This article comes from Entrepreneur.
You have a great idea and the ambition — now what? As you start your own business, there are some things every entrepreneur needs to know to make it through that critical first year successfully. In my more than 30 years as a tech leader, entrepreneur and C-level corporate executive in public and private companies, here are three of the biggest lessons I’ve learned.
The number one reason entrepreneurs fail is that they don’t have customers who want to buy their product or service. With that in mind, your first year should be about finding communities of people who want to buy what you’re selling — or even just part of what you’re selling.
As you do, don’t assume that you need to create the perfect product or service before you locate your customer base. That will only hinder your momentum. Banish negative thinking along the lines of, “If I just get this piece right, then…” and instead remain laser-focused on the bigger question: “Am I able to find or generate enough interest to keep moving forward with my idea?”
One of the best ways to identify your base can be through paid channels like Google that maximize your exposure to consumers. Consider how businesses would open in malls because that’s where the foot traffic was, but today, all of that traffic is online. Once you locate your customers, you are in a strong starting position and you can turn to fine-tuning from there.
The other main reason that companies fail early on is that they run out of money, so managing your monthly cash flow and expenses is crucial during this window. Of course, the two go hand-in-hand: You want to be able to survive long enough to discover customers.
To set yourself up for viability, adopt a highly conservative approach. Start by implementing a good cash-flow management system to track the money going in and out and make sure you understand the difference between cash flow and profit. For example, even if you sell lots of your product to customers, that doesn’t necessarily mean you can pay your bills. If you sell, say, $50,000 worth of products on credit with 60-day terms, yet you ordered $35,000 worth of supplies to make those products and you have to pay your suppliers within 30 days — on top of rent and payroll — the math quickly becomes complicated, and you may not be able to keep the lights on.
Part of being conservative is also making calculated decisions — meaning, don’t overhire talent until you determine how you’re going to locate your customer base, make money and be attractive to investors. Keeping a sharp eye on all of this is essential to opening up growth opportunities.
During the first year of founding a new company, there is always some reason to panic or have an existential crisis. Maybe your new product turns out not to have the take rate you expected, or someone who you feel is critical to the team quits, or you miss your revenue numbers because of an unexpected expense, or unforeseen competition enters the market — the list can feel endless.
All of these scenarios are serious, but rest assured that they are typical and can be navigated gracefully. The solution is often just to stay calm (I personally find that meditation helps me avoid becoming wound up and stay attuned to what’s going on around me), listen to your instincts and do the next right thing. If you do that, the path forward will start to reveal itself.
By deploying these tactics, entrepreneurs can navigate some of the more common challenges that will surely arise during the first — and arguably the toughest — year while staying focused on what matters most for success.
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