Made It Through Your First Year? How to Ensure Your Startup Thrives in Year 5
Why do so many small businesses survive their first year… only to fail in years four and five? Here’s how to ensure that doesn’t happen to your startup.
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You've launched a small business -- and managed to avoid some of the common startup rookie mistakes. You've identified customer pain points and found ways to solve those problems the way customers want them to be solved. You resisted the temptation to scale too quickly. You hired the right people.
Take a second to congratulate yourself - and to congratulate your team.
And then buckle down, because you aren't done. Statistics show that small business failure rates don't begin to slow dramatically until years six and seven.
Which means the practices you implement in your first year go a long way to determining your startup's future success. Thriving now is obviously important--but thriving over the long term is just as important.
My advice? Constantly peel the onion. Continually test ideas to develop your products or services. Continually test new ways to solve customer pain points. Continually test new ways to make your customers happy. Continually test ways to lower customer acquisition costs, improve operating efficiencies, increase margins--in short, constantly evaluate and analyze and optimize every aspect of your small business.
Relentlessly focus on execution
Ideas are the lifeblood of any startup. But unless you execute those ideas, they're worthless.
Consistently track the short-term metrics that lead to long-term success: Sales. Revenue. Margins. Churn rate. Customer acquisition costs. Sales cycles. Inventory turns.
Track your progress against targets that not only ensure you can survive now - especially if you're bootstrapping and basically financing your startup with revenue - but also later, when your business matures. Maintaining a relentless focus on execution will not only improve your business, it will also provide the data and insights you need to better solve your customer's problems, especially as your business--and customer base--evolves.
You won't get to enjoy the long-term if you fail in the short term... but you also won't get to enjoy the long-term if you don't relentlessly focus on short-term execution.
Constantly test new ideas
Focusing on existing products, services, processes, etc. is important--but so is finding new ways to improve your business and the value you provide to cusomers.
Businesses that last don't just find ways to be even better at what they already do well; they also find ways to do new things well. At LogoMix our initial goal was to help entrepreneurs and small business owners who were struggling to create a brand identity for their businesses. We created a minimum viable product, tested different marketing strategies and eventually launched when we felt we had a competitive advantage.
While that required a ton of time and effort, it was only the start. We refined those initial ideas and processes, but more importantly we developed new systems: New automation tools, new product and service offerings, new ways to solve even more problems for our customers.
Many entrepreneurs see those early days of testing a product or service as a stage they can complete. Successful entrepreneurs see testing products, services, systems, processes, etc. as a never-ending process that helps create a long-term competitive advantage.
And don't pivot too quickly
Pivoting is cool. Many entrepreneurs see pivoting as a badge of honor.
Sometimes pivoting does make sense, especially when you've misjudged customer needs and your minimum viable product falls flat. But maybe success can be found a few layers deeper.
Plus, few startups have the resources required to drop one idea and successfully shift to another.
Before you pivot, take a step back and think about your customer. What did you miss? Did you fall in love with an idea that seemed great but didn't actually solve a real problem? Did you fall in love with a "hot" industry or a "hot" technology instead of falling in love with a solution people need--and will pay for?
Make sure you truly understand the customer's problem. When you do, finding a way to solve that problem is a lot easier--and may only require a slight shift in focus or execution instead of a full-on pivot.
Always dig a little deeper before you give up on a product or service or initiative. The perfect solution--and the perfect business--might just be waiting to be uncovered.