Your first year in business is sort of like driving cross-country through dense fog. It’s a long, harrowing trip and you can only see about five feet ahead of you the entire way. Since we recently celebrated our one-year anniversary, a milestone that came a little more quickly than I expected, now seems like a great time to reflect on lessons learned during this past year in the hopes of lighting the path for others who might be heading down that foggy road.
This post started as a list of 12 insights (a poetic approach to providing one for each month), but was ultimately culled down to three ideas, categorized under the primary functions of any business:
- 1. Marketing and Advertising
- 2. Finance
- 3. Operations
MARKETING & ADVERTISING—Understand your advertising budget
In our first year, we spent more money than we should have on print and digital advertising with minor success. What I quickly came to realize is that our ad budget should be a percentage of actual sales and not a part of our startup costs, investment budget, or even accounts receivable. Advertising benefits most from consistency over time. In your first year, you’ll have tons of advertising opportunities that you’ll want to take advantage of, but those dollars are wasted if they are not a part of a long-term, incremental growth plan that is funded by actual sales. Start by identifying a percentage of sales to devote to advertising. Increase your sales and you can increase your advertising budget, which creates a cycle that will begin to fuel itself. This is the best way to build a successful advertising plan.
FINANCE—Your primary role as a business owner
You may think of yourself as a passion-driven maker. A designer. An artist. And, of course, you are all of those things. But as a designer or maker who owns their own business, what you are first and foremost is someone who manages money. Therefore you have to think like a Chief Financial Officer (unless, of course, you’re able to hire one right out of the gate).
So as a CFO, your priority is to establish your cash-flow and sales forecasts. No individual task can be more important than this. As an example, here’s how we formatted our cash flow forecast: Sample Cashflow Forecast
OPERATIONS—Strategic vs. Tactical planning
In the corporate world I came from, people talked a lot about “strategy.” And, when I started my business, I remained unsettled at not having a clear answer to those who’d ask what my “product development strategy” or “go-to-market strategy” was. But I quickly learned that worrying about strategy stood in the way of actually getting stuff done. For that reason, I try not to be too concerned with our strategy or apparent lack of one. We like to focus on tactics and check things off the list, knowing that so long as we operate from a single vision with open communication, the cumulative efforts of all our tactics will define our strategy without having to obsess over it.
Here’s how we approach our week: every Sunday night, we plan the list of things we need to get done for the week and categorize everything into three buckets in order of priority.
- 1. Customer needs
- 2. Finance and accounting
- 3. Operations, Marketing & Advertising
Come hell or high water, everything on this list gets accomplished by the end of the week, and a whole lot more stuff shows up in between that we find a way to accomplish or move to next week’s list. At the end of the day, this is our business strategy. There’s no reason to make it more complicated than this.
This barely scratches the surface of the depth and complexity of what I’ve learned this first exciting and rewarding year of business, but I hope I’ve been able to illustrate a few critical points. Here’s to looking forward to the fog clearing a bit in our second year.
Hopefully, you’ll find something useful here or be sparked to reflect on an insight of your own. If so, please feel free to provide some of your own suggestions in the comments below!