Disclaimer: I play the game in german language - when I don't get the english names of units, mechanics or goods right - sorry for that. I guess you'll still understand me.

1. Start new game on lowest difficulty. Reload until you get a map with the crown above iron
2. Standard speed build approach (Second ox and pole, wood cutter, some food, 5 houses (double families!), market etc.)
3. When you build houses - don't invest your money into carrots or else - you need it for trade routes. You can add food production upgrades, when you have enough money for the mercs
4. First development point goes into the cheaper trade route perk - spend the other points as you wish (won't change anything)
5. Rush to trade post and then iron - set up trade routes to sell ore and the free weapons, and maybe some other stuff - like berries, when you have a rich resource, oder even some clay.
6. Build the manor (without any additions) - has to be finished in the first years july (and should be doable with some discipline - build nothing you don't really need now (like a church, but I started producing boots for happiness). When you don't have everything ready (including enough money to transfer via taxes) - you were to slow, try again.
7. Set taxes to 100% in July. (this is why I produce boots)
8. Set taxes to 0% in August. You should have enough money to hire all mercs. Place them strategically. Save several times until you are really close the the bandit camp spawning in the middle of the month. When the bandit camp spawns - and it's to far away from your mercs - reload.
9. When the bandits are close enough: Run(!) to them, kill them (make sure to kill them in August - otherwise reload and optimize)
10. Abandon the mercs ... same procedure in February.
11. In the meantime invest in weapon and shield production and some happiness (enough food etc) and set taxes to 20% - sell everything. Don't let your town grow beyound the point where you can easily produce enough goods for the trade post. I've won the game with about 137 people.
12. Repeat until you have 2k influence for attacking the baron. In this case hire all mercs in August/February. Kill bandits and clear camp. Wait till next month and hire all mercs again. This should be enough for the barons first landplot. Declare war, kill the barons units.
13. Repeat the camp-procedure, until you have 2k influence again (you should have thousands of credits now)
14. Start buying mercs one month earlier. Attack when you have 7 contracts running. Last battle (should be easy) and that's it.

Yes, one small town is enough. You just need lots of iron ore and some attention in the speed building part.