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Surviving Your First Year

Nothing can quite prepare you for the rigors of starting a business. Here's how to stay ahead of the game.


Serial entrepreneur and author Walt Sutton likens a new to a baby. Care for it, nurture it, protect it, and it can be the most rewarding and fascinating experience of your life. Leave it alone for a minute, and-well, let's not think about what could happen to it out there in the cruel world.

Yes, starting a business can be a lot like having a baby. It's one of the most harrowing things you can do in life, yet the rewards make the risk and responsibility worthwhile. Anyone can start a business, but how well-prepared you are is often directly correlated to how well it turns out. And hey, you even get to pick out a name.

But like baby's , your first year in business can be a new and confusing time. So how can you prepare yourself for your first year in business? First, do your homework.

Preparing for the Big Plunge

"The biggest mistake [first-time entrepreneurs make] is somehow believing that what appears to be a good will carry the day financially," says Sutton, who started four businesses during a 23-year period and wrote Leap of Strength: A Personal Tour Through the Months Before and the Years After You Start Your Own Business. "There are many, many good ideas that don't become financial successes. In the long run, if you want to make a business out of your idea, it's got to really make ."

So how do you determine whether your brilliant idea will bring in the bucks? Research, and lots of it. After Michael Trott woke up from a dream with a business idea in his head, he and his wife, Angela, didn't run out and start it right away. Instead, in July 2000, Angela took leave without pay from her job to do research on the idea-Timeless Message LLC, an e-commerce company that provides personalized messages in keepsake bottles, which they fulfill and ship in their home in Potomac Falls, Virginia.

Likewise, Julee Wasserman spent 10 months preparing to launch Julee's Gorge Tours LLC, an event-planning company that unites corporate planners with the local lodging and sport outfitting companies in the Columbia River Gorge National Scenic Area, a 50-mile stretch that straddles Washington and Oregon. She enrolled in a 10-month community college program, where she learned to do the proper research and plan for her fledgling business.

Finding the Money

Next step: Obtaining funding. You have several options, and unfortunately, none of them is easy. Should you try to fund it out of your own pocket? Ask relatives for a loan? Try your luck at the bank?

Wasserman chose the first option by making a huge commitment to her business: She sold her house for start-up funds. "I decided that I would get rid of my house because it was the only way I could do it," says Wasserman, who now works out of a one-bedroom apartment in Hood River, Oregon, the main town in the Gorge area. "So I did, and it wasn't tragic. I miss it, but I think it was a worthy choice."

Another option-one many experts advise against-is asking family for loans. "When you borrow money from family, then your family is your business partner at lunch, dinner, Thanksgiving and Christmas, whether you want them or not. And they may know absolutely nothing about your business but want to give all sorts of advice," says Janet Attard, author of The Home Office and Small Business Answer Book and founder of Business Know-How, an information site for SOHOs.

Next option: Going to the bank. Angela Trott cites this as her biggest challenge. The couple began their business by using all of the above methods and more: personal funds, credit cards and borrowing money from Angela's mother. But when they needed a larger infusion of funds, they sought help at the bank. "Having never done this before, we thought, 'Gee, if we show the bank we invested this much money, bought the and started this, they'll be proud of us and want to give us more money because they'll see we're responsible.' Wrong," says Angela. Luckily, they had been working with their local Small Business Development Center, which helped them apply for a SBA-backed loan, which they received in the nick of time for their 2001 launch.

Before you open a line of credit or call dad for a loan, Sutton advises you go slow: "Start small enough so that the risks aren't so large, you can't face them. Why not start part time on a small scale, go through two or three iterations by yourself to see if it really does make a 20 percent return on your effort? If it doesn't, you haven't lost too much. It's a lot better than borrowing $25,000 from somebody and it not working."

Attracting Your First Clients

Another way to bite it in your first year: Spend way too much money on ill-fated marketing campaigns that yield no customers. How can you avoid that? Again, research and starting small.

"Spend some time really defining your market," advises Denise O'Berry, a small-business consultant who works with clients on strategy and operations issues. "I see way too many business owners using the 'splat' approach-just hoping that something will stick. They end up wasting time and money."

Angela and Michael Trott didn't exactly use the "splat" approach, but they did lose out with an unsuccessful marketing campaign. When they first launched, they did a series of local radio commercials for Valentine's Day, which proved to be a success. So for Mother's and Father's Day, they did the same thing, plus a cable commercial. But this time, neither one worked. "There wasn't a specific call to action," says Angela. "We really lost big on Mother's Day and Father's Day."

So what did work? "We had to figure out the best way to market our Internet product, and lo and behold, it was the Internet," says Angela. They began advertising on sites where their romantic gifts would feel at and The Romantic's Guide-and saw their site traffic soar.

Julee Wasserman found one of her best marketing tactics-local trade shows geared to corporate event planners-through research. After visiting the shows, she then calls new contacts to ask if she can give a 10-minute presentation. "If I hadn't done those presentations, I wouldn't have had any business at all. But I was going there, putting a face to the business, being really personalized and selling them on it." She also obtains new clients through referrals, and some trickle in to her Web site.

Attard offers these other ways to market your new business without spending too much money:

  • Call your friends and see if they know anyone who might need your service.
  • Keep in touch with former employers who may be potential clients.
  • Network in your community.
  • Read your newspaper to find out who's doing what and who might need your services, then send individual letters to them.
  • Partner with other businesses.

Surviving the Change

Finally, you've got to deal with a whole new mind-set. You are the master of your own fate, and that's a heck of a lot of responsibility. And since you've decided to start this business in your own home, you've also got to deal with many of these new issues alone.

Peers are an oft-forgotten but essential part of work-even when you're a solo flier. "You need to create some society in your work life that you weren't required to create before," says Sutton. "And there's a lot of richness if you recognize this and then go out and do it. I know people who have put together the equivalent of informal coffeehouse support groups for themselves."

Another homebased trap to watch out for: working too much. Trott enjoys working at home (though she's not alone, with her husband as a partner and her brother-in-law as a full-time employee), but "it can be very tiresome because I'm a workaholic," she says. "I'm like, 'If I could only get this one more thing done,' and the next thing I know it's 11 o'clock at night."

So how do you know when to say when on your work day? "There is so much to do. It can truly be overwhelming," says O'Berry. "Break it down into bite-sized pieces, tackle those things that will help grow the business, and outsource the rest. Set business hours, communicate those hours to customers, and live by what you have set up."

Getting Help

  • Freebies from the government. The SBA and its programs can be a godsend to new entrepreneurs. Check out SCORE, SBDCs and your local SBA offices for more information.
  • Trade and business associations. Trade associations are essential for industry-specific information like licensing requirements, market research and suppliers. Find yours through the World Directory of Trade and Business Associations (Gale Group) at your local library.
  • Mentors. Both Wasserman and Trott swear by their mentors. Wasserman found hers through a community college course, and Trott's is her husband's former military supervisor, who is also an entrepreneur.
  • Community organizations. The chamber of commerce, the Better Business Bureau and other like organizations can provide networking opportunities, the chance to find mentors and more.
  • Local colleges and universities. You can find information on executive education programs here, or inquire at your local college to find out what programs and courses they offer.

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