There is no blueprint for a great business or any limit on who can become a great entrepreneur.  It’s hard not to get carried away with the excitement but turning your idea into a functioning business will require a plan and the drive to see it through.  

There is no blueprint for a great business or any limit on who can become a great entrepreneur. As a person, you don’t need a university degree, a heap of money in the bank or even business experience to start something that could become a wonderful success. It’s exciting when you have a moment of inspiration, that flash of brilliance that becomes your new business idea. It’s hard not to get carried away with the excitement.  But turning your idea into a functioning small business will require a plan and the drive to see it through.

Make no mistake, the risks are real. The Bureau of Statistics claims there are more than 2 million small businesses in Australia. But starting one and, more importantly, keeping it afloat is never smooth sailing. Data and analytics provider illion revealed 54,992 businesses went bust in Australia last financial year. This figure was a 12.7% increase in the number of failed businesses compared to the year prior. 

The data also revealed that retail has been most affected by businesses closures. American Express and RFi Group surveyed almost 1,000 small business operators (to produce The Economy of Shopping Small Report) and found that one in three fear they will close their doors in the next three to five years. Of those in fashion, 43% fear they will become insolvent in the next few years, while 53% of food retailers think they will close soon. Retailers closing their doors is not only bad news for the owners but also for the banks and the economy.

The reasons for failure are many and varied and include rising energy bills, increasing overheads, cashflow problems, payroll costs and, most recently, struggles to secure finance.  Some businesses grew too quickly without fully understanding how to scale. This lack of knowledge, coupled with increased competition, poor systems and processes, as well as inadequate record keeping all play a part and can have major impacts on your success. A lack of marketing can also bring a business to its knees. 

There is also financial risk as you leave behind a secure paying job, with company benefits like annual and sick leave, superannuation and rewards. Your home and personal assets might also be at risk. 

But that said, if you don’t try you will never know how much you could achieve.

Starting a business is not complex but requires quite a bit of thought, consideration, research and planning.  And the more of this you do at the beginning of the process, the better off you will be 3, 6 and 12 months down the line. 

So, before leaving a secure job and launching your own venture, ask yourself – are you truly ready to start a business?

Why?

Starting a business can be the most rewarding thing you will ever do, so long as you are in it for the right reasons and plan well.

Being in it for the right reasons, is a hugely important factor – as this is the reasoning that will get you through the tough times. It is about acknowledging that there are benefits to starting a business that mean something to you personally.  For us, it was autonomy and independence, followed very closely by flexibility, which has allowed us to be with our children when they need us. 

The second most important factor is what and why.  Having now met and worked with hundreds of small and large business owners, I can safely say that those that are truly successful are a) passionate about what they do and, b) have a truly authentic ‘why’.  Mark Zuckerberg was passionate about what I like to call social connectedness and built a tool that made it possible for people to connect anytime and anywhere on topics that interested them. It may not seem like much and sometimes your what may not be very unique (we are accountants….nothing unique in that!) but your why is the power in your punch.  When you hear someone deliver an elevator pitch with a powerful ‘why’ it changes the game…remember Kenny and his toilet business?

If you are new to the world of carrying on business, you will need to navigate step one business set-up activities, before you can even start trialing your product or service in the real world.

Skills

Before starting your business, it is important to be honest with yourself about the skills you have and those you don’t have.  Ask yourself:

1. Do you have the skills to provide the service you want to sell?  If not, skill up before you quit your day job and interview other business owners in the same field to understand what they struggled with. If you have no experience in your field of interest, another option is to work in the industry on a casual basis, whilst keeping your day job. For example, if you’re thinking of buying a cafe, take a casual job in a cafe to be sure it suites you.
2. Are you good with things like financials, marketing and operations?  If not, when writing your business plan, consider the software and people you need to help you get going (and the costs!).
3. Do you have the discipline and motivation to keep going when times are tough?  If not, consider getting a mentor or support group of friend and peers.
4. Do you have any industry experience?  If not, do your research.  Catching up with business owners over coffee can give you invaluable feedback that helps enormously.
5. Do you understand the tax, compliance and corporate secretarial requirements of running s business?  Do you have a solid understanding of how to do your own books?  If not, reach out to an accountant and also scope their costs.
6. Are you an effective communicator?  Do you have a sales presentation and, the courage to present it?  Practice makes perfect so ask your friends to watch you and give you feedback.
7. Are you good at problem-solving under pressure?

Consider the above and makes some notes about where you excel and where you need help.  This will ensure you don’t become deflated when pouring tons of energy into doing something you don’t have the skills to do.

Further, there is a plethora of free training you can do online.  Consider attending a Small Business Victoria workshops on business planning, financial management, marketing or online.

Planning

I am a true believer in having a plan.  Your sense of success is dependent on your achievement to plan (especially in the early days when profit and money won’t be a good indicator).  So, ask yourself:

• Do you have a business plan (chicken scratching’s are not acceptable)?  If not, take the time to write one.  It may take a few days, but it will be well worth it when you find yourself floundering.
• Have you thoroughly researched the state of the market and the type of customers you need to target? What do you know about your competitors?
• Is there a proven market for your service or product?  Are you filling a gap, entering a market where demand is greater than supply, or providing a point of difference in a non-unique domain.
• Have you thoroughly researched your industry? To find out more about your industry, seek out existing market research or do your own. IBISWorld has independent research reports and analysis on more than 500 industries. You can also access IBISWorld reports for free at Victorian Government Trade and Investment (VGTI) offices.
• Do you have sufficient funds to cover the start-up costs and the first couple of years when cash flow might not be steady?  This is often hard to plan for as most business owners miss significant costs that de-rail their budget.

The best course of action is to write a business plan for the first 12 months, a marketing plan, a financial forecast and cash flow forecast.  Once again, I cannot stress enough the importance of research and planning to ensure you budget and forecast correctly.

Mentors and Business Advisers

Mentors and business advisers can provide you with day to day guidance on how to run and operate a business and, if you choose them well, they may also offer industry insights into your industry. Business Victoria provides a paid mentoring service, which can connect you to someone with experience in your industry.  Or ask your friends and family for the names of business people that may be willing to offer their time for free.  You will be pleasantly surprised by how helpful people will be if you ask.

For help with the financial aspects of starting and running a business, seek the assistance of a Chartered Accountant.  Good accountants will be registered with a professional body that regulates their professional conduct and ensures that they stay abreast of legislative changes that guide how compliance is to be applied.

An accountant can help with most of the financial aspects of starting a business: from registering a business, to tax, compliance, corporate secretarial, software, software training, bookkeeping, payroll, business planning, cost and cashflow forecasting, management accounting and reporting.  Accountants make great business advisers as they are business owners and, if they are dedicated business accountants, will be surrounded by other business owners.  They also tend to be financially literate and commercially savvy which is a definite bonus.  We always recommend having an accountant in your group of advisors from the get-go, to ensure you have a laser focus on financials from the start.

Financial Planners can also assist and likewise, should be registered with the Financial Planning Association of Australia.  They can help with setting up short and long-term financial goals, including investment advice and estate planning. 

Buy or Start from Scratch?

Buying an established business is definitely the easiest way to get started, especially if it is a turn-key solution (walk in and everything is set to go).  Buying an existing business offers you a proven track record. You’re buying the physical assets, customers or clients – which are crucial to making a profit. But it is essential to perform your due diligence and check the financials carefully before you buy.  Once again, a good accountant is an important asset during this time, providing independent guidance and advice through the acquisition process.

Starting from scratch inherently has more risk and difficulty. When you start from scratch there are so many things you need to establish compared to when you buy something established (e.g. compliance, legal requirements, pricing, marketing, stock and staff just to name a few).

Once again, starting a business can be the most rewarding thing you will ever do, so long as you are in it for the right reasons and plan well. Starting a business is also hard work and sadly, often there isn’t anyone around to pat you on the back and keep you motivated.  But if you start with a coherent business plan, a group of trusted advisers and mentors and, make the right decisions early on, the rewards are well worth the effort.

If you have any questions or need advice and clarity specific to your situation, feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.