Starting your own business is an exciting adventure but it involves plenty of challenges as many entrepreneurs will know. Surviving the first 3 years requires an understanding of 5 major disciplines and keeping them in focus every step of the way. Here they are; see if you recognise them as we offer suggestions on how to manage them.
1. Capital and Cash Flow
Money, or lack of it, is by far the biggest problem faced by small business star-ups. Too many times, eager to get the new business up and running, business owners underestimate the amount of capital needed. Start-up costs often exceed budget or they get left out of the budget altogether. It is important to get multiple quotes for large-ticket items and equipment and always set up a contingency reserve for possible unforeseen costs.
The other key money factor is cash flow. It’s easy to be overly optimistic when forecasting projected sales figures and cutting your operating expense budget too thin can be disastrous. Good financial managers suggest having enough cash on hand to sustain the business for two years, at a minimum.
Hand in glove with good forecasting is making sure the cash is coming in on time. Get your invoices out within the first week after completing the work and keep a tight rein on the credit you extend. If your terms are 7 days, chase the payment as soon as the time is up. Remember, credit is a privilege you extend, it is your money…you’ve earned it.
2. Failure to Plan
All too often entrepreneurs “fly by the seat of their pants.” Most of these businesses struggle from the outset and become casualties before they get off the ground. Success for a small business starts the same way as a large company, with a sound strategic plan, complete with realistic goals, some market analysis and a vision for the future. You will need to develop a business plan with a detailed budget, cash flow projections and break even analyses. Be careful not to cut corners with your planning and research; don’t overlook the difficulties you might face. A well thought-out plan that faces the tough issues up front will be a huge step toward success.
3. Not Getting Expert Advice
Your plan doesn’t have to be a complicated set of documents and you may need to get some professional help with the preparation but it is well worth the money in the long run. You will pay a little more for a CPA or a solicitor to help get your business off on the right foundation but this is an investment in your future. Mistakes can be costly. Professional help will pay dividends over time and you’ll sleep better at night too.
4. Time Management
A business plan is only good if you stick to it. That means managing your time well. Avoid packing so much into your day that that you can’t possible get it all done. Pick and choose what’s important, focus on critical stuff and get it done. Little things will fall through the cracks…that’s OK; if they’re important they’ll resurface later. Use visual tools and charts to keep track of your work flow and assist your decision making.
5. Resistance to Change
Whether your business is a start-up or has been going for decades, change is real and it can be frightening. We’re living in a world of rapidly changing technology and methods so we need to embrace a culture of forward thinking. Be open with your staff about changes taking place in your organisation and in your market. Invite their ideas and suggestions and implement the ones that are best for the business… and give credit where credit is due for valuable contributions.
Written by Art Beavis – Managing Director of Experience Plus Consulting Pty. Ltd. You can contact Art at the following email address: email@example.com