So you want to start your own small business. You’ve lined up suppliers, obtained all the relevant permits and have all your finances organised and are ready to go.
Or do you?
We’ve all heard the statistic that 20 per cent of small businesses close their doors within the first three years of starting, while 50 per cent will fail within five.
The reasons for closure are many, and can vary depending on industry. But there are some common trends we see small business owners grapple with across all industries - many of which can easily snowball out of control and force businesses to shut their doors if not addressed early.
So how can you avoid an early closure?
Poor business planning
Do you find yourself getting that starry-eyed look when you start thinking about your baby (your business)?
That’s great! In our experience, passion - be it a passion for your product, a passion for your industry or a passion for being your own boss - is one of the biggest differences between a successful business owner and one that may end up closing shop within three years.
But passion alone doesn't keep the lights on. No matter how big or small your business is, you need a solid business plan. No ifs or buts - a comprehensive plan is a must-have.
“Failing to plan is planning to fail,” after all.
“And a goal without a plan is just a wish.”
“You wouldn’t bring a knife to a gunfight.”
We’re running out of idioms, but we think you get the point!
Whether your business makes X, Y or Z, you need a solid business plan. You can’t go into business without understanding what you’re getting yourself into. You have to know what you’re up against the moment you even start thinking about opening a business.
It’s best to seek the help of a professional when coming up with your business plan. Your business plan should be able to answer the following questions:
How would you describe your business? And what is your vision?
What are your goals and measures of success?
What do you know about your market and your competition?
Who do you need to hire to make this possible?
Have you accounted for likely roadblocks?
What are your marketing, advertising and promotional plans?
How will you budget and manage company growth?
Poor financial management
What is wrong, however, is when many small business owners decide to take on the burden of managing their finances alone.
We strongly advise against this. And we’re not just saying this because we’re professional bookkeepers ourselves! There are countless considerations that go into proper financial planning and management: cash flow, profits, margins, expense management, audits… the list goes on and on!
Each of these are essential for a comprehensive understanding of your business, where it stands and where it’s heading. Far too often, we see small business owners (with all their passion and love) stumble and fall because they’ve neglected one (or all) of these financial considerations.
Poor financial planning
Financial planning is all about developing plans and strategies for keeping your business' financial affairs in order and your small business solvent - and the first step is asking for help from a professional bookkeeper.
Maybe their forecasts are far too optimistic. It could be that their funds are being allocated inefficiently or to areas that are complete deadweights. Worst case scenario, you might not even plan at all.
When thinking of opening a small business, you have to plan every aspect of your finances from how your savings are being used, risk management... and most importantly, cash flow.
Poor cash management is one of the cardinal sins of business ownership. And it's a sin that we see far too many small business owners committing before we step in.
Another major financial related set-back that small businesses often deal with is messy bookkeeping.
In the end, the reason we bookkeepers exist is to, of course, keep the books, but also provide you with information that helps you make better business decisions that help you achieve both short- and long-term business goals.
And when your bookkeeping is muddled, you lose valuable insight into your business’s financial health.
Maximum Business Solutions is here to help you manage your small business' day-to-day bookkeeping. We know the importance of handling business income and expenses accurately. Our experienced team know that you want your business to succeed just as much as you do!
Going all-in too early in the game
When opening a business, it’s understandable to want only the best for your baby. However, it also pays to be cautious. In poker, you don’t go all in when all you have is a two pair (unless you’re a very good bluff)... and the same holds true for your small business.
We’ve seen far too many small business investing in assets which don’t fit with their core business or long-term strategy. Handling your investments responsibly and making financial decisions which are in line with your business’ strategic plan is paramount.
Resist the urge to go all-out in the early days of your business. Pace yourself - there may very well be a day when you can afford to invest thousands of dollars in the latest technology... it just might not be today.
Protect your business: start with the right small business bookkeeping strategy!
So if your business is flying blind when it comes to small business bookkeeping, rely on Maximum Business Solutions to take the weight off your shoulders.
Our team of bookkeeping professionals take care of the bookkeeping needs of small and medium-sized business owners all across Melbourne - from cleanup to complete account management, we’ll create the right solution customised to your specific business needs.
For peace of mind and expert advice which puts your business on the right heading, book a consultation with our team or call (03) 9589 0128 now.