4 decisions you’ll face in the first year of a new business

By Michael Deane

The math is clear: 20% of businesses are doomed to fail in their first year.

Although this doesn’t seem like much as a great majority of them survive, it’s important to do everything you can to avoid becoming the part of this statistic.

In this article, we’ll discuss some of the most important decisions you’ll have to make as a new entrepreneur to help you keep your business afloat during this turbulent period.

-What is the right business structure to choose?

There are several ways to set up your business, and the decision you make will play an important role when it comes to your liability, ownership, and other legal issues that may arise.

Besides that, the business structure will have an impact on your day-to-day business activities, taxes, and operations.

That’s why you need to choose wisely and opt for the one that will offer you legal protection as well as benefits.

—A sole proprietorship is a structure that gives you complete control over your business. However, as your business assets and liabilities aren’t separate from your personal ones, you will be held responsible for any debts and obligations incurred by the business.

—A partnership is a good option if you want to start a business with a friend or a family member. You’ll be sharing any profits, losses, and responsibilities, but you’ll also be affected by potential wrong decisions made by your partner.

A limited liability company (LLC) can be a great choice if you want to keep your personal assets protected from any business liability. Also, it allows you to avoid double taxation. All this means that an LLC offers the right balance of control and protection

—A corporation comes with the least amount of personal liability as it’s a legal entity separate from its owners. Other advantages of opting for a corporation include avoiding double taxation as well as having a higher likelihood of obtaining funding.

– How should you run your finances?

Poor cash flow management is the no.1 reason why 82% of all businesses go under.

As an entrepreneur, you don’t have to be an expert in finances, but it’s essential that you are familiar with the basics, as that will keep you on the right track.

For example, many people never separate their personal and business bank accounts, which can lead to a number of issues and prevent them from keeping track of their incomes and expenses properly.

Even if you’re a sole proprietor of your business, good financial hygiene is of crucial importance for easy bookkeeping and protection of your personal assets.

It’s even more important if you’re running an LLC, partnership, or corporation. If your personal and business finances are tangled up, it would be hard, and even legally impossible, to distinguish from you as a business owner and you as a private citizen.

In a nutshell, if a client sues your company, your personal assets will be at stake. So, separating your business and personal finances should be among the first decisions that you make.

– Should you expand or keep your business small?

Once your new business starts thriving and bringing more revenue, you’ll find yourself at the crossroads – should you keep things as they are or expand your operations? There are different pros and cons for either of these paths, and you need to analyze everything properly before you make this important decision.

Keeping the status quo can seem like a good idea if you want to stay in your newly established comfort zone. It’s less risky and allows you to stay on top of your day-to-day business operations without too much effort. On the other hand, growing your business and becoming an important player in your industry has its own benefits, and one of them is generating significantly more revenue.

But, for this not to turn into a bite-off-more-than-you-can-chew situation, you need to be very careful as this new situation will require you to either partner up with another company, or hire new employees, as well as penetrate unfamiliar or foreign markets. Having a proper business plan and some quality assurance strategies in place will help you stay on solid ground.

– Should you outsource or hire in-house?

When you start your small business, you’ll probably be capable of handling a great deal of the workload on your own, or with the help of your family and friends. But, once your company takes off and lands more customers, you’ll have to delegate some of the responsibilities, which means that you’ll have to either outsource or hire in-house.

If you decide to outsource, you can save a lot of money, as not having someone on your payroll means fewer employment taxes. Besides, you’ll pay these contractors per task or project.

However, having an in-house team means that you can always count on those employees to take care of something urgently. Not to mention that full-time employees will learn the nitty-gritty of your business operations which will result in their better productivity. Finally, with the right company culture, they can become your loyal partners in business.

These four are among the most important questions you’ll have to ask yourself (and your potential partners) during the first year of your business, and the decisions you make will have a significant impact on the success of your venture.


Michael Deane has been working in marketing for almost a decade and has worked with a huge range of clients, which has made him knowledgeable on many different subjects. He has recently rediscovered a passion for writing and hopes to make it a daily habit. You can read more of Michael’s work at Qeedle, or catch up with him on Twitter.


1 comment

  1. Outbooks says:

    It’s a valuable read for anyone embarking on an entrepreneurial journey.

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