The Pitfalls You Can Face After Year One Of Business And How To Avoid Them

Starting your own business is not only daunting but it can also be an exciting venture. Your own business can give you so many things. Flexibility in your working life, a chance to earn a decent living, and the opportunity to work within a field you feel passionate about. After all, passion is often the number one reason why someone starts their business. However, the first year is often the hardest, so when your business has overcome that hurdle it can be easy to be blinded by the common pitfalls you can face as you move into year two. So if you find yourself wanting to avoid some of these issues, then here are the common pitfalls and how best you can avoid them with your new business. 

pitfalls business

Expanding Too Quickly

If year one is done and you are thinking about expansion then that is what you would call a success, right? Sure! Your business is doing well enough to start thinking of expansion. That might be with your team, your clients, or even the workplace as you seek out bigger premises. But don’t be too tempted to expand too much too quickly. It is still worth it to take a steady approach to expansion. Common pitfalls are to overexpand your business and then find you can’t sustain the clients or the sales, then it could lead your business into an area where you are spending more than you are making. 

Poor Growth Speed

While it is best to avoid overexpansion you can’t sit in the slow lane either. Your business won’t do well with poor growth speed. This means that you are playing it too safe and are not moving the business forward. It is all about finding the right balance when it comes to building on your current success. 

Employing The Wrong People

The problem you have with a start-up is that if things start to go well you need to think of expansion, and in most cases, it means employing people. A business can not be sustained as a one-man band if things are progressing in a profitable way. But the risk you have is employing the wrong people. It can be too tempting to employ the first person you meet because desperation can take hold. Spend time interviewing people and ensure that not only are they the right fit for your business but they are also the right fit for you and your existing employees. This will help you to avoid internal issues with staff members and will help everyone to stay focused on what matters. Their jobs and moving your business forward. 

Insufficient Capital

In order for your business to function, you will need capital to get you started and ultimately to help you grow. In the beginning, a start-up can often find it hard to generate capital due to having no history. So it can be hard to generate credit and obtain investors’ interest. Managing cash flow is important in the first year. It can be put towards contingencies, more on that soon, but also helps you to manage expenses. The early stages of your company’s growth are key, so monitor your spending to help you stay on track. 

Not Having Contingencies in Place

It might sound obvious, but no matter how well your business is doing, it is important to have contingencies in place. Your accounts will reflect your profit margins, your turnover, and any losses that have been made. But you also need to consider your margin of safety. This is the buffer your business has before it becomes unprofitable. Contingencies, such as a safety margin, can be useful after the first year of trading. You can use the margin of safety formula to help determine what it needs to be. Your accounts are a vital element of your business, and they are used to help you predict future growth and profits. Having the contingencies and safety margins in place will help you to avoid failing at the first hurdle. 

Lack of Planning, Process, and Procedure

Running a business is not easy, and if there is a lack of planning, process, and procedure in place then you are running the risk of your business failing. Year one may have been a success based on hard work, a little bit of luck, passion, and dedication. But year two and beyond means you need to capitalize on that and you do that with plans, processes, and procedures. Your company and brand values, the way you operate sales or take care of clients, and the procedures you have for making sales and adhering to orders. Failure to plan is a recipe for disaster with your new business. 

No Online Presence

It is hard to have any business without an online presence these days. But even with an online presence of a website and some social media, if you don’t build on that then your business will start to diminish. Most of what consumers do these days is online, so if you don’t build on your online presence then you are not going to expand your business and move it forward. Having a website and a consistent social media presence is key. 


One major issue that many new businesses can face is having a dependency on one thing. This one thing might be your biggest client, or it could be your business is dependent on a manufacturer or shipping company. In some cases, depending on one company or client is key to growth and success, but there is a risk involved. The questions to ask yourself would be whether your business would survive if that one client decided to put their business elsewhere. Would your business function if that manufacturer abroad went bust or if that shipping company couldn’t adhere to your order levels? Dependence can be a positive. It shows loyalty and can also be cost-efficient when it comes to company spending. But at the same time, your business can’t be reliant on if your business would fail without it. 

Let’s hope highlighting some of these pitfalls will help you avoid them with your new business.