Starting a new business can be risky, but there are steps you can take from the outset to help ensure its resilience. In fact, building in resilience from the earliest stages can give your fledgling business a much better chance of not just surviving, but thriving.
As an entrepreneur, part of the thrill of starting a business is embracing the inherent risk. However, some of those risks can endanger even the most promising company. Even before the Covid-19 pandemic, fewer than half of UK start-ups made it beyond the five-year mark, with a fifth failing in the first year. So how can you build an armour of resilience to prepare for the unpredictable years ahead?
1. Create a community
Through market research, you’ve likely identified your target customer profile, as well as what they buy and how you’ll differentiate your offerings from those of your competitors. But don’t stop there. Building a sense of community can provide your business with a more enduring foundation than a purely transactional relationship.
Consider offering deals, discounts, free workshops, or other incentives to get early customers on your side. Ask customers to help beta-test your services or website. The aim is to involve your first customers and turn them into loyal champions who can stimulate word-of-mouth referrals.
2. Define your purpose
Corporate responsibility isn’t just for big corporations. Small businesses often have a social purpose too – from using sustainable materials, to supporting local charities. Define your values from the outset and make sure your customers know what they are. Research shows that businesses with a clearly articulated purpose perform better, particularly during tough times. During the pandemic, over half of consumers said they were more likely to buy from businesses sourcing products locally, and almost half said they favoured businesses supporting local charities.
3. Create a double budget
Running out of cash is the most common reason businesses fail. Avoid unpleasant surprises by creating two budgets at the outset: one for your realistic hopes for your trading year, and another that sets out how slower-than-anticipated trade would affect your cash flow. Consider how you would handle the second scenario and make contingencies as far as you can.
4. Anticipate shocks
Don’t limit your forward-thinking to sales; consider other potential hitches too. Covid-19 was an extreme example of an adverse event that disrupted many business models, but less seismic changes could also derail your plans, such as a key customer taking their business elsewhere or a vital supplier abruptly stopping trading. Sketch out a plan for each scenario and act now to defuse events that would be particularly paralysing, such as sourcing alternative suppliers. Building up savings from the outset can help you develop a back-up fund, so you’re in a stronger position if those shocks do occur. On the flipside, having money set aside means you’re in a better position to grab unexpected opportunities.
5. Do a trial run
Before you make the leap into your business, try a pilot – for example, through a simple website or a pop-up shop. This test can help you assess the market for your business and the strengths and weaknesses of your product. It’s also a way to assess your own skills and identify areas where you may need to enlist outside expertise. Learning these lessons in a lower-risk context will give your full launch the best possible chance of success.
If you’re ready to put these steps into action, you can apply for a new business account in minutes with HSBC Kinetic. As a sole trader or single director shareholder limited company, you can find out more at business.hsbc.uk, simply download the HSBC Kinetic app, and apply in minutes – with most accounts opened in 48 hours.
In summary, building resilience from the earliest stages can help your business survive and thrive. By creating a sense of community around your business, defining your purpose, creating a double budget, anticipating shocks, and doing a trial run, you can prepare your business for the challenges ahead. So take the time to plan wisely and build the resilience that your fledgling business needs to flourish in the years to come.