Congratulations! If you’re reading this article, the chances are that you have already done something amazing by surviving the first year of running your own business. If it doesn’t seem like a huge achievement, bear in mind that crucial first year is regarded by Forbes magazine as the toughest year to survive. It may have felt like you lacked experience at times, were simply treading water rather than making a living, and maybe you even had the odd night or six where you had to survive on a pot of noodles for dinner in order to survive, but you made it!
If you are one of the business owners who has managed to achieve this impressive feat, pat yourself on the back, grab an extra large celebratory portion of those noodles, and then get back to the hard graft. After all, the second year of business brings with it an entirely new set of challenges. Avoiding the threat of the second year blues is all about overcoming the challenges of continuing to grow your business whilst consolidating your current client base.
Balancing The Old And The New
After your first year in business, you will – in all likelihood – possess your first batch of clients. This initial batch of clients may not have hit your books as a result of your very best negotiations, and you may not have the most amazing deals ever in terms of margin, but retaining those clients during your second year is crucial.
The Harvard Business Review has an excellent guide to the pros and cons of retaining clients but the real figure worth bearing in mind is that winning new business is somewhere between 5 and 25 times more expensive than retaining current clients.
If you are to expand whilst keeping intact the important relationships developed with your first-year clients, it is crucial to ensure that you have enough time and resources to devote to everyone, old and new. This will help reassure your old clients that you still have that personal touch that no doubt won you the business in the first place, whilst still allowing for the energy needed to seek out new contacts. It might be worth investing in the monthly cost of a CRM tool such as Salesforce to help you with this most important of business juggling acts.
Financing That Growth
When you do start to expand, you may be sending out invoices on a monthly basis, but you may not be “cash rich”. In fact, you might start to feel that your current finances are constraining you in a way that is stopping you from expanding effectively.
In these instances, you might need to start thinking about how to balance the need for expansion with the financial security of your company.
Short-term boosts can come in the form of changing your payment terms to encourage quicker payments. If you’re looking for slightly longer-term help you could, of course, start to look at the idea of diluting your ownership by looking for new investors. Alternatively, or in addition to these actions, you could look for solutions that help you free up capital in the short term. There are plenty of options for small businesses needing immediate access to capital, but just make sure you look into the small print before committing in order to uncover any up-front fees or other Ts and Cs that might not be immediately obvious. If you decide to go for a loan, make sure you do your research and read loan reviews to see which service suits your needs. For instance, the lack of any up-front fee is a huge plus point of Kabbage, which specializes in lending money to those who have been in business for one year or more, making them a clear choice for business owners needing help with cash flow during their second year of trading.
Keeping The Faith
Of course, the most important aspect to avoiding the second year blues of being in business is making sure you have faith in yourself and learning from the challenges you encountered during your first year. It won’t always be an easy ride but you have already shown that you are better than around 50% of other entrepreneurs because you made it through the toughest year with your business still intact.
If you can draw from the strength this gives you, the chances are that you’ll be able to continue to expand and consolidate your business and look forward to fewer pots of noodles and much more steak and fries!