Rome wasn’t built in a day. The same can be said of businesses. In fact, businesspersons are given three years as the initial goal for survival—three years to build their small businesses from the ground up, or fold up before earning a cent.
Experienced owners of healthy franchise opportunities and other small businesses say that the first three years are the crucial ones for growth. As far as the restaurant industry is concerned, many restaurants close during its first year of operation. According to Christine Letchinger, an associate professor at Kendall College in Chicago, of the 60 percent of businesses that fail, 44 percent fail on the first year.
Although the timeline is three years, the chance of failure may decrease the longer the business stays. Still, getting through the first year is a challenge in itself. Business author Ann-Maree Moodie breaks down what a small business may encounter during this crunch period, in her article for The Age.
Reality checks often happen during the first year. Most business owners think they can handle the pressure but soon realize business management needed more energy than they thought.
“In the beginning, there is a belief that you can do anything. But reality hits at a point where there are too many responsibilities and areas where the lack of knowledge and experience of the business owner starts to show.”
Never expect success in the infancy stage of a business. Underestimating the responsibilities of a business owner is a common ingredient for failure.
The second year of business becomes less difficult, given that the brand would have strengthened its foothold in the market by that time. Entrepreneurs made it through the worst, but it’s not over yet. A business owner would have been burdened with “employing staff, creating a website, moving into new premises” during the first 24 months of operation, as well as “enjoying business growth and rising profit levels.”
The second year calls for a major change in plans. If the first year was about holding ground, the second year is about your counterattack.
Managing the business gets much easier on the third year. The company may be making money already, but a lot can still happen within that time. The country may enter another economic recession or federal shutdown. Stronger cyclones and natural disasters may batter vital supply lines.
For new entrepreneurs, franchising will make the first three years relatively easier to tackle than when you have to build your business from scratch. Franchise companies of a popular pizza franchise for sale or a hit frozen yogurt franchise will be more than happy to assist entrepreneurs in establishing and marketing their business.
(Article image and excerpt from “The secret to surviving your first three years,” The Age, August 24, 2009)