8 Business Milestones to Hit in Your First 5 Years
According to the Bureau of Labor Statistics, just over half of the small businesses that opened in the U.S. in 2019 survived their first 5 years and were still going strong in 2024—a number that has stayed fairly consistent since the 1990s. It’s an alarming statistic for any business owner, even those who have passed the 5-year threshold.
Why do these businesses fail? Sometimes, market trends work against them. Others can be chalked up to poor timing or unfortunate economic changes. But many businesses fail because of things they can control.
In his book Why Startups Fail, Harvard Business School professor Tom Eisenmann identified, through hundreds of founder and investor interviews, the primary culprits for avoidable failure. The 2 most common boil down to “right opportunity, wrong resources” and the opposite: the right resources but the wrong opportunity.
Here, we’ve broken down 8 business milestones to help you avoid the pitfalls and stay on track during your first 5 years.
1. Develop a Profitable Business Model
A business model should tell the story of your business journey and how your entire business works. The story should focus on 3 core questions:
- Who is your target customer or client?
- What do they value?
- How do you deliver that value at the right cost?
All of these questions add up to creating a profitable business model. If you nail these questions, you’re well on your way.
Set aside some time to formally write a full-fledged business model. It’s the first and most important of all business milestones you must reach. Here’s one easy system for creating a rough business model, although there are endless ways for you to create your own effective business model.
And not feeling 100% sure about all the details? No worries. Your business model can, and likely will, evolve over time. But you’ll still want to start with a clear plan for success—even if that plan changes in the future.
2. Land Your First Repeat Customer
Your next business milestone involves that sweet, sweet exchange of currency. Landing your first repeat client (sometimes called an anchor client) will give you confidence that you can build a successful business—which, in turn, can deliver the motivation you’ll need to keep moving forward.
The keyword here is “repeat.” While any new customers are great for business, repeat customers that consistently drive revenue are the key to sustainable growth.
You may earn that first repeat client through personal recommendations, an existing contact, or cold calling. But from there, landing more repeat customers takes not only understanding exactly who your target audience is and where they spend their time (both online and off) but also having a clear business strategy for transforming first-time customers into loyal customers that will continue to engage your business on a regular basis.
It’s up to you how you build a loyal customer base and drive repeat business. For example, you might offer incentives for returning customers, like a discount when they engage with your business for 3 consecutive months. Just make sure to prioritize finding and retaining returning customers in your business plan and/or marketing strategy.
3. Create a Scalable Marketing Strategy
Marketing is the lifeblood of your business. Business owners who wait for clients to call are destined to fail. Smart marketing can actively bring in new business.
Once upon a time, the norm was for businesses to hire a marketing firm to handle everything. Today, most emerging entrepreneurs tackle as much of the marketing as they can and only outsource once they know what works.
Taking an active role in your marketing campaign will strengthen 2 key talents small business owners should master: delegation and determination. You’ll have to learn the ins and outs of social media marketing and other marketing tactics and commit to regularly putting in the time to market your business.
Once you understand the tools at your disposal, create a scalable marketing strategy around them. Scalable means that you can amplify the effect without amplifying the costs by the same degree.
4. Hire the Right Team Members
Starting off as a 1-person operation is great. However, for most businesses, it will only get you so far. At some point, you’re going to need help.
And that’s when you hit your next business milestone: hiring a team.
This exciting business milestone will grow your business by leaps and bounds—but only if you hire the team that will work best for you, your target customers, and your business.
So, how do you determine what kind of team you need to build? Ideally, you’ll want to hire people to manage the parts of your business that:
- you don’t like to do
- you’re not good at
- you don’t need to be doing
- aren’t directly tied to business growth
To figure out who you need to hire, make a list of everything you’re doing in your business that falls into one of those categories, along with how much time you’re spending on that particular task each week. From there, you can figure out your top priority hiring needs.
Depending on your situation, you may opt to hire full-time employees. But if you don’t have the budget for full-time help, you can still get the support you need by outsourcing tasks to freelancers or independent contracts, either on an hourly basis (like a virtual assistant you hire to manage admin work for 10 hours each week) or a project basis (like a graphic designer to design your new company logo).
Hiring the right team can help you establish that highly sought-after work-life balance that all entrepreneurs need to thrive—which is why it’s one of the most important company milestones.
5. Gain Authority in Your Industry
At this point, you’re making money and have a great team in place. The next item on your company milestones list? Becoming an authority in your industry.
Even if your business doesn’t exist entirely online, the internet is your fastest route to building your brand recognition and authority—and, more specifically, by creating online content that establishes you as a subject matter expert and authority in your niche and/or industry. Create the type of content that your industry needs and will appreciate, and give it away for free. Your peers will see that you are knowledgeable, and over time, you’ll become an authority.
You can also build authority offline. Get involved in local events that allow you to share your expertise. You may even wish to seek out speaking events and industry-wide conventions.
Coupling speaking engagements with stellar online content will turn you into a sought-after authority—which, in turn, can help your business grow.
6. Hit Sales Goals
If you’ve developed a profitable business model, created a scalable marketing strategy, and found the perfect team, you’re on pace for lasting success. The final business milestone to reach is a significant number of sales.
Set a specific sales goal. Without a goal, the business will stagnate. Having a goal will help you continue moving toward your target growth.
Determine an ambitious yet achievable dollar figure for your business. Obviously, the numbers will vary depending on the nature of your business. Only you will know what number to set as your target, but once set, make sure everyone on your team knows about it. Make it something you strive for together.
7. Get Your Bookkeeping in Order
If you hit all the company milestones on this list, your business is doing well. You have an effective marketing strategy, a solid team, and loyal customers—and, as a result, and are hitting your revenue goals.
But as your business grows, your finances become more complex. There are more expenses to categorize, more invoices to send, and more payments to process…managing it all can feel like a full-time job.
It can be a lot—but keeping accurate and organized books as your business grows is an absolute must. The right bookkeeping processes can help you:
- improve customer service
- prepare your business for tax time
- ensure your employees are paid accurately and on time
- better understand your cash flow—and how you can improve profitability
Because there’s so much to keep track of, consider investing in accounting software to manage the process.
With FreshBooks, you can manage all of your accounting, including invoicing, expenses, time tracking, payments, and financial reporting, from one easy-to-use platform. Use it to ensure your bookkeeping is accurate, organized, and compliant—without spending a ton of time, money, or effort on the process.
8. Create a Big-Picture Financial Plan
Getting your bookkeeping in order is an important company milestone, but accounting is only one element of your business financials. The next milestone you’ll want to start thinking about is creating a big-picture financial plan.
Start thinking about your overall strategy for long-term financial success. What revenue goals do you have for the future, and how are you going to measure and hit those goals? For example, do you want to expand your company to a new location or attract new customers with a new product?
What kind of expenses are you going to incur to get there? Will you have to increase your budget to hire new team members? Will you need to lease a new commercial space? Dig into your numbers and figure out how to get from where you are now to where you want to be in the future.
You can create a financial plan on your own—or you can hire an accountant to advise you. Just keep in mind that, as a small business owner, it is imperative for you to be involved in all financial aspects of your business. Because, at the end of the day, you are the person responsible for your business’s long-term success or failure.
But you don’t have to do it alone! Accounting software (like FreshBooks) and partnerships with accounting professionals who understand your business can make financial planning and management much easier.
You Can Be the Successful 50%
It is possible to survive the first 5 years, and then onward to 10 or 20 years. The key is meeting important milestones and goals to keep you and your team focused and on the right track.
Setting milestones to build customer loyalty, develop a growth-minded marketing plan, increase sales, and establish a solid team will keep you heading in the right direction so your business has the best chance for long-term success.
This post was updated in January 2024.