What a Small Business Must Consider as it Enters its Second Year
One of the horror stories that you probably heard when you were starting your business is that 90% of startups do not survive their first year. The truth is the number is closer to 25%. But while the first year in business is typically considered the most risk-averse, the reality is that statistics for businesses staying open don’t get better as the years go on, they get worse; 31% don’t make it beyond two years, and only half of newly minted businesses are still open after five years.
Now, the challenge which lies ahead of you is taking all the lessons that you have learned throughout your first year in business and using them to build into the second year, because you want to make it past the fifth year and beyond. This requires building a sturdy business foundation during the second year.
Here are some of the things that you need to know as you enter your second year of operations:
Invest back into the company
When you were starting the business, you had goals such as a free lifestyle, buying the things that your job couldn’t afford, holidays and a few other related dreams. The second year of business is not the right time to start using profits for those personal dreams. It is the time to reinvest as much as possible back into the company. You are at a stage where the brand is known, the business is established, and lenders are now willing to help finance further growth. Combining LendingClub business loans with reinvested profits can give a small business in its second year the jolt needed to keep running for years to come.
Rework your business plan
There are some things that you had put down in the original business strategy and they seemed really easy to implement and also held a lot of promise to transform your business. However, now that you have put some of the strategies into actual practice, you have figured out the ones that are worth keeping and those that aren’t working. The questions that you need to ask yourself include:
· Why does your business exist?
· How have the demographics that you targeted with the goods or services responded in the first year?
· Are there new opportunities for business growth that you have seen in the market, and how can you capitalize on them? do you need to expand or downsize?
If you aren’t in a position to answer these questions, consider hiring someone to perform a brand audit for you. They will help you come up with strategies which will not only help you survive the second year but will also help you grow.
Keep your business expenses low
Most people make the mistake of getting comfortable when they have succeeded to keep a business on its feet for a year and see it is registering a profit. The success of the first year can be deceptive because there is nothing else to compare the performance against. People, therefore, make errors such as expanding their business expenditure and moving into larger premises in the hope that even more clients will come. Then, they end up at a business plateau and because they already spent the profits on the expansion, they start incurring losses. Before you make any decisions to expand your business just because it is the second year, make sure that it will better optimize the operation. If you can manage to keep your business expenses low, this is the year where your business can really maximize profits.
The second year of small business is when it either shoots for the stars, stays mediocre or tanks depending on how well you strategize. Do it right and you will have no regrets.