Take a wild guess at how many small businesses there are currently operating in Australia. Okay, I won’t leave you hanging, there are well over two million out there right now, many of them probably a lot like yours as far as staff, turnover and other boring business statistics are concerned. Hard-working, determined people like you putting in the big hours and the big effort to make a go of it. Lots of ideas, tons of effort and every reason in the world they should succeed.
So why do around half of them tank before they make four years in business? Yes, you read that right – half of all new businesses will fail less than four years after they open their doors. Despite a universe of online advice, expert coaches, consultants, classes and workshops, 50 percent of small businesses simply don’t make it. And perhaps the biggest surprise is that the reasons so many of them bite the dust are not mysterious, driven by complex market forces or a bad economy. A lot of this is very simple and common knowledge for people working in commercial banking, who see this stuff every single day and who I talk with all the time.
Be careful who you hook up with.
It sounds like a line from an STI prevention campaign, doesn’t it? Maybe that’s apt, because the wrong business partner, just like a nightmare bunny boiler, can leave you angry, confused and fearful for your financial life. There are other parallels, too. Very few lasting business partnerships are love at first sight. We’ve probably all run into people who have infectious energy, amazing ideas and a drive to succeed, but shaking hands and running off to the Business Registry Office together rarely ends in ‘happily ever after’. Stop. Think. Take your time. And if after lots of consideration you still believe that a partnership is the way to go, discuss it and plan it down to the last detail. Be perfectly clear on roles, performance and what each partner expects of the other. Agree on an exit strategy in case it all goes wrong. And if you find that your potential partner passes all of this off as unnecessary complication, don’t walk away – run!
Do the numbers. Then do them again.
Nobody ever got into strife in business by focusing too closely on their accounting. Unless they are threatening to actually change the locks on you, there is no such thing as seeing your accountant too much. Your business numbers are your compass. You check them often, navigate by them, see obstacles before they come up and steer around them. Does that sound excessive? Because anything less is effectively running your business with your eyes closed. It never ceases to amaze me how many business owners I speak with who seem to think that an accountant is someone you see when you need your tax done. That’s a lot like designing an airbag that goes off after your car collides with a tree. Stick to a business plan based on rigorous budgeting. Check your sales figures against budgets and goals. Get into a habit until you can see anything out of the ordinary at a glance. Too many good businesses collapse because the owners just don’t pay close attention to accounting.
Don’t show off.
Got your ego in check? It’s amazing how many people start up a business and fall over themselves to overtly show off that they’ve made the big time – long before they actually have. You know how it goes, fancy clothes, fancy car, expensive, holidays. Now if that’s your style and you want to treat yourself then go right ahead if you can genuinely afford it…but owning your own business is not an instant ticket to the high life. As I’ve already mentioned, do your accounting rigorously and navigate by your numbers. Then only when you really have everything in order and the disposable cash to do it, if you really want a fancy car or whatever, reward yourself. But be careful. Driving a Porsche is all very well, but watching the repo company load it onto a truck is far less of a buzz!
Talk to those who’ve made it.
After all those don’ts, lets close with a ‘do’. When you’ve chosen the right partner (or better yet, chosen not to have one!), you have your accounting in great shape and you’re making smart choices, find one long-term successful business owner you admire and make a habit out of talking with them. Try to catch up regularly, buy them a coffee and keep your ears open for the sort of wisdom you’ll only get straight from the coalface. Keeping the right business company can go a long way towards your own long-term success – and staying off that scrapheap!
Wishing you the best for your week in business,
Jason Smith l Director