Small business ownership is so much more than a path to building wealth. For many, it pays huge dividends in terms of emotional fulfillment and a sense of accomplishment.

Yet, ask any veteran small business owner, and they’ll share how dreams of instant success were quickly dispelled by the day-to-day realities.  

“You absolutely have to be an optimist to start a business,” offers Shana Peterson-Sheptak, PNC Bank’s Head of Business Banking. “At the same time, many would-be entrepreneurs begin their journey with very idealized expectations. That can lead to problems once their doors open for the first time.”

In short, it’s important to dream, but to do so with open eyes. That means realistic expectations in terms of business goals and the adversity you may face along the way.

Overnight Successes Are Rare

It’s an often told tale. The grand opening takes place, the doors are unlocked and…nothing. The phones don’t ring. The customers don’t flood in with money in hand.

What exactly happened?

“When you open a new business, the expectation is often one of skyrocketing sales. But, time after time, the opposite happens. Even if you’re doing everything right, you need to coax buyers out of their current patterns. That takes time, patience, and ongoing efforts to win their trust.”

The other thing to consider? It won’t just take longer to gain customers. It also takes time to get operations up to speed. Having a trusted business banking relationship is an essential component of success. Not just for the purposes of a business loan, but for the acumen that comes with it.

Peterson-Sheptak continues, “There are a lot of interconnected parts in a business. You should coordinate product development, selling, shipping, and invoicing. Even the smartest entrepreneur will go through some trial and error to establish the smoothest process. It’s a long cycle, too – it can’t be done overnight. So, the more preparation you do before opening your doors, the sooner you’ll begin to see positive cash flow.”

From a financial standpoint, how do you prepare for this extended cycle? Pay attention to an old adage: Cut your expected revenues in half and double anticipated expenses. This time-honored principle will help establish the right mindset when it comes to money management and avoiding unnecessary expenses. At the same time, make sure that you have financial backstops in place such as strong cash reserves and loan availability. That way, you enjoy much-needed flexibility and security.

This is especially true in a time of elevated interest rates.

“As rates have risen, the cost of borrowing has gone up as well. That means both you and your suppliers need to adjust for higher costs, while you still have to account for employee pay, rents, and every other expense that may have been impacted by inflation. All these things can interfere with your profitability. And higher interest rates mean carrying costs are so much higher on lines of credit and vendor expenses. So, it’s important to be mindful of these variables in your planning.”

Setting Real-World Goals

One key to success? Enlisting your business banker as planning reaches maturity—but before taking the plunge. PNC Bank has a wealth of resources for decisions that are right for you and your venture.

“People don’t necessarily see banks as business and financial advisers,” Peterson-Sheptak continues. “Yet, if we have the chance to analyze a well-written business plan alongside a savvy entrepreneur, we can speak to risk mitigation, for example. It’s important to have an objective view to maximize the odds of your success.

“That’s when we talk about realistic financial goals to create favorable conditions for the survival (and flourishing) of your dream. This is especially crucial during those first few challenging years.”

One of the key tools is to have a well-conceived business plan. Not just a sketch on a napkin, but one that really provides a detailed look into how you plan to operate. Need help with creating a plan? Look no further than our helpful guide here.

When drafting your business plan, keep your goals attainable. One easy acronym to help you remember is SMART:

  • S for Strategic. Avoid nebulous benchmarks. Instead, define what constitutes success in clearcut terms. For example, ‘Increase gross sales 15% over Year One’ is far more compelling than ‘We need more sales.’
  • M for Motivating. Rather than “Get more new business meetings,” use concrete numbers that can be easily defined such as “Schedule ten new business meetings in April.”
  • A for Action-Oriented. Make everything a task on a To Do list. Give yourself or your team members the resources needed to accomplish the job.
  • R for Relevant. We all love big, sweeping goals. But it’s better to think incrementally, achieving smaller goals month-by-month than lose sight of a giant objective that’s two or three years away.
  • T for Trackable. Vague deadlines have a way of getting pushed back or even forgotten entirely. It’s far better to have firm deadlines and hold you and your team accountable.

“The beauty this type of discipline offers?” Peterson-Sheptak adds, “It truly applies to every area of your operations, financials included. If you’re aiming to increase sales, reduce debt, or give your margins a bump, keeping these goals uppermost in mind increases your chances for success.”

Finally, Be Flexible

More than two millennia ago, Heraclitus said it best: “The only thing that is constant is change.” Business conditions can shapeshift overnight. Opportunities arise, reversals take place, and key employees and customers leave. All of these are the kinds of hits you need to expect.

“We talk to our clients all the time about risk mitigation,” concludes Peterson-Sheptak. “It’s so important to think through all the contingencies, the ‘What Ifs’ that crop up in the life of every business. It’s not that we want to be negative. Instead, we are helping the entrepreneur prepare for the potential obstacles ahead.”

That means maintaining a bench of advisers, from your banker to an attorney and accountant, to help you see the risks. Because, once again, entrepreneurs are optimists by nature. Yet having a healthy dose of realism when it comes to your goals and objectives could prove the most important component in your plan for success.