Ann Marie Puig discusses a few of the challenges entrepreneurs face in the first year of a business
Date : May 19, 2022 By
Opening a company is a complicated task. Even with a great product or service idea and an efficient business model, you need to face a series of difficulties to overcome the first year of operation, a period in which many ventures fail. Ann Marie Puig, a global business consultant, shares some of the most common challenges businesses face in their first year and how to overcome them.
The main challenge of the first year of a business is faced on the financial side. At first, the entrepreneur must take into account the concept of survival, not profitability. The income earned during the first year is rarely enough to recover the initial capital.
Without being able to extract from the company the resources to pay the bills and daily commitments, the entrepreneur must have a previous capital, enough to maintain himself without the income of the business.
Make projections for working capital for three, six, and twelve months, and review them throughout the year to compare it to your current budget and adjust strategies as needed. To overcome the challenge of the first year, it is also essential to choose the segment of action (industry, commerce or service) and study well the market and the competition that you are going to face.
Your company will only be able to pass the first year if you respect some management principles, such as staying true to the mission and organizational culture of the business, having an efficient business model and income, etc. But that won’t be enough to get to the second year if the organization doesn’t have credibility in the market.
“When you launched a new company,” explains Puig, “expect to see the challenge of persuading people to take you seriously, even if the concept of the business seemed very good to be true. The response is first to deliver what the customer wants and only accept payment when they are happy.”
Another big challenge is learning how to reconcile the new business with the family. It may seem like an anecdote, but one of the main causes of the suspension of payments is the difficulty of reconciling time for family activities with the dedication that a new business demands. A dispute in which, usually, the entrepreneur ends up prioritizing the family (or divorce).
To avoid this problem, make your family aware of the difficulties that will come. Always set aside some moments during the week to dedicate yourself to the activities that will make everyone happy.
Starting a new project brings economic, commercial, operational, tax and innovation challenges. Identifying and treating them properly make the difference from those who manage to consolidate their business to those who do not manage to pass the first years of activity.
Entrepreneurship requires commitment and effort, business instability during the pandemic motivated people to consider creating their own business as an option to generate financial resources. First, they must have a structured and robust business plan capable of guiding the development of the project in its different stages.
Identifying the characteristics – value proposition, cost of production, materials and equipment required to produce it – are what really defines a business and its likelihood of success. One of the most recurrent mistakes among those who start their business is the lack of clarity regarding the product or service they are going to offer to the market.
When starting a company, usually the economic budget to run it is limited. The lack of capital restricts some decisions, so you have to be very careful in how to prioritize expenses. To start, set up and develop a business requires an investment of money. The ventures during the first years are exposed to certain credit restrictions, the banks are conservative when it comes to granting loans, so it can be an alternative to raise funds in other ways, such as private equity funds.