As a small business owner I have felt great success and great failure in my businesses.
Throughout my professional life I have also had the opportunity to work with a variety of different people and businesses. I have seen ideas go from nothing to greatness but I have also seen some great ideas result in large debts and lost dreams. So why is it that statistics shown 9 out of 10 small businesses fail?
Well I believe that the success of most is based on a strong foundation of hard work and passion but this is not always enough.
Here are a some of the top reasons whey small businesses fail.
_
1. Mindset
Just to reconfirm, I believe that the success of most small businesses comes back to the strong foundation of hard work and passion.
Some people believe that small business management will be a breeze compared to the 9-5 that they currently enjoy.
Small business is not a breeze, it is hard work for anyone wanting to do it. Hard work equals pay off, the goal is to get that mindset right before starting up a small business.
_
2. Insufficient research
So you have an idea for an incredible product or service and you feel you can take that idea and make it huge. But one has to remember that for a business, groundwork and research is as important as an incredible idea.
Before you are part of the market, you need to research the market. Areas to research:
• Target Audience;
• Identify demand for your product or service;
• Competitors currently in the market;
• Barriers to entry (new competitors);
• Point of difference to current competitors.
This research is just the start, and it is important to tick these off as a minimum.
_
3. Poor/No Planning (No Business Plan)
You have done your research but now you have to plan. To ensure success you need to plan every step of your business. The first step is to speak to an advisor and ask for a business plan template, start completing this. You will need to understand and document all key areas of your small business and the associated strategies.
Even if you have been in business for years it is always a great exercise to do a refresher of your business plan. I recommend annually.
_
4. Business based on Emotions
The greatest business owners do love what they do and if you don’t love what you’re doing it will be tough to get out of bed everyday. But there is a point where you need to understand that you are running a business, not hanging out at the beach drinking Pina Coladas.
Make business decisions based on logic and not emotion. If you let emotions make your decisions, you will struggle.
_
5. No Cash or Start up Capital
All businesses need cash, without cash the business will finish as quickly as it started. Get your business plan sorted and understand what cash you need to get your business idea started and funding for the first 12 months minimum.
There are multiple options for funding your small business including self funding, crowd funding, bank finance or equity investors. Look into this when you are forecasting out your income, expenses and TAXES!
Speak to a business advisor about cashflow forecasts, they will save you a lot of pain and give you some good data to work with to create a successful business.
_
6. Forgetting about Taxes
In addition to point 5, one big item that small businesses struggle with are taxes. Australia is one of the top taxed countries in the world.
Be sure to budget for taxes especially if you want to be running a successful small business.
_
7. Hurried expansion
Sometimes it is a simple as too much too fast. At times if the start-up shows early signs of growth, then the business owner may undertake aggressive expansion plans without taking into consideration as to how this would be done in terms of capital and resources. For expansion adequate planning is needed.
Remember, before expansion there must be planning and a cashflow review.
These are just some of the reasons I believe small businesses fail. If you would like to discuss these points further or would like some advice surrounding the success of your small business, please contact Walker Hill on 07 3367 3155.
Nick Hill
Walker Hill – Director
