How to Help Small Businesses Survive Year One and Why It’s Good for Your Business Too

The first year of success for any business is a significant accomplishment, but for small businesses, even surviving is something to be celebrated. As I’ve stated before, our economy depends on small businesses, which account for 44% of the U.S. economy and more than two-thirds of new jobs.

The creation and healthy survival of small businesses truly drive competition and innovation around the world.

Unfortunately, approximately 20% of small businesses fail in their first year. Why? It most often has to do with founders not being prepared — not having business training, not knowing how to run a business, not understanding finance and accounting, and not having clarity about the services or products they will offer.

How small businesses usually launch

Generally, people have a small business idea and try to sell it to family or friends — sometimes for moral support and sometimes because they need funding. Then they sign a lease for office or shop space too soon, without considering non-lease options.

A hairstylist may open a salon because they’re not happy working for someone else, or a dentist will open their own practice after working at a large practice for a time. Both make huge investments in space and equipment. These people may be very good at their craft, but they often don’t know how to run the business side of being a business owner.

If a small business owner isn’t interested in running their business, they won’t succeed. It’s that simple — and that hard. What they need is for the business part of having their own business to be simplified. And that’s something fintech platforms can help them with.

The first-year learning curve

Most small business owners didn’t go to business school, and they need all the help they can get from the financial services they use, including banks and platforms. These entrepreneurs often learn on the fly what people should be taught in high school but aren’t. Those who studied business or received on-the-job training for running a business have a head-start on those who didn’t and will avoid many common problems.

Typical first-year problems caused by a lack of business training include:

●      Confusion regarding cash flow versus sales

●      Difficulty in managing expenses

●      Not keeping proper business records

●      Being unclear on what needs to be tracked

●      Not understanding the difference between income and profit and what tracking and math are required to calculate them

Unfortunately, most new business owners don’t know their cash flow needs because they are not tracking the right things, which leaves them in a poor position to plan for their future. You must know exactly what you have and what you need before you can strategize for healthy growth.

Surviving comes before thriving

People often talk about businesses thriving or what they can do to succeed, but there needs to be more attention paid to just plain survival. Too many good business ideas die because of a simple lack of business and financial knowledge. Those first couple of years, which are usually filled with numerous struggles and hurdles, are crucial for later success.

Good record-keeping makes a solid base for any business.

Keeping detailed financial records is a key component to building a successful business, and it must start at the very beginning — before a lease is signed or the first sale is made. There is no other way to make investments for growth or to understand weaknesses that must be addressed.

Fintech platforms can be the heroes

To have the opportunity to grow in its second year, a business must survive the first. Logic dictates that the organizations with the greatest opportunity to help businesses accomplish that survival are the common fintech platforms most small businesses depend on today.

Tools that can help small businesses track and manage their finances can easily be added to a bank or fintech platform with APIs and fully baked, white-labeled SDKs.

With Tight’s API — which can be leveraged to seamlessly embed white-labeled accounting tools — business owners can manage invoicing, financial reporting, business expense tracking, and much more. Most importantly, business owners can have ongoing clarity about their cash flow without devoting hours of time to adding up receipts and sales slips.

When small businesses and the ideas behind them survive their first year and go on to thrive, we all profit in some way from what they contribute to innovation and the economy. We all reap the benefits, and we all — especially the businesses that provide services to them — should ensure we do all we can to see small businesses survive year one.