Many people dream of starting their own business one day. But the harsh reality is that the vast majority of new businesses will fail in just the first few years. According to the US Bureau of Labor Statistics, one out of every five startups will close their doors after just twelve months, and over half will be out of business after five years.
Those numbers are extremely alarming and disheartening for most entrepreneurs. And unfortunately, this fear of failure can hold many people back from pursuing their dreams of creating their own company.
But numbers like these should certainly not scare you away if entrepreneurship is your true passion. There are some steps that you can take during your startup phase that can help you beat the odds and establish long-term success from the first year and beyond.
Let’s dive in.
Go Beyond Financial Achievement
It can take many years before you ever start to see a profit – so if this is your only measurement of success, you will soon be disappointed. Instead of only measuring your business’s success in terms of profit margins, it may be better to focus on the “bigger picture.”
For example, say that you do freelance design work and sell services online. Even though you may not turn a profit within the first year, have you gained or grown in other areas? Perhaps you are making enough income to leave your day job or you are able to create a flexible schedule to spend more time with your family.
Another great area to switch your focus is on the impact your company is making on the much grander scheme of things. For instance, the startup sock company Bombas wanted to help the homeless community by donating socks to shelters.
However, since they followed a one-for-one model, their socks came with a premium price tag. This made it quite difficult for them to attract customers and turn a profit. However, their passion for supporting a good cause kept them going, and they recently hit their biggest goal of donating (and selling) 7 million pairs of socks.
Since these co-founders were focused on the bigger impact their company was making, it kept them motivated when times got tough.
Are there any bigger causes that your company can support?
Not only is this an admirable business model to have, but it can also help you attract more customers. In order to get through those first few tough years, you may need more than just a creative business idea; you need a brand that sells itself through its personality and dedication to a higher cause.
Be Transparent with Plans for the Future
You should not only be preparing for the future internally, but you should be sharing plans and goals with your customers.
- What are your intentions as a business?
- Do you want to provide customers with the best service, lowest price, or greatest product on the market?
- Where do you see your company within the next few years and how do you plan to get there?
While you don’t need to spill all of your secrets, it is important that you are transparent and open about your goals. But remember, your customers don’t really care if you want to buy a second home or be able to pay off your business loans; they care about how your company is going to help them.
So, what products and changes can they look forward to? Why should they keep coming back?
One of the best ways to start turning a profit is to increase the number of repeat customers. It is far easier and less expensive to retain a customer than it is to convert a new one; focus on the goals that will impact customers the most.
Build the Right Kind of Team
The people that you surround yourself with and support the startup is a huge aspect of its long-term success. One of the leading causes of startup failure is a lack of leadership and issues with internal infrastructure. Nothing will cause a company to crumble quicker than a team that cannot work together or one that lacks the skills to keep the business growing.
Making those first few hires can be difficult, so it is best to really take the time during the hiring process to figure out both the hard skills and soft skills needed to support your business. Remember too that these foundational employees will help to shape your company’s culture for years to come – so these decisions cannot be made lightly.
Don’t be afraid to break out from the norm here to find the people that will fit in with your startup. When the CEO of GateGuru, Dan Gellert, needed to make his first few hires, he adopted a rather non-traditional but highly effective recruiting strategy.
First, he looked within his own network to find people he knew he could trust – rather than hiring blindly.
Second, he used a more proactive interview process by presenting candidates with specific challenges and seeing how they would work through the problems. And finally, he talked at length about each individual’s goals and passions by asking them to explain their personal competitive advantage.
Thanks to this more unusual approach, Gellert was able to build a strong team that he says “fits together like a puzzle, and that’s been really helpful in getting the product to where it is today.”
Focus on Your Niche Markets
One of the greatest tips for long-term success is to actually think a little bit smaller. In order to survive in today’s startup world, you need to become a niche marketing expert. This is what will help you to compete against larger companies that seek to cater to massive audiences.
First of all, be sure to clearly define your niche market.
- What age groups, genders, and income brackets are going to be most interested in your products?
- What are their interests, goals, and motivators?
- Do they care more about the product’s appearance, quality, or price point?
It is best to think of a funnel when trying to narrow down your niche. Start at the top with the service or product you provide and then work your way down to see what niche audience pockets you really focus on.
Take the company Tipsy Elves for example. They wanted to start a clothing line, but since the market is so massive they decided to narrow down by selling Christmas and holiday sweaters. Then, the co-founders Nick Morton and Evan Mendelsohn got even more niche by creating humorous sweaters with creative designs that were sure to be a hit at holiday parties.
And clearly, this focus on smaller markets paid off. If you’re a fan of Shark Tank, you may recognize them as one of the most profitable investments ever made on the show.
The road to startup success is not going to be easy and straightforward.
There will certainly be many obstacles in your way that are nearly impossible to foresee. However, by keeping these tips in mind and planning ahead as much as possible, you can set your business up for success.