20% of new businesses fail within the first year. Here’s how to make sure you’re in the 80% that don’t.

20 percent of new businesses fail within their first year, and 60 per cent within the first three. 

Here’s some suggestions on how you can set yourself up for success during your first year as a business owner.

Know your market First and foremost, know your market. It might sound simple, but you’d be surprised at the number of people I speak to who haven’t truly identified this. You should have a clear idea about who your clients are, what services they need, and how you can help them in achieving their goals. This is your why, not your how. Why this business? Why now? Why you? Only once this is clear, should you move forward into the next steps.

One of the reasons I set up my own business, Globus HR Consulting Ltd, was to help my clients make sure that their new businesses remain on the positive side of the percentages. I set up my first business in 1994 and I have successfully navigated the sometimes-tricky waters of sustaining it for 28 years, and I’ve also helped over 100 other small businesses do the same. 

Assess your market competition

The next thing to do is to assess your competition. Who else is providing the same or similar services to you, and what can you do that will help you stand out. What is your USP? I’ve previously shared a newsletter detailing tools for measuring business performance: Porter’s Force Five within it will help you to do this by taking you through four steps - competitive rivalry, threat of new entrants, bargaining power, and substitute services - each helping to identify your own unique answers. 

Create a business plan

According to Harvard Business Review, the ideal time to write your business plan is 6 - 12 months into your new venture, or at the time when you’re speaking to potential new customers and getting your business ready for market. This will help ensure that you have the fundamental information about your market and your market analysis (see above points) to hand when drafting it. It will be unique for your business, but should include information on your objectives, industry and market analysis, core strategies, organisational structure, products and services, marketing plan, expenses, and 12 months sales plan.

I can highly recommend the template for a business plan you can download from my profile - It's one we use as Virgin Start UP Mentors. Take a look and adapt.

Focus on the necessary 

I can almost guarantee that when you start your business, you’ll feel like you have a million things to do, and not enough hours in the day to do them. This is where business performance tools come into play. I’d recommend working through the GE-McKinsey Matrix or the BCC Growth Share Matrix to help identify the most important areas to focus on, right now. I’ve shared more details about these, and information on where to find them in a previous newsletter. Find out more here. 

Build your network 

I cannot overstate how important having a network is when you start (and indeed when you are in the midst of) running a business, for so many reasons. Referrals are one of the best ways to win new clients; reach out to former colleagues, as well as friends and family members, to let them know what services you offer and ask them to keep you in mind for future needs. LinkedIn is another great networking tool, as are networking events. 

Some ways in which I help clients build networks (while at the same time gaining informative business knowledge) are via online events discussing anything from psychometrics, how to gain confidence, how to use LinkedIn to your advantage, how to gain financial confidence, and yes, how to win more clients. I also host an annual retreat for like-minded business owners to get together, connect, share ideas, and move their businesses forward. 

Keep your expenses low

I know it can be tempting to go all-in when you start a new business, reasoning to yourself that it’s ‘now or never’ or that ‘you have to invest to gain’. While both of these are true, you must be sure to keep a pot of money in the business bank as a safety net. I’d suggest around six months of salary and expenses as a minimum. Think of this as much as a start-up buffer as it is protection over external factors because - as we’ve all seen over the last few years - anything can happen. Two methods to help you maintain reasonable expenses are Benchmarking and Balanced Scorecard. I’ve shared more details on both here. 

Come to terms with failure

Failures do - and will - happen in business. Indeed, if you don’t come across them at some point during your business journey, then I’d go as far as to say that you’re not pushing yourself to your full potential. What matters is how you handle them, and what you learn from them. We always have capacity to learn more, and failures are simply a method of speeding up that learning curve. To do this, it’s a good idea to cultivate a growth mindset. Not sure how? Get in touch to see how I can help you. 

Measure and adapt 

A great segue from coming to terms and learning from failures, measure and adapt simply means not being too rigid with your plan. 

To quote Robert Burns: 

“The best laid plans of mice and men often go awry”. 

And that’s ok. In fact, it’s a good thing. It means you’re testing, trying, learning, and understanding. 

All the best businesses do. Including mine. 

And a reminder that during economic difficulties HR Consultancies can thrive.

According to a survey by the UPS store, 70% of small business owners that receive mentoring survive for five years or more. This is double the survival rate of founders who don’t receive mentoring.

98% of those that go through our Virtual HR Consulting Mentoring Programme have survived the year and beyond.

As always, I love hearing your feedback and we must talk if you want to move into consulting or grow your business. Just DM me.