Starting a company is not as simple as it might seem. Some people start companies oblivious of how tasking it will be. Over 300 million new companies are started worldwide annually. It is said that over 95 percent of businesses fail in 5 or fewer years of operation. There is risk involved. Like Chris Hadfield once said, “Almost everything worthwhile carries with it some sort of risk, whether it is starting a new business, getting married, or flying into space”. You must know that in starting a company, there will be hurdles. They will start and may even be intense in the early days. Here are three some of the important things to be aware of in the early months of starting a company:
Money Tends To Start Off Hectic
The tightness of money will often be a common occurrence when starting a company. The degrees will vary given the type of company and or circumstances. When starting out, there usually is high demand for money. Many ideas never even take off due to a lack of startup capital. It is that important. Thus running out of money will often occur. When starting a company, you should expect this. It is almost normal that money will get tight sometimes.
“Depleting funds without being replenished is the number one cause of business failure.”
– Pooja Agnihotri
Depletion of funds is largely inevitable. The most important element is that you should plan for it. Roughly over 80 percent of businesses fail because of cash flow challenges. At the core of that is the tightness of money. The fact that many businesses fail because of that means cash flow challenges is a common phenomenon. That is why you should anticipate it. To set yourself apart and not fail, you a better buffer against it. That is why you should appreciate the different strategies you can use to raise capital.
Things Will Often Go South
So many people have the misconception that starting a company should be smooth. They feel that it should be automatic as long as they have the business idea figured out. Well, that is seldom the case. So many things will not go according to plan. In other words, in the early days of starting a company, many things will likely go wrong. This is something that should not even surprise you.
“The real test is not whether you avoid this failure because you will not. It is whether you let it harden or shame you into inaction, or whether you learn from it; whether you choose to persevere.” – Barack Obama
Lots of trial and error may be necessary during those early days. It is like a building construction job; it is messy initially. The same goes for starting a company. The high likelihood of things going south should be good for you. One, it will condition your readiness to deal with whatever will come. Two, it will prime you to be agile and innovative – both skills that will be useful moving forward.
Anticipate High Employee Turnover
This is something that may not affect everyone at the same stages. For instance, some people, when starting a company, may ride solo for quite a while. For some, the need to employ people may be needed from the onset. Thus you can take this employee turnover aspect literally or figuratively. You should know that wide-ranging stakeholders and even shareholders may abandon you in the early days. High employee turnover should come as no surprise. It costs a lot to both recruit and retain employees. Unfortunately, money will often be tight during the early days of starting your company.
“Employees who feel a sense of belonging tend to stay engaged, productive and are far less likely to leave than those who feel excluded. So if you want your good employees to stay, invest in belongingness” – Abam Mambo.
By the way, how do you know whether or not your employee turnover is too high? Well, if your turnover rate exceeds 10 percent that becomes too high. (Employee turnover rate = the number of leavers divided by the average number of employees over a period of time, e.g. a month; then you express that as a percentage). There are many reasons why employees will leave a lot during the early days. For one, they may feel your company may not amount to anything. They may feel overworked, underpaid, and even lost due to unstructured job descriptions. These are all dynamics that will be replete during the early days. Anticipate and remedy high employee turnover in the early days; it is inevitable.
If you are ever going to start a company or are already starting one, bear these things in mind. The extent and how long you will grapple with these issues varies. For some, it may just be for a few months. For others, it may be for a couple of years. The good thing is that we can anticipate and prepare for these three dynamics we discussed. Now that you know, you are better positioned to sail through more equipped.