3-Year Anniversary for Businesses

Is It Really a Big Deal?
The short answer is YES. It really is a big deal to have made it to 3 years in business!

Generally, one should be able to at least begin to see profit within 3 years of starting a business. This allows time for growth, firming up your business plan and market, and being able to differentiate yourself as a business rather than a hobby. This does apply to nonprofits, entrepreneurs, and authors as a "business." 


IRS Tax Deductions
TurboTax refers to an IRS "safe harbor rule" that suggests a business should be able to turn a profit in 3 of 5 consecutive years. Keeping records of your business plan, receipts, expenses, and income are critical. Every business owner has their own comfort in what deductions to attribute to a business. A tax professional is always advisable.

Mindset - From Startup to Growth
The 3-year mark is a transition reference for different challenges in a business. The first 3 years tend to have a lot of adaptations to make to find a solid path forward. Once you get past the 3rd year, you approach your business differently. You feel more in the drivers seat and ready to take on different challenges, seeking more opportunities to expand your client base, consider hiring assistance, or simply feel more confident in what you're doing.

Common Challenges - First 3 Years
There are some pretty big factors that need figured out in those first 3 years. I do a deeper dive on the first 3 years on ​this blog post. 

• Business plan: Your business needs at least a rough structure to succeed. What do you hope to achieve with your business? 
• Market fit: This will likely take some adaptations along the way to find your ideal audience and product fit. Is there a demand? What's the competition like? How can you differentiate?
• Cash flow: Do you have a sufficient reserve or plan for the lean start and initial investment? If your plan is big enough to have staff, you're able to pay salaries and stay afloat? Have you addressed the basics - can you handle the back-shop bank book/invoicing or do you have someone skilled to do so?

Small Business Survival in First 3-5 Years
A search of the U.S. Bureau of Labor Statistics shares 65-70% of small businesses succeed within their first 3 years. I did find a note that number does continue to drop over time, so survival past the 3rd year is no guarantee, simply an indicator a business has promise to succeed.

The 1st year is often driven by excitement and drive. The 2nd year shows the weak spots in cash flow, market, and business plan. The 3rd year is that golden year typically where you've sorted through the obstacles to being viable. At this point you have systems in place for your business, a customer base, and a proven concept!

You've Made It - Now What?
What does the future hold for your business past the 3rd year? You begin to look at long-term strategy.

• Scaling: What's your growth plan? Will you be expanding services, locations, or staff or you're comfortable where you're at?
• Strategic plan update: It's time to sit down to map out your next few years. You've survived the initial test! Are you in it for the long haul?
• Check your financial plan: Are you solid in your back-shop processes and accounting? You know your numbers to break even, sustain growth, and begin investing in the business or your retirement?
• Brand awareness: This is a good time to consider updating your brand visibility. Consider different marketing and outreach options. Anchor your primary supporters to become your biggest cheerleaders to draw others into the tribe! 

Where are you in your business as a nonprofit, entrepreneur, or author - first 3 years or beyond? Have you noticed a difference between the two time periods? Any advice to share?

​Love to hear from you - Let's Chat or find me on LinkedIn! 

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