An astonishing 20 percent of small businesses close their doors in their first year. Experts say that the first year of a small company is mainly about staying in the market. If your business managed to survive these 365 days, it was likely as turbulent and exciting as a roller coaster ride.
In the second year, things start to settle. You already have customers and dedicated staff and can face stressful elements, such as financial insecurity, with more experience. Like the closing of a cycle, your company’s first anniversary can be a great chance for you to re-evaluate your standards, prepare yourself for the challenges you will encounter, and consolidate your position in the market.
Every ambitious business owner dreams of having a company recognized for its quality, efficiency, and good practices. The best way to convey this impression is to maintain standards, which are set to ensure a company gets the best results. More than just a “prize,” standards represent a way to remain competitive.
There are different types of standards. In the U.S., there are more than 100,000 official standards for all industry sectors, including Performance-Based Standards (which guarantee toy safety and food safety, for example), Management System Standards (such as ISO 9000), Personnel Certification Standards, etc.
Determining industry standards for your business and doing everything to follow them is a great way to stand out from the competition. However, you should make sure each standard is directly geared toward your business. This increases the effectiveness of new plans.
Creating a budget is the only way to know if the company is spending more money than it’s earning. You can compare your expenses with actual or expected revenue and determine if you have enough money for the challenges of your second year.
These tips can help you make a better business budget:
- Check the standards of other companies in the same industry.
- Make spreadsheets specifying how much of your revenue will be allocated to expenses such as materials, taxes, rent, insurance, etc.
- Make sure you have enough cash before making a decision that impacts your budget—like hiring employees or expanding your business.
- Review your accounts to identify where you can cut costs.
- Consider new suppliers or invest in different services.
Your business should have a set of insurance policies from the beginning. As your risks might change during these 365 days, your insurance needs may be different now. When doing the annual renewal, take the opportunity to review the risks and ensure you have adequate coverage.
A coverage that every business should consider is a CGL policy—CGL meaning Commercial General Liability. It is a comprehensive policy that provides coverage in the event of damage or injury caused by a company’s operations or products or at its facilities.
CGL insurance can help you in the most diverse cases. Maybe a customer slips on the wet floor of your business, falls, and breaks a leg. Or maybe one of your ads results in accusations of defamation or slander, etc. You want to make sure your business is protected from lawsuits.
At the end of the first year, you should already know your employees well. It’s the perfect moment to evaluate your staff and consider the opportunity to hire some help if your workers are overloaded. You can also change workflow processes to increase efficiency.
But the decision to hire new employees always requires caution. If it is too early, you will be left with a worker at a standstill who you will probably be forced to dismiss at some point. You also lose any costs associated with training the individual.
Before changing your staff, assess your real growth goals for the coming year and the need for a new hire. Also, remember that it can take up to eight months for a new employee to establish in the company and achieve your expectations. Allow individuals the time to meet opportunities.
Maintaining the quality of products or services gives your company a competitive advantage over the competition. It can also help win and maintain a loyal clientele, build a strong brand image, and allow you to increase your market share. Never neglect your original higher-quality goods/services, those that made your company what it is, as customers may feel betrayed and seek out the competition.
If your business ended the first year with a well-received product or service, it might be the right time to capitalize on that by offering upgrades. This may include locally sourced, fresher ingredients in a restaurant, more clothing selections in the retail industry, etc. You can even listen to customer feedback to understand what you can improve or add.
The Importance of Maintaining Standards
Standards define how your company operates and how you build trust in your brand. They can range from quality, performance, and safety systems under authorized agencies or simply voluntary rules you establish for your business and your employees. Adequate insurance coverage also works as a good standard, showing that you care about the safety of your workers, suppliers, and customers.
In any case, it is a way to create trust, showing your customers that your small business tries to operate at a high, demanding, and consistent level of quality. But it’s not enough to just set standards—you need to re-evaluate them frequently and find out where and how to improve.