Gauging business success after the first year


Date: 26 September 2018

Gauging business success after the first yearWhen a football manager takes control of a new club and sees an instant upturn in results, it is often referred to as a honeymoon period. The board congratulate themselves for making such an insightful appointment, with the apparent effortlessness of the change in fortunes convincing fans that the good times will last forever.

Of course, the nature of a honeymoon period makes it finite, but it is useful for establishing positive relations at the club.

There are no such luxuries in business. For new businesses, the first year will be the most difficult. Yet, a business that survives the first year can then go from strength to strength. The end of the first year is the ideal time to sit down and consider the strengths of the business.

Identifying success

There is nothing to gain from being self-deprecating when assessing your business. A lack of assurance in the business' ethos will create space for competitors to muscle in. This is evidenced by recent news detailing how 2017 saw a record number of start-up companies in the UK, with nearly 700,000 new businesses established.

This is why it is imperative for business owners to reflect on the successes at the end of the first year to create the confidence to fend off competition.No matter how stressful the year may have been, there will be progress and achievements to celebrate.

Identifying this is not just important for maintaining high morale, but it also has a clear practical use in informing future business strategy. Perhaps one product outperformed expectations, or perhaps a marketing technique proved particularly lucrative. Finding these areas of success can help guide the business towards subsequent accomplishments.

However, it is not sufficient to merely identify success. It is critical to analyse the causes of this progression. Just because something worked once does not necessarily mean it will work again. Finding the root of your success will inform how to tinker with variables to fit the circumstances that lie ahead.

Successes are not always massive moments that cause people to punch the air with exuberance. Something like surviving a particularly tumultuous week may seem incidental at the time, but upon reflection at the end of the year it can be championed as an example of resilience and adaptability.

Making business connections is another advancement that may go unnoticed at the time, but forming and developing partnerships that will prove rewarding in the months ahead is another cause for celebration. Developing a business is a never-ending process, so take the time to listen to advice from those who have been there before.

Identifying weaknesses

Just as it is vital to not get swept up in any successes, it is important to not get bogged down in areas of weakness. Running a business should be a process of constant self-evaluation, but the milestone of a year is the perfect time to take a step back and consider the business in a wider context.

After a year, your business has survived an entire calendar cycle. It is now possible to gauge how business rises and falls as the seasons change. If something has gone wrong at any time, then that is part of the formative process of learning how to be effective in business.

Identifying why something happened and how to avoid the event happening again is essential in the hunt for profit. In forex, traders are encouraged to consider the margin call as a necessary wake-up call to avoid complacency, with lessons learned from the mistake pivotal to securing future profit.

As in trading, there are always going to be close calls in business, but it is vital to reflect upon how small changes in strategy can ensure that those close calls fall in your favour. Sometimes mistakes only reveal themselves when looking at the big picture, with a year giving owners the chance to really understand their business.

Not all weaknesses should be treated equally, however. A failure to rigidly stick to the business plan made at the business' conception should not be considered as careless if you can identify and rationalise exactly why certain decisions were made. Grossly overshooting your budget in one area or another is more problematic.

That doesn't have to be a devastating blow to the business' future, but it dictates that some difficult budgetary decisions will lie ahead if the business is to continue.

Planning for the future

Even if the evaluation at the end of the year reveals more successes than failures, it is not the time to rest on laurels. Likewise, if there are more weaknesses than strengths, then it doesn't have to be the end.

Plan for the next year, or maybe just the next six months if there are still teething problems. Teething problems can last for a few years when starting a new business. Don't let that discourage you; acknowledging issues and developing long-term strategies to combat them takes time.

Too many people are quick to pander to the false, yet widely propagated, declaration that 90% of new businesses fail within the first year. A year is a long time in most walks of life, but in business it is the patterns across five or ten years that are most revealing.

Businesses need time if they are to flourish. Use a tough first year not as a reason to stop, but as guidance for the next year. Setting targets can be tricky. Low targets can breed complacency, while high targets can inhibit motivation. Analyse trends across the year and consult with expert opinions to form realistic goals.

Looking back at your initial goals is also useful in this process; were your goals from last year too low, too high or just right? If they were suitable, then set goals that are a natural progression from the previous year.

All the hopes and fears that existed when starting the business will remain even after a year of trade. But, after a year, business owners will have learnt a great deal about their company and about themselves. A year-old business may still be in its infancy, but it is strong to have survived. Evaluating strengths and weaknesses from the previous year can turn surviving into thriving in the years ahead.

Copyright 2018. Article was made possible by site supporter Robert Davies, freelance writer