It’s very exciting when you’re starting your first business: you’re thinking about the opportunities you’ll have, the customers you’ll reach, and different ways you can grow. However, there are also some pretty harsh realities to face with regard to how many new small businesses fail. The numbers are pretty staggering; according to data from the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, and about 50% fail by their fifth year.
So the question is, how can you as an entrepreneur make sure your first business is successful? And if it isn’t successful, how can you learn from your failure and turn it into a success? Many entrepreneurs failed multiple times before they found success. The reason they were able to do this is that they didn’t drive their first company into the ground to the point of being unable to recover, and they used failure as a learning opportunity when starting their new ventures.
Here are some tips to ensure you’re setting yourself up for success when starting your first business.
The most essential tip is to start slow and take your time. When starting your first business, don’t put all of your eggs into one basket. By relying on your new business to support you immediately, you may end up putting too much pressure on the business and yourself to succeed. When you’re getting started, it’s better to take your time with it. Work on your business after your day job, or supplement your income in some way to keep a solid foundation. Many entrepreneurs take up side gigs like freelancing or even driving for a rideshare company to maintain a regular income while starting their business.
This solid foundation will be crucial for when you’re getting your business off the ground because you don’t want to stretch your cash flow too thin. Don’t take out too many loans, destroy your credit, and bite off more than you can chew. If this is your passion and you truly love it, you have plenty of time and energy to figure things out. You don’t need to do everything at once. It’s better to take time to do things well, rather than rush and start off poorly.
You may not have all the answers when you’re starting a new venture, but you may meet someone who gets pretty close. Use opportunities like networking events and social media to connect with others who have experience in the industry you’re entering. By building a network of people with a wide array of different knowledge and experiences, you can use these connections as resources for when you need help or guidance. The more people you establish relationships with, the bigger an audience your business will have when it gets off the ground. It’s a win-win.
If your business doesn’t succeed, you will have found many potential partners for your next venture. You may also learn that you don’t like being the CEO of a business and would rather help build something that already has some legs. By networking, you’re increasing the number of people that you can help and that can help you.
Don’t get comfortable with where you’re at in your business. Stay motivated about the field and stay up to date with the industry you’re in. Find more problems to solve and the potential to grow. The industry won’t be the same a year from now, and you need to be able to stay on your toes and adapt. Otherwise, you risk falling behind and losing customers. If you stay ahead of the curve, if you’re continually learning and improving, your customers will recognize your passion and reward your business for it.
If you “fail forward” and learn enough to start something even better down the road, you’re doing something right. The last thing you want to do is spend a bunch of time and energy on a project only to be exactly where you started when things are all said and done. You may even learn that you don’t love the industry as much as you thought you did, that’s okay. Just keep learning.
Let’s clarify: a safety net is not a Plan B. It’s not a backup plan. You don’t want to focus on a backup plan, because having a backup plan will always distract you from your Plan A: your business.
But if your business does go downhill, you’ll need to make sure you have a friend’s couch to sleep on, or a spare bedroom at your parents’ house to stay in. You may want to build an emergency fund or savings account that you can use to get back on your feet if you run out of cash. Knowing that you have a safety net to fall back on if times get tough will allow you to focus on your passion.
Knowing you don’t have any other options can be a great motivating factor to get your business off the ground. However, maxing out the credit cards and ending up homeless won’t give you the opportunity to try again if you fail. Besides, sleeping on your mom’s couch may be a motivating factor enough to do what you need to do to avoid it.
If your business fails, you can make sure you still succeed by learning from your mistakes, the industry, and building a network to try again. If you start a business, fail, and learn nothing from your experience, that is just time wasted.
Instead, a failed first business can be used as an opportunity to start anew and build again. If you’ve followed the above steps, you’ll have learned from your resources, knowledge, safety net, and network of peers from your first business. You can use your experience to start your second business -- or third, fourth, fifth -- even stronger.
This isn’t meant to scare you into not starting. If half of businesses fail, that means another half goes on to be successful. If you put in the work, do your research, and learn from your mistakes, building a business can be extremely rewarding.