new customers. The first customer to work with your business again is a big milestone to watch for. If what you offer is compelling enough for one person to return, others probably feel the same way.
3. Become a Master of Marketing
Marketing is essential for long-term success, but it’s also challenging, costly and consequential if you don’t do it well. Even if you work with an outside marketing firm, it’s your responsibility to approve any strategy. The milestone you’re working towards here is establishing a strategy that is cost-effective, scalable and, most importantly, resonates with customers. Until you meet this milestone, your small business may struggle with inconsistent cash flow.
4. Gain and Build Trust in Your Team
No matter how carefully your hire your employees, you can’t know how well they’ll actually perform until you see them on the job. Their performance will also depend on the work culture you establish for your company. Being able to trust your team completely – and encouraging them to trust you – is especially important for small businesses. As a small business owner, you’re delegating responsibilities and asking people to wear a lot of hats. Finding anyone to work for you is tough in times of low unemployment; finding the best people is even harder. Once that team is in place, though, your business has become a true enterprise instead of an individual endeavor.
5. Finance a Growth Opportunity
As the saying goes, you have to spend money to make money. Growing your company often means opening a second location or buying new equipment – things that require a major investment. Most new businesses don’t have lump sums readily available in savings or are reluctant to give up equity to investors. Some business owners consider small business loans or equipment financing solutions as alternative ways to fund these investment opportunities. Building your business credit and using financing strategically is how most businesses reach the next level, even if their budgets aren’t technically there yet.
6. Meet a Major Sales Milestone
After you have all the pieces in place – a viable company model, stellar marketing, a great team – set a major sales milestone for yourself. Presumably your business is firing on all cylinders at this point. Now it’s time to see what your business is truly capable of by committing to boost sales by 50% or some other significant figure. If you’re able to reach this target it suggests your business is succeeding and is capable of continuing to grow that success.
Is your business on track? What will you do if an unexpected setback appears? Could you reach the next milestone with an injection of cash or a line of business credit? These are questions you need to be asking early and often. The answers to these questions will help you create a road map of where you want your business to be, which is essential to navigate as you grow.
Dave Gilbert is the Founder and CEO of National Funding, a leading provider of small business financing solutions. He is considered a thought leader on issues related to alternative lending and is regularly sought out as a speaker and expert source. Over the last 25 years, Dave has worked with countless businesses to help them realize their full potential through creative lending strategies.