With SMEs accounting for 99 per cent of all businesses and 33 per cent of employment, Britain is undoubtedly a hub for entrepreneurship. In fact, 800,000 new companies were registered in the first year of the pandemic alone.
However, despite this widespread optimism and burgeoning talent pool, nearly 9 in 10 start-ups end up failing. Now, with the cost-of-living crisis escalating and amid a backdrop of soaring inflation and supply chain issues, SMEs are facing an even bleaker reality.
According to Lloyds Banking Group, business confidence has already dropped to just 33 per cent this year – the biggest fall since the first 2 months of the pandemic. Moreover, with the Office for National Statistics (ONS) finding that 24 per cent of businesses saw a drop in their turnover in June compared to the previous month, it is easy to see why so many SMEs are struggling to envision a path to success.
So, how can SMEs survive and thrive the first year in business amid the ongoing market turmoil?
Start selling … quickly!
The biggest mistake business leaders make in their first year is focusing too much on perfecting their offering and not focusing on driving forward delivery with the product and/or service they already have.
The mind of an entrepreneur is programmed to overthink every detail and constantly work on improving their perception among potential customers. However, often they forget to take stock of what is right in front of them and, equally, they are not aware that what looks perfect to them isn’t what looks perfect to the client.
If you have a minimum viable product (MVP) ready to go, then what is stopping you. This is usually enough to attract a first wave of clients, so act at pace and start selling. This will get you off the ground, but, most importantly, this then allows you test the market in real time. The crux of the matter is to bring your business to the market as fast as you can, so you can get you the information you need to make the best decision for the business to move forward. Standing still on the start line debating ‘what if’s’, is not going help your business take off.
Forget about profit
Simply put, in order to survive the first year in business, SMEs need to forget about profit entirely. Instead focus on directing any disposable income into the correct marketing channels and establishing cash flow.
If 80 per cent of your business is coming from ‘marketing channel one’, concentrate all your efforts into that one area and set other marketing channels aside for now. This will vary from industry to industry, but as an example, if you spend $1 on TikTok adverts and it is consistently giving you $2 back, you need to understand that you now have a sales printing machine!
Taking advantage of this whilst you can is paramount as this channel and flow of sales will not last forever. Our growth at The Clinic Room doubled month on month from the very beginning by applying this very same principal.
Learn to say ‘no’
In order to set your business up for success in the first year, you need to learn to say ‘no’ to all your other great ideas. Opening up a variety of different product lines or services too quickly only leads to loss of focus. Entrepreneurs have an extremely bad habit of trying to expand too quickly, and into diverse markets, which almost always causes a fracture in their primary business or product line – ultimately leading to a decline in sales and an overall downtrend in business growth.
Instead, focus your attention on one idea, and developing that idea extremely well. Saying ‘no’ and putting other ideas aside for the time being is the best thing you can do to help you and your business thrive in the first 12-months.
You can have the best business idea, strategy, and game plan, but unless you put concerted time and effort in building your network, you run the risk of the market demand dwindling.
The key to remember here is that offline is just as important as online. An engaging website is a great start as a base to direct people to. However, connecting with individuals and businesses in person and putting a face to your name/brand is invaluable. Consider joining local business groups and attending events to boost your profile and learn from the wider business community. Stakeholder engagement is equally crucial, helping to identify new target markets, opportunities for growth and even mitigating potential pitfalls.
Setting up a business is no easy feat and the first year has always been the make and break for SMEs. However, amid an extremely challenging economic landscape, the steps entrepreneurs take now to stay afloat and on track with growth projection pathways is more important than ever.
Profits will come with time, but they are not the be all and end all in the first 12-months – there are other priorities to conquer first. Therefore, make sure you are prepared to operate amid tight margins, in order to set yourself up for future success.
While three-quarters of SMEs now see the cost-of-living crisis as the biggest threat to their survival, the long in the short is that they are essential to the economic revival of the nation. Therefore, it is vital that we inject a wave of optimism into the sector and support as many entrepreneurs and business leaders not only to survive, but also to thrive, in their first year of business.