How to Make It Past the Five-Year Mark as a Business

For many people, the idea of running a successful business is a huge part of the American Dream. However, hard work, risk, and sacrifice no longer seem enough to make it big anymore, and that’s something reflected in the data as well. When it comes to entrepreneurial attitudes, only 50% of Americans believed they had what it takes to start a business. 

Beyond this reality, you also run into the fact that even after starting a business, 45% fail within the first five years. If you had dreams of running your business for decades, the statistics are even more bleak. Only 25% make it to the 15-year mark and beyond.

While no magic pill can mysteriously ensure your business’s longevity, every insight you internalize will help. In this article, let’s look at three tips that might make a difference for you. 

1. Do the Small Things Perfectly 

Too often, entrepreneurs are preoccupied with big decisions, and this can be a problem in the long run. We get it; every business has multiple important aspects to worry about, but you can’t let it take focus away from daily operations. 

It’s the seemingly small steps like hiring wisely, tracking cash flow, or even investing in something like chargeback protection that make a difference. It’s the things you’d never really think of as important that end up compounding over the years if left unaddressed. For example, chargebacks may not seem that big of a deal, but add in the administrative costs to fix it, and it’s a substantial hit.

Similarly, clumsy handling of your supply chain can also end up coming back to bite you in the future. As McKinsey points out, it’s really important to move at the same speed as your consumers. In other words, you want to meet the ever-changing needs of your consumers as and when those needs emerge. 

2. Know How to Find the Balance Between Profit and Growth

While there are many reasons that businesses collapse after the first couple of years, this is one factor that isn’t emphasized enough. Essentially, once a business is on its feet, it has two primary objectives: profitability and growth. You need both to succeed in the long term, but finding that balance isn’t easy.

On the one hand, profit feels like the most important objective because, without the means to sustain yourself, you’re dead in the water. On the other hand, you also need to expand your company to keep investors and shareholders happy. 

For an inexperienced entrepreneur, this can feel like the worst tug-of-war game ever. It’s not uncommon to hear some say they’d rather go back to a cushy office job to escape the stress. 

But it begs the question: what’s more important– Profit or growth? Well, it depends. James Webster, Executive Chairman at ROK Financial, in a piece on Forbes, favors growth. According to him, growth is the fountain that provides more avenues for profit in the long run. 

However, there’s no right or wrong answer here. You just need to develop the business acumen to know which direction ought to be a priority in your context. 

3. Never Underestimate Your Competition

If there’s one thing to remember when trying to last in the world of business, it’s that someone else always wants their turn. In other words, never underestimate your competition, because if you’re doing really well, they’re just going to be even more motivated to take your spot.

Yes, it’s a little disappointing that it has to be so competitive, but that’s the nature of business. Too many entrepreneurs have lost it all from being blindsided by their competitors. Sure, if you’re powerful, you can simply start all over again, but for the average entrepreneur, it means giving up on their business dreams. 

John Horn, author of “Inside the Competitor’s Mindset” in an Inside the Strategy Room podcast by McKinsey, had some interesting insights on this. According to Horn, it’s all about breaking out of your mindset and forcing yourself to look at the world like your competitor does. 

He explains that to understand competitors, there are four key steps. Paying attention, learning about their assets, who’s making the decisions, and finally, making and tracking a prediction. 

All things considered, it’s so important to have a realistic picture of the risks of starting a business. It’s particularly important these days because productivity influencers make the lifestyle seem so glamorous and attainable to everyone. 

Speak to entrepreneurs in your location, and try to find genuine insights. Odds are, their story of entrepreneurship is going to sound quite different than what you expect.

4. Plan For Long-Term Stability

Many businesses make it through the first couple of years but struggle once growth starts to level out. Reaching the five-year mark often comes down to how well you adapt, manage your finances, and prepare for the future. Business owners who regularly review their goals, track performance, and adjust their strategy are usually in a much stronger position to handle changing markets and customer demands. 

It’s also smart to think ahead about your long-term exit strategy, even if you aren’t planning to leave anytime soon. Understanding what buyers look for when you eventually sell your business can help you to make better decisions now. Strong financial records, reliable systems, and a loyal customer base can all increase the long-term value and stability of your business.