Get All Access for $5/mo

Startup Life: Six Rules For Surviving The First Two Years While that first year may be full of the excitement of setting the foundations and getting off the mark, it's the second year when you need to see traction and growth– it's this period that exposes businesses that are not working.

By Neil Petch

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.


For a startup, it can sometimes feel like a struggle to survive.

One third of new businesses don't make it past the two-year mark according to a study by the Small Business Administration in the US.

While that first year may be full of the excitement of setting the foundations and getting off the mark, it's the second year when you need to see traction and growth– it's this period that exposes businesses that are not working.

So it's about solid foundations: your infrastructure, offering, and most of all your customers– all in place by your second year in business.

With that in mind, here are six rules for surviving those crucial first two years of your entrepreneurial endeavor.

1. Establish a healthy work environment These things matter– where you work, the office environment, what's around you. It has an impact on morale and overall function. In the book New Workspace, New Culture, authors Gavin Turner and Jeremy Myerson link how we psychologically process our home environment when growing up (perhaps only having a bedroom that was truly our own domain) with how we view our work environment. They argue that "organizations become the family for our working lives, and their physical surroundings become our professional home."

What they call "organizational ecology" is essentially the idea that the work environment is more than just the way the place is decorated and the facilities available. It's the "symbiotic relationship between the social organism of the organization and the internal physical structure of the environment within which it breathes and mutates." In other words, it's aligning your team with the place they work.

These things need to line up; they need to match. And if you're in doubt, take a look at company review site Glassdoor– more often than not the fastest-growing firms get great reviews for their work environment.

2. Find your work-life balance "The candle that burns twice as bright lasts half as long." The famous saying could easily be applied to the phenomenon of getting burned out at work. The signs are feeling exhausted all the time, getting sick a lot, detachment from the world, feeling helpless, and a marked change in sleep and eating habits.

It impacts both the individual and the company as a whole. Working excessive hours has been shown to actually damage productivity in the long term. In the study How Does Workaholism Affect Worker Health And Performance? it was found that "since the cost for workaholics is high in terms of ill-health, workaholism has on average adverse effects on health and performance."

So this applies to both you as the startup leader as well as your staff. Make sure you get that work/life balance correct– get enough rest, social contact with supportive people, and physical movement and exercise.

Related: Hustling Smarter (Not Harder)

3. Learn how to hire Your company is only as good as the people who work in it. Get the wrong kind of employees representing your business and you will be in a mire of your own making. In the study Hiring By Competency Models by Patty Grigoryev, it's pointed out that the "hard costs" of a bad hire can be between 50-200% of the first year salary, and soft costs can be even higher.

What do we mean by soft costs? We're talking here about the confidence that is lost in leadership, the emergence of morale issues, and the possible destabilization of the workforce. The study argues that a bad hire can in fact knock your business back by many years. Yet, at one time or another it is inevitable that every leader hires the wrong person. The key is to reduce as much as possible those instances, and when they do occur to deal with them swiftly and efficiently so the wider business is not damaged.

Research the psychology of interviewing, don't think you're wasting time doing second or even third interviews, and explore the references provided as well as doing your own investigation. It's the same level of diligence you would apply to any other aspect of your business.

4. Build great work processes Whether formal or informal, the way you deal with workflow and problems as they come up will fully depend on the processes you adopt and accept for the business.

According to Roger Burlton in the book Process Management – Profiting from Process, it's all about the synchronization of "people, technologies, facilities, information, and knowledge."

These are very different elements, but by bringing them all in harmony you will find efficiencies and a way of creating order from chaos. From something as simple as organizing your email, to the complexities of your sales funnel process– without well-defined, structured processes, your business will lose direction.

Related: From Lean To Mean: How To Turn A Startup Into A Corporate Behemoth

5. Commit to great products and services As effective as good marketing can be, your business has to start with the right product or service. Look at the Apple example: Steve Jobs, after building up the company from a garage to a billion-dollar brand, was ousted from his role in 1985. Apple's product development suffered without his genius. During the absence of his product innovation, the business came close to bankruptcy. On his return in 1997, he created the brilliant iMac, which put the company back on track as a market leader. Steve Jobs said when he returned to save the company: "The cure for Apple is not cost-cutting; the cure for Apple is to innovate out of its current predicament."

So it's about your product. Is it something people want? Or is it something people will want? If the answer is yes to either of those, you're on track.

6. Protect your company Yes, you lock the door of your office at night. But are you locking the door on your data? Whatever the current size of your startup, you can bet one of your most valuable assets is your information– whether it is your sales leads, your client information, your accounts, and so on. Now, imagine if all of that disappeared in a heartbeat. There are a variety of statistics that get thrown around on this issue– the most famous claim being that around 40% of businesses that experience data loss end up closing for good.

The actual figure may be lower or higher than this, but what cannot be disputed is the assertion made by Klaus Schmidt in his book High Availability and Disaster Recovery which is simply this: "Data loss –while not identical to disaster– is clearly a major symptom."

Shop around for cloud providers, check how often they experience outages, and find out what happens if you (or they) incur a problem. Will your data, your business, be safe?

"To infinity and beyond"

A company that survives the first two years is not just doing something right– it's probably doing many things right.

So let's end on a lighter note: it's important to stay excited about your ideas and make sure your business is something you enjoy. If you don't get something out of the journey, the cut and thrust, the pure thrill of invention, the glory of sales, then what are you doing it for?

This business of yours can make your life a rewarding adventure.

Related: Five Things You Must Avoid If You Want To Succeed In Business

Neil Petch

Founder and Chairman, Virtugroup

Neil Petch actively assists over 300 entrepreneurs and startups to conceive, plan, and build their businesses on a monthly basis.

After launching Virtuzone as the first private company formation business in the region over 10 years ago, Neil has led the company to set up more than 16,000 businesses, making it the largest, fastest-growing and best-known setup operator in the Middle East.

As the chairman of the holding company, Virtugroup, Neil also leads VirtuVest, an in-house angel investment vehicle; Virtuzone Mainland, a provider of directorship services, corporate sponsorship and facilitator of local Dubai and Abu Dhabi company setups; and Next Generation Equity, a citizenship-by-investment firm. Virtugroup has invested in and supported the growth of multiple companies and delivered passports in over 10 different jurisdictions. Virtugroup also enjoys partnerships with Dubai FDI, the Chamber of Commerce, Dubai Holdings (ARN), VFS, Regus, Etisalat, KPMG, Aramex and Beehive, and has received awards from Arabian Business and Entrepreneur Magazine, among others.

In addition to starting up businesses, Neil has held leadership roles in several companies. He helped establish ITP, the largest media publishing house in the Gulf, which he oversaw growing from two to 600 employees. At ITP, he spearheaded the launch of over 60 digital and print titles, including Time Out, Harper’s Bazaar, Arabian Business, Ahlan and Grazia.

As Managing Director of ENG Media, Neil launched the Coast FM radio station and numerous magazines, including MediaWeek. For the last seven years, Neil has also served as Chairman of GMG, the world’s first interbank financial brokerage based out of Dubai, with offices in DIFC and London. Due to his extensive knowledge and expertise, Neil has been appointed a member of the ‘Ease of Banking’ panel organised by the Chamber of Commerce.

Having lived in over a dozen countries and with a career spanning over 25 years in the UAE, Neil has the ability to merge astute cultural insight with fresh thinking, leveraging his seasoned business acumen, intuition and black book to repeatedly bring ideas to living, breathing success stories.

Neil has appeared in BBC (Dubai Dreams) and ITV (Piers Morgan) features on Dubai, as well as programmes on BBC World and Sky. He has participated as a judge on the radio programme Falcons’ Lair, an entrepreneurship reality show loosely based on the BBC production Dragons’ Den, as well as a similar TV competition hosted by MAD Talks. He now hosts Starting Up on Dubai Eye 103.8FM, the only national weekly show for the startup community in the world’s startup capital.

Neil also lends his in-depth market insight to fellow entrepreneurs and helps cultivate Public Private Partnerships as a Task Force Member of the Advisory Council, a coalition of key decision-makers and prominent movers of the UAE business landscape, led by EMIR and the Ministry of Economy.

He is also a regular speaker, panelist, and economic commentator, specialising in the SME sector.


Emirates Inks Partnership With HiDubai To Strengthen Dubai's SME Ecosystem

Under this agreement, Emirates will reach out to and engage with over 180,000 SMEs on the HiDubai platform.


Here Are The 20 Startups Selected For The Eighth Cohort Of The MBRIF Innovation Accelerator Program

The final participants of the year-long program were selected from over 200 applicants from across 35 countries.

Side Hustle

The Side Hustle He Started in His College Apartment Turned Into a $70,000-a-Month Income Stream — Then Earned Nearly $2 Million Last Year

Kyle Morrand and his college roommates loved playing retro video games — and the pastime would help launch his career.


5 Small Business Marketing Tactics to See Results This Quarter

Five quick and effective small business marketing strategies that can yield both short-term results and long-term success.

Social Media

A 3-Step Beginner's Guide to Social-Media Marketing

So you can create a Facebook post -- congratulations! However, that isn't social-media marketing.


Steve Jobs' 3 Public Speaking Power Moves Remain Just as Relevant Today, 13 Years After His Final Keynote at the Apple Developers Conference

The co-founder and former CEO of Apple knew how to get big ideas across to consumers and investors.