There is plenty of allure in starting your own business: You’re the boss – ain’t nobody going to tell you what to do! You make the rules and can run your business the way you like. Your potential to earn can be far greater – not to mention the pride you gain in creating your own legacy.
However, with these benefits comes responsibility. A new business requires substantial personal investment, you may encounter times of financial strain and instability and find inconsistencies in upcoming work. We all know the stats – approximately 2 out of 3 businesses that start-up fail within the first 3 years so how do you set yourself apart and make your business the exception rather than the rule?
What is it that successful businesses have that unsuccessful ones are lacking? What are the characteristics of a good young business?
In the words of Benjamin Franklin “By failing to prepare, you are preparing to fail”, Antoine de Saint-Exupéry “A goal without a plan is just a wish” and Abraham Lincoln “Give me six hours to chop down a tree and I will spend the first four sharpening the axe” the message here is unified, plain and simple: You gotta have a plan – it is critical to success.
A good plan not only enables you to solidify your vision and goals; exactly what it is you really want to achieve, it will also assist in navigating you through the barrage of decisions and questions you will come across, particularly in your first year of business.
A business plan outlines: what your business will do, how and where it will operate, how it will become profitable, defines your customer base and why your business is important. This will help you to identify your niche. What sets you apart from the others? What do you want to specialise in? If you find this niche, then you can charge a premium for delivering your product or service.
Passion – It all starts with you
You may be an expert in your craft but there are other skills involved in running a business that you will need to learn. One of these is your ability to sell both yourself and your business – people need to know it exists! This skill doesn’t always come naturally but it does come more easily when you have a deep passion and drive and overall belief in what you are doing and what you are trying to achieve. You need to be the driving force behind your business – having a positive attitude and clear focus is vital to success. Get out there, knock on some doors, you will only get out of your business what you put in.
Look into how you can get the word out about your business. What are some cost-effective marketing strategies you can try? Get on the phone and find out how you can do it yourself. Can you take advantage of social media platforms that come at little-to-no cost? What are your competitors doing? What can you do better than them? Don’t try to recreate the wheel – try something, see if it works, if it doesn’t move on and try something else.
People – Relationships and partnerships
Knowing and dealing with the right people is another important aspect. This is true for many levels of relationships and partnerships – within and outside your industry, your customers and staff that you hire. Invest time in forming and nurturing your relationships.
Do you have someone to bounce ideas off? This can be anyone not necessarily related to your field, it could be a mentor or just someone you are comfortable to seek advice from. Having an outside perspective is invaluable when you are buried in the thick of it.
Partner with other industry experts – you are not supposed to be a master of all trades– seek financial advice from an accountant or other finance professional, find a partner that you feel good about and is like minded. This is particularly vital in the earthmoving game where there are substantial capital expenditure requirements, these contacts can be a real asset to your business and make the difference between success and failure.
Do you have wider industry contacts? Is there an association you can join? Chances are you’re not the first person to start this kind of business so rub shoulders with people that have done this before you and help each other out.
Projections – Capital, cashflow and forecasting
Many companies fail to succeed due to poor cashflow management. Put quite simply: they run out of dosh. When starting your business, you need to ask yourself: Can I afford to run this business for 6 months without making much (if any) money? If the answer is no, you are putting yourself at considerable financial risk.
You need to understand your business’ cashflow – money in and money out is probably the single most important consideration. Cashflow forecasting is such a valuable tool, not only to understand what you’re owed and what you owe but also to use as a barometer to gauge how well you are tracking over time. Are you sticking to your plan and budget? If you find that your budget and actuals aren’t marrying up, you need to identify where you went wrong and assess what needs to change.
Your receivables collection process is particularly crucial, the thing to remember here is some people just don’t pay. Establishing a diligent process in this area can save a lot of heartache and sleepless nights. Working for the right people and ensuring that they pay within the terms of your arrangement goes a long way to ensuring strong, positive cashflow.
Processes and record keeping
And lastly, something that perhaps many businesses overlook as being key is processes and record keeping. Designing and implementing good processes is what will help you to grow your business. They allow people within your organisation to function without your involvement, freeing your time. Keeping records is not only the law it can also save time and resources and keep you out of trouble. Look into running your own accounting software programme such as Xero or MYOB to assist with this as it can do a lot of the work and organisation for you.
Once you have considered these key aspects then you are well on your way to creating a successful business. To maintain your success over time, make sure you adapt to change, don’t let your business become stale and make effort to stay relevant in the market. Try to enjoy the process and keep evolving.
As part of our role as a finance partner, we have witnessed and assisted numerous businesses start and grow – reaching success after success. Unfortunately, we have also seen the flip side with some businesses that showed great potential, fail. If you are looking for a finance partner to speak to about your business or if you have a finance query of any sort Magnolia Lane Financial Services would love to speak to you. We pride ourselves on helping our clients grow and succeed. Please don’t hesitate to contact us on (02) 8287 3000 or email email@example.com