20 Success Principles to Survive the First Five Years in Business

Posted on March 3, 2008 by David Gass 6 Comments

What if you could sit down with a group of entrepreneurs who have created multi-million dollar organizations, successful one-person operations, and even failed several times before being successful? What would you ask them? What would you want them to share with you?

There have been millions if not billions of successful and unsuccessful entrepreneurs over the years. There are just as many lessons to be learned from the unsuccessful as there are from the successful ones. Some of the most intelligent people in American history believed there were just as many lessons in failure as there was in success. Take Thomas Edison for example.

Thomas Edison was a firm believer in the importance of failure. Failure was what led him to success. Once, when he was working on developing a better battery, a discouraged assistant came up to him and suggested that Mr. Edison must be ready to quit after having performed some 50,000 tests without success. “You must be pretty downhearted with the lack of progress”, the assistant said. Edison replied, “Downhearted? We’ve made a lot of progress. At least we know 50,000 things that won’t work!” In the end he developed a nickel-iron alkaline battery that became an industry standard and is still used today-more than 90 years later!

If Edison had let the 50,000 failures let him down, we might not have that battery today. It took more than 2,000 tests to find the right filament for the light bulb. We all use the light bulb; imagine if Edison had given up because it was too hard? We might still be reading by candlelight!

For the last ten years I have gathered together lists, advice, lessons learned and more from my experience of staring businesses, those of friends that have started businesses and from consultants and advisors I have paid a lot of money to. I recently took the compilation of information and developed my own list of 20 Success Principles to Survive the First Five Years in Business.

So here is the list:

1. Take time to work on your business and not just in your business. Recognize the difference between tactical and strategic tasks.
2. Have P.R.I.D.E. in your work. When you spend time working in or on your business you need to focus on the right priorities. Tasks should be completed based on the PRIDE acronym. You and your employees should focus their time on tasks that first produce Profits; second, Revenue; third, Increase quality of your products and/or services; fourth, Decrease expenses and last Everything else.
3. Use Leverage. My acronym to remember this is T.I.M.E. Leverage your time by using Other Peoples (Time, Intellect, Money and Experience).
4. Choose the right business for you. Don’t waste time running a business you hate.
5. Develop a complete plan for your business. This isn’t to say it has to be a professionally written business plan with all the bells and whistles. You can simply write down exactly what you want the business to do, be and have within a specific period of time and then an action plan to get there. The action plan is going to consistently change and those able to adapt to the change will be successful.
6. Have sufficient capital. Start the business with access to more capital than you think you need. Access to capital can include cash, trade credit, investors and/or credit lines.
7. Think BIG. Why spend so much time creating a business that is just barely enough to cover your monthly expenses? Think BIG and get what you have always dreamed of. We have to be doing this for a reason.
8. Separate you from the business. Incorporate your company as either a LLC or Corporation and start to separate your personal and business life.
9. Create a separate business credit profile. This will protect your personal credit and continue to separate you from the business.
10. Develop a well-researched and thought out marketing plan. Know how you are going to get your customers when you open your doors for the first time, to when you are five years old.
11. Compliance. Stay in compliance with all local, state and federal agencies. File your tax returns, maintain a business license and file all annual lists with the state.
12. Spend the money for custom lawyer prepared contracts and agreements. Don’t use the template documents.
13. Manage your money, time and energy. To lose any of these three items because you weren’t prepared is foolish.
14. Prepare financial statements. Have a P&L (Profit and Loss Statement), Balance Sheet and Cash Flow Statement for your business and individually.
15. Understand how to read your financial statements and use them to improve your cash flow.
16. Use metrics. Have a maximum of 4-5 key measurements for the company that track how the business is doing. These metrics should be something you can put together and see daily and be able to react to with a plan if they fall below pre-determined levels.
17. Have accountability measurements in place. As you bring on employees, they need to know how they are being measured for success and be able to see the results often.
18. Manage your clients and prospects. Use a database management system to track your clients and prospects and communicate with them often.
19. Have a good team and support system.
20. Know your exit. Know before you start a business how you are going to get out of it.

If you have experience in starting, growing and exiting a business please provide your insight in our comments area.