Whether you recently got your business up and running or you’re still in the planning phase, you’re likely wondering: How long will it take for my business to be successful? We can all picture the exceptionally quick rise of headline-grabbing companies, and while these stories may give entrepreneurs the notion that they can become a successful startup overnight, the reality is that it can take quite a bit of time.
Real talk: In most cases, it will take about four years to attain a real business and around seven to 10 years for a business to be successful. On top of that, more than half of startups fail before they reach their fifth year. That’s why the advice here is so important — we want to provide you a blueprint for profitability (and how to maintain it) no matter what type of business you have. What should you be doing with your business during its initial four-year window? Read on to find out.
What to Expect From Your Small Business in the First 4 Years
Creating a business can be accomplished relatively quickly, but creating a lasting business takes a significant amount of time. Research shows that only 40% of small businesses are profitable, so the more work you put into your business during its formative years, the better.
Of the small businesses that thrive, you’ll notice similarities during the first four years. Even though small businesses vary in size and room for growth, nearly every small business goes through similar stages during these years.
Whether you are forming a limited liability company (LLC), need help outlining a business model, or launching an e-commerce website, ZenBusiness has the services to help you start on the right foot. What should you expect during the first four years of the startup process, and what steps can you take to plan for a successful business?
Amazon is also one of the most viable platforms in the world, underpinning 45% of online spending in 2019 with a revenue of $47 billion per year.
During the first year, small business owners are overwhelmed with emotion in large part because of uncertainty. Roughly 20% of small businesses fail in the first year. So to ensure your survival, let’s understand why these small businesses fail.
Studies suggest that small businesses fail for a variety of reasons. A common reason for failure is a lack of need in the market. In fact, 42% of small businesses fail because they don’t find customers for their products or services. Even if you have the most amazing business idea, it’s essential to ensure a market need.
Following a lack of market need is a lack of capital. Nearly 30% of small business owners run out of cash and can’t continue their business venture. Even if a business is functioning with low funds, lack of capital can close the door for critical business functions.
Having the wrong team can be another reason for failure. Over 20% of small business owners cite the wrong team as the reason they closed their doors, meaning that you should prioritize finding the right people if you plan on expanding your business beyond just yourself.
This data is important in learning how to combat business failure. The lessons learned by others give us important insight into how small business owners can avoid growing pains and build a successful and lasting enterprise. Below are some steps you can take to protect your business from failing in the first year and beyond:
- Keep accurate accounting so that you are aware of your finances and startup costs. This includes staying on top of your business taxes and giving yourself enough time to file. Many businesses fail because they run out of money when it matters most. If you haven’t already, make financial tracking a priority!
- Make and follow a business plan. Even though there will be times where you might want to pivot your business plan, this plan must align with your overall goals and the functionality of your business. For some, this might mean creating a marketing plan with market research and establishing a business brand image (via channels like social media). Other businesses might focus heavily on developing a solid business strategy. In a perfect world, all small business owners should develop a business strategy and have a marketing plan. And no, your business isn’t too small to be coming up with plans and strategies. If anything, they’re more important right now as you get up and running.
- Avoid false promises. This goes for your business partners and customers. If you make a promise, make sure that you can deliver on it so that you are seen as trustworthy. As a new business owner, we know it’s tempting to say yes to everything, but a team that over-promises yet under-delivers won’t be in business for long. Know your limits.
- Build good business relationships, and appreciate your hardworking employees. Building your core team can set up your business for long-term success. Your staff is not only the face of your business but good business relationships between staff can improve day-to-day motivation.
When it comes to your second year, your biggest obstacle might be finances. The average small business requires $10,000 in startup capital, meaning you need to figure out ways to generate enough cash to keep your business afloat right away.
This is where your business planning and relations come into play. In your business’s early days, you should have created a business plan. This plan can help you reflect on your overall goals and reach out to investors. Ensure that you keep positive relationships, as this can help you when it comes time to find additional funding in the form of a business loan.
Besides focusing on your goals and reaching out to investors, a solid business plan can help solidify investors. In most cases, investors will want to see your business’s plans. They may want to see a market analysis, understand how your business is structured, and more.
As mentioned, a marketing plan is a proactive step that you can take in protecting your own business. In your second year of running your own business, a marketing plan that works is extremely important to creating a profitable business. Registering a domain name that correlates with your business name can also help you grow your online presence while advertising your business online can help you sell products or services through an online store or at your business location.
You’ve planned, found funding, and started executing. Now as year three rolls around, you may find that your venture into entrepreneurship is stable enough to become your full-time job. During this year, successful small businesses focus on growing their operations and extending their reach.
Once you’ve reached the third year, reevaluate your business practices. Your business practices should be sustainable and fixed toward growth in the coming years. By the time you’ve reached this point, you’ve overcome many obstacles and should keep up the momentum to really expand your business.
For instance, take the time to ask yourself:
- What is and isn’t working for my business?
- How can I improve my business’s cash flow?
- Should I expand my business?
- Is there anything I should change about my business structure?
If you’re unsure how to find the answers to these questions, start by examining each day— what went well and what didn’t? What can be improved? After re-evaluating your business, you might be ecstatic, while in other cases, you might not be able to continue as you were. However, staying proactive over your business finances allows you to pivot and adapt your strategy to build a lasting company.
Throughout all of this, remember that some of the most successful businesses started with turbulent beginnings before seeing the results of their hard work. In fact, Airbnb struggled and tried to launch two times before it finally took off. It wasn’t until Airbnb had enough capital from Sequoia Capital that the company could start building the innovative business that we know today.
In most cases, companies tend to find success from the fourth year onward for various reasons, including solid brand image, efficient team management, and an expanding customer base. These aspects of a business take time to grow and don’t usually manifest overnight. Instead, they take hard work and planning along the way.
As an aspiring small business owner, there will be many obstacles that you’ll face in your first four years of business. To help you picture this, think of a small business you probably see all the time in your community: two mechanics starting an LLC together.
- During the first year, these new business owners would need to keep accurate accounting notes, create a solid business plan, and build relationships with potential clients or else risk facing massive uncertainty and little demand for their services.
- In the second year, they would likely have to make sure they have enough money to keep afloat, whether that’s by refining and executing a marketing strategy or seeking out financial assistance in the form of grants, loans, or other fundraising.
- The following year, these mechanics would need to look at the data on the books and experience gathered so far to reevaluate their business and see if any shortcomings need to be addressed in order to get ahead of what may hurt the business and invest more in what’s helping it.
- And if they make it to the fourth year, these business owners should continue to monitor what is and isn’t working for their business, as revising your plans and being flexible are key for lasting success.
What do I need to do to start a business?
Now that you know what to expect during the first few years of owning a small business, it’s time to put this into action. We’ve compiled a short list of essential steps you should take as a small business owner to build a thriving enterprise:
- Come up with your business plan. Create a well-thought-out business plan early on. This should provide essential details to potential customers, employees, and lenders. A business plan should help your business’s management make critical decisions and prove to the outside world that you have a legitimate company. For example, if you need an investor, a well-executed business plan can help you get investor support.
- Register your business. You will need to register your business with your state. This process can take anywhere from a few days to a few weeks.
- Create a website. As a business owner, you should register a domain name for your company. In today’s world, establishing an online presence is essential to promoting and adding legitimacy to your business. It’s important to register your domain name early on to protect your business name from someone else purchasing it before you have a chance.
- Obtain funding. There are a number of funding resources, such as a government or private business loan, that you can use to start your business. As discussed, it’s essential to have the right amount of capital to start your business.
Start Your Business Today
Starting your own small business is a risk, but one with exciting possibilities and unparalleled rewards. As an aspiring small business owner, the future may seem intimidating. But by combining the passion you have for your idea with the right team of experts, you can rest assured that some of the major paperwork and state compliance issues are covered. That’s where we come in.
At ZenBusiness, we’ve been in your shoes. That’s why we’ve dedicated our business to helping others start, run, and grow their businesses. We know that starting your own business takes courage, especially in the early days, which is why we’re here to help you along this journey. Whether you need assistance filing paperwork for your business or are searching for helpful guides, we’re here to offer expert support.