The vast majority of new business owners start a business not because they are good at business, but for a variety of other possible reasons.
Maybe they are passionate about the field they want to operate in, or they have an idea for a new product or service.
Perhaps they believe they can operate more efficiently or effectively than others in the space or they simply want the autonomy and freedom that having your own business can provide.
However, according to recent data from the US Bureau of Statistics, approximately 20 per cent of new businesses fail during the first two years, 45 per cent during the first five years, and 65 per cent during the first 10 years.
Only 25 per cent of new businesses survive 15 years or more. Worse still, in spite of the desire for autonomy and financial freedom, most business owners find they have less spare time and generally earn less than they would had they stayed in the workforce.
Yet in spite of these relatively depressing numbers, according to data from the Australian Small Business and Family Ombudsman, small businesses (those with 19 staff or less) make up 97.5 per cent of the population.
So how can you improve the odds? Here are my five top five things to consider:
1. Identify your target market
No matter how good your product or service, if you can’t make money you simply won’t survive.
This means being really clear about who would buy what you do and why.
It means understanding the market you are about to enter and how your true value stacks up against this.
What specific customer problems are you solving and how does your offering address these?
2. Understand the true value you bring
This is essential and should be articulated properly.
This can often be derived by defining your desired business culture since your purpose, direction and values should make this clear.
When considering value, it may be tempting to believe that this means selling something similar for a lower price, but this can actually work against you since it may imply poorer quality goods or services and in a price war, a small business can never win against those with deeper pockets.
3. Know your numbers
Although the thought of dealing with numbers may be about as appealing as root canal surgery, it is essential that you have a financial plan to succeed.
This means developing a month-by- month budget based on conservative estimates of what revenue you can achieve over the year, the expenses you will incur (which includes paying yourself a wage and superannuation!) and what you can reasonably expect to make.
It is also essential that you monitor progress against this each month and keep a very close eye on your cash position as well.
4. Develop a Business Strategy or Plan
Although few small businesses actually do this, putting some time aside before the business is actually established to determine what you plan to achieve can help identify potential issues before these are actually encountered.
A business strategy might be defined in terms of quantified business goals, what you will need to get there (staff, resources and support systems) and associated time-frames.
5. Establish a support network. It may seem obvious when you think about it, but having access to others who have ‘been there and done that’ can save you a lot of time, heartache and money! This may include keeping in touch with business experts you know, but I would also strongly recommend joining a local business network such as BNI (Business Network International) or other local business networks such as the Narre Warren Berwick Business Group, as these can be a great source of new business as well.
Ian Ash ACC AIECL AInstIB
Managing Director OrgMent Business Solutions – ombs.com.au
