16 / October / 2018

Starting a business? Three key things you need to consider before you start

Business

Posted 16 October 2018


Article by Tracy Johnson, SRJ Walker Wayland Accountants and Advisors

Small Business Administration statistics suggest about 20 percent of business start-ups fail within the first year of operation.

If you’re starting a business now or in the near future, it’s worth heeding the message behind these statistics.

But, while the figures should sound alarming, most new business start-ups make the same common mistakes in the research, planning, and management stages of their business venture.

This means that even dynamic, independent and successful professionals who take the first steps to starting their own businesses, with great dreams and lofty ambitions, can fail.

Having worked with startup businesses over the past 20 years, Tracy has noted the main trends that lead to business success or failure, and three key areas to focus on:

1. Passion: do you love what you’re doing?

Yes, a business should fill a real need in the marketplace. But, if you’re thinking about starting a new business, you may be looking at 10, 20, 30 years or more in the field. So make sure it’s something you love being involved in and that you’re passionate about.

2. Research: how well do you know your marketplace?

When starting a business, if you want your product or service to be successful, research is critical.

Invest the time to determine the potential demand and opportunity that exists for your business idea.

Understand key metrics, such as your selling price points, that is, what the market will pay for your offering; what the costs associated with delivering this offering are; and what your profit and return will be, based on the capital and time invested.

3. A plan: have you mapped out the road to success?

No business plans for failure; but many businesses don’t plan for success either.

Has a successful General ever won a battle without a good strategic plan for success? All new start-ups should begin with a high-level business plan.

This is critical for helping you strategically focus your time and resources during the early stages of your business development. Businesses that follow a strategic plan in the first 12 to 18 months are more likely to advance to the next stage in their development.

Starting a business? Four key areas you need to get right to succeed

Now that you’re across the three key things you need to consider upfront before starting a new business, here Tracy looks at another four key areas that you need to get right when navigating the all-important early stages of business.

1. Management skills and multitasking

According to research, the number one reason for business failure is poor management.

New business owners often lack the relevant business and management expertise in broad areas such as finance, purchasing, selling, production, and human resourcing.

To address this challenge, small business owners can educate themselves on the skills they require; hire employees who have the required skills; or outsource work to external professionals.

2. Choosing the right software tools

Software that provides efficiency and reporting metrics is paramount to starting a small business.

With cashflow tight and labour expensive, you may be trying to balance the books. But spending a slice of your budget on good software can add great value.

There are excellent cloud-based software products, such as Xero Accounting, which are dynamic building-block products for business start-ups.

Xero integrates with many operational software packages and phone apps and comes at an affordable price that allows quick and low-cost business expansion.

3. Managing cashflow

Cashflow is the life blood of any business start-up. So planning and monitoring your cashflow weekly should be an important focus of your business once you’re up and running.

When you start up, you’ll need cashflow to cover both your business and personal expenses over the first 18 to 24 months, until you’re more established.

Many new business owners take a reduced salary over the first couple of years while the business cashflow improves. This needs to be factored into your capital requirements.

Other means of financing your cashflow include borrowing from the equity in your home or approaching a bank for a loan with a detailed business plan and cashflow forecast.

4. Request professional help from those in-the-know

Starting a business can be a challenging but a rewarding journey. Don’t try to do it all yourself – there are qualified professionals who can guide you.

The four tips above, together with the three tips provided earlier, are a good starting point. They will help guide you through some of the potential challenges and increase your chances of success.

Find out more

Get more advice and assistance in the setting up and planning stage of your new business venture with the friendly team at SRJ Walker Wayland.

Contact Tracy Johnson on 0407 037 713 or tracy.johnson@srjww.com.au.

 

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