the first hurdle
The first hurdle every small business has to overcome is financial stability. A small business can’t grow without first achieving at least one steady stream of revenue.
Small businesses produce notoriously fluctuating income, especially in their first few years. That’s why it’s best to start a small business from a place of personal financial security (a best practice many of us ignore).
For those of us who aren’t starting with a big personal safety net, naturally the first thing we need to do is build one with our business. And for those who do have a personal safety net - the first step is still to create one in our business. The need just isn’t as dire.
In the first few years it’s important to keep both the customer experience and the company as simple as possible - easy to produce products and services, low overhead, great margins, scalable systems. This allows us to prove our concept and begin bringing in income to keep us (and employees) motivated as we prepare for future growth.
Essentially, the only thing we need to do in year 1 and year 2 of a small businesses is keep things as simple and cheap as possible and focus on establishing a reliable customer base.
Unlike our startup counterparts we don’t have venture capital to hire the best and brightest right away. We have to self-fund by building up a customer base that provides enough steady revenue to hire and grow without unmanageable risk. Starting a small business is a risky move, yes, but nothing else we do in a small business should ever carry that same amount of risk. Ideas should always be evaluated and planned carefully to avoid sinking the business.
Using the most simple, lean business model we can concoct is a surefire way to reach financial stability in Y1 or Y2. Once a stable income stream has been established, then it’s an okay time to start investing in business growth opportunities (all of which include some amount of risk).
From here, there’s just one major caveat. Don’t. Change. The. Business. Model.
The benefit of creating a reliable revenue stream is that it will always provide financial security as the business explores various opportunities for growth. You cannot fundamentally change the business method after the first few years without risking the loss of your initial customer base.