A diligent, potential new owner or manager seeking to determine what are key first year strategies to insure a fifth year anniversary will receive hundreds of suggestions.

If he or she asked consultants to offer their own listing, the prospective new owner may receive many more different answers.

Also, new owners need to remember only one of five companies survive till their fifth anniversary. From talks with hundreds of small business owners, almost all successful (and not so successful) managers said the following would improve the chances of a company reaching its fifth anniversary:

  • Deliver a successful project or product in the first 12 months
  • Generate enough sales or investment to carry the company through the first 15 months
  • Be written up in at least three publications within the first nine months
  • Create a positive credit rating as soon as possible

Of course, all of these suggestions assumes the company has a good product or service and can deliver on its sales promises. However, many companies with good products, sufficient capital and high performance have failed. There are always other factors to consider.

Breeding Success

Nothing breeds success like success. It is important the company's first efforts are successful. In one study done in 2000, 97% of companies who survived to the fifth year successfully delivered a product or service to a customer resulting in that client being a reference for the firm.

Many companies fail to deliver on time because of factors they can control. The same study showed that of those companies that did not deliver a successful product, analysis showed that the factors contributing to the failure were in their control. Therefore, it is important to deliver not to make a profit in the first year.

Deliver Sales

Every company needs sales. The dotcom boom obscured that fact for many companies, most of whom are no longer around. Almost unanimously, successful small business owners said their companies delivered enough sales in the first 15 months to enable it to weather the next 15 months. By the end of this 30-month period, a company needs to be on solid financial footing or its ability to survive are greatly periled.

Called by one consultant, the "30-30 rule", this concept argues that companies who survive the first 30 months can usually reach the fifth year anniversary if they show a profit by the middle of the second year. To do that, almost every company needs to have made significant strides towards profitability by the 15th month. The company doesn't need to be totally profitable, it must be near or exceeding the monthly break even point.

Have Publicity

No company survives without publicity. The corner delicatessen, high-tech startup, or office cleaning service has the same need ? getting known to a target audience. Most startup companies do not pay enough attention to the value and need of public relations. However, in a study recently completed of companies reaching their fifth year anniversary, almost 100% reported they had been written up in at least publications within the first year.

Positive Credit Rating

Because cashflow is so important to any nascent company, gaining a favorable credit rating right off the bat is critical, according to the small business panelists consulted. They said that many successful entrepreneurs have been able to grow their companies rapidly with little or no cash thanks to a favorable credit rating.

There are several ways of gaining a good credit rating. The first and easiest is to borrow money from a bank or other institution and then repay it ahead of schedule. This takes discipline and a strong commitment to the company.

Keep in mind also that, often, with new companies, lenders require personal guarantees. These should never be given lightly as they encumber the individual owner(s) and their personal assets.

Another method is to become strongly entrenched with a local bank and its officers. When a need arises for extending credit, the company can then use the banking relationship as a reference. Using a bank where the owners have their personal funds and other accounts, i.e. mortgages, helps build a credit profile. While talking to the bank officer, remind him or her of these other relationships. That will encourage them to speak positively about the new company. If possible, keep significant cash in the checking account or to a savings account attached to it. This will make it easier for the bank to speak about the account.

Finally, when creating a supplier or vendor relationship and references are requested, use individuals that you have briefed as to what to say and report. This is called managing your reference checking and can result in better terms for the company.

Obviously there are many other factors contributing to the success of a small business startup. The strategies suggested reported by successful companies most often. New owners or managers need to set their own priorities. They would be well rewarded to include these in their tasks.