Every aspect of starting a company can be daunting, from the company formation process to understanding the market and staying financially sound. Here are our six golden rules to help you survive your first year in business.
Protect Your Cash Flow
Protecting your cash flow is probably the most important of these six golden rules.
However, your cash flow can become troublesome in the first few years of starting your own company. Therefore, running company credit checks on all suppliers and large customers can be the difference between the life and death of your new company.
Credit checks give you a firm understanding the financial situation of a company you’re considering doing business with. Also, they give some insight into the character and intentions of the directors. A company credit check will outline how a company has dealt with historic debts. It will also show whether the directors are on the board of any other, illegitimate companies.
Your cash flow is also vulnerable to internal changes. Making a change to your company that causes a mass exodus of customers is a lot more damaging when your company is new. It could be the difference between your company surviving or not.
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Keep a Pace That You Can Handle
You need to know your market well when you first start a company. Otherwise, it’s easy to make alterations to your product that don’t suit your customers’ needs. This can lead to you making further changes to rectify any issues. If you make multiple changes in a short time, it will be harder to identify exactly what caused an issue.
This could cause your business to spiral downward if you cannot work out what or why something hasn’t worked. If you then try and reverse the changes, you could cause customers to become even more dissatisfied. That’s because they may believe that you have stripped down your product, offering them less value.
Don’t Try and Wear All the Hats
Outsourcing after your company is somewhat established could deliver significant improvements in the long term. However, it might not be suitable to outsource when you’ve just started a company.
That’s because it is impossible to understand exactly what you are going to excel at when you first start up. Take time to review how well you complete tasks in your company. Do this not just from a performance perspective, but also look at how long tasks take. Your time is valuable and might be better spent in other areas. This exercise will help you to identify where it would be most beneficial to outsource.
Get to Know Your Customers Immediately
Understanding your customers and serving their needs well can be a reciprocal process. Better satisfying your customers comes with unforeseen benefits. What’s more, getting to know your customers is one of the six golden rules that will pay off big time. Happy customers are more likely to leave positive reviews of your company.
Before you even register your company, you must have a thorough understanding of who your customers are and what problem your product solves. Therefore, make sure there is no inconsistency between your product’s features and your customers’ needs.
Additionally, look at your competitors’ offerings and see what pain points their products solve. You are able to influence your customer experience and build a product or service which changes your customers’ lives. A good product serves a customer once. However, a great product can change their lives.
Moreover, understanding how your product delivers value to your customers is important. A successful product changes a person’s life in a positive way. You must understand how your business can achieve this.
Understand How You Differentiate from Your Competitors
Knowing exactly how you differentiate from your competitors is invaluable. It will mold the way in which you need to compete to be successful.
Acknowledging the strengths and weaknesses of your method of differentiation is also vital. It will have a great effect on your long-term business plan.
Keep in mind that competing on price is a lot less resilient than beating your competitors on quality. That’s because your competitors can simply change their price (even to their detriment) and beat your offering. However, if you aim at beating your competitors on quality you’re more likely to come out ahead in the long run.
See the Big Picture
Understanding how your company fits into the market should help you control how your business scales. Are your competitors owned by a parent company with deep pockets? In that case, scaling too quickly to try and compete can be dangerous. You may leave yourself overstretched.
This can lead you to be unable to adequately serve your market. As a new company, you will also have less lead time to work out where your weaknesses as a company lie. This could cause lasting, long-term damage to your brand if you let your customers down.
Take some time to build for the future. Recognizing the power of a strong brand is one of the key golden rules. Protecting your brand will help you in the long term. As Warren Buffett said, “”It takes 20 years to build a reputation and five minutes to ruin it.”
We understand how overwhelming starting a company can be. There is a lot of conflicting advice. Add to that the fear of the unknown when you’re first considering taking the plunge. By taking time to consider these 6 golden rules, you are giving your business the best chance of surviving and flourishing.
About the Author
Joe Hurst is the paid search manager for Company Formation MadeSimple by day and runs a digital marketing agency by night.