Did you know that, on average, nearly 50 percent of all small businesses will fold before hitting the five-year mark? But don’t be discouraged — avoiding three common mistakes can help you beat these odds so that your small business will grow and thrive in the long term.
I’ve learned what it takes for small-business owners to succeed by getting to know some of our nation’s most exciting entrepreneurs — winners of the FedEx Small Business Grant Contest, like Ryan Lane, founder of Dream Beard.
We started the FedEx grant program because we truly believe in the power of small businesses like Lane’s to make the world a better place. Small businesses are the backbone of our economy, and we’ve seen how much they contribute to the quality of life in the communities where we live and work. That’s why we’re dedicated to helping these business owners succeed — since 2013, we’ve awarded more than $275,000 in grants to these passionate, energetic entrepreneurs.
According to the grant winners we’ve met over the years, there are three critical mistakes you should avoid when you’re starting out:
Mistake #1: Not Planning for the Long Term
Short-term goals keep you on track day to day, but are you setting aside enough time to map out your long-term goals and plan for your business’s future?
Lane says that scheduling regular planning sessions is essential to long-term success. He should know: in just a few short years, he’s transformed the company he started in his father-in-law’s basement into a global powerhouse with worldwide distribution in 80 countries.
Lane explains that his company’s growth is fueled by the time he dedicates to long-term planning. That’s when develops ideas for new product lines, packaging concepts and sales channels — and it’s also when he maps out how he’ll bring those ideas to life.
For example, before his peak sales season hits during the Christmas holidays, Lane sets aside time to plan for the following year. Then he’s ready to execute on those plans after the holiday rush is over.
“We try to prepare for the coming year six months out,” he explains. “That makes everything less stressful.”
While it’s important to schedule time to set goals and explore new concepts, great ideas can arise any time, Lane says. That’s why recommends making sure you’re ready when inspiration strikes.
“It all starts by writing down cool ideas when you have them throughout the year,” he says. “Find those little moments that inspire you, and when you have a thought, capture it in some way.”
Mistake #2: Not Planning for the Worst
Another mistake too many startups make is neglecting to plan for the worst-case scenarios.
Money was tight when FedEx grant winner Fat Toad Farm was looking to expand their small business selling traditional goat’s milk caramel. Then a flood nearly destroyed the brand-new business. That’s why Judith Irving, the founder and partner of Fat Toad Farm, says it’s always better to be safe than sorry when your business is on the line.
“We live on a hill in rural Vermont and rent warehouse space for our sugar, cardboard packaging and caramel inventory,” she says. “The warehouse is by a river, but it’s also in a space designated as a 100-year floodplain. A lot of things can happen here, but a flood? Not so likely — and flood insurance was expensive. The day that Hurricane Irene hit, the paperwork for flood insurance was still sitting on my husband’s desk. That thing we thought couldn’t happen to us had just wiped out the warehouse and most of what we had in it.”
Fat Toad Farm recovered with the help of state flood relief funds and is thriving today, having learned the hard way to expect the best and prepare for the worst. But some small-business owners make the opposite mistake: erring too much on the side of caution.
Mistake #3: Being Afraid to Take Risks
When you’re putting your heart and soul into building a business, your instinct may be to play it safe. But if you let fear of failing keep you from taking risks, you could miss growth opportunities that can keep your business healthy in the long run.
Anne Hed, CEO of HED Cycling, is a big believer in taking risks on new ideas. Her company, which manufactures premium quality bicycle wheels and components, is more than three decades old. The secret to HED’s success to staying competitive over the years? A drive to keep innovating — and being willing to try out new ideas that may or may not work.
“You have to realize that, to keep the company growing and moving forward, you’re going to fail — you’re going to fail a lot,” Hed says. “You have to get scared, and get out of your comfort zone or you’ll never evolve your company. You’ll fail, but you have to fail forward — fail because you tried something new, not because you stopped thinking or trying.”
Ryan Lane of Dream Beard agrees that it’s essential to keep innovating and experiment with new ideas; his reason is to stay relevant to his customers.
“We’re about to go past the five-year mark, so we’re no longer in the ‘buzz’ phase,” he explains. “We’re not a new company anymore, but, as the business matures, we don’t want to become old and boring, either.”
So these grant winners agree how to avoid the pitfalls common to new businesses: Never stop thinking about what’s around the corner, be sure to expect the best but plan for the worst, and be fearless about taking risks and embracing the possibility of failure. This is all great advice for entrepreneurs looking to beat the odds and see their businesses make it to the five-year mark and beyond.
Want more great advice from small-business owners about building a foundation for long-term success? Read “Your First 5 Years: What Small-Business Owners Need to Survive.”