Starting a business is incredibly exciting. It’s a chance to build something you’re really passionate about, which will potentially support you and your family. It’s also a lifestyle choice that can help you lead a much more fulfilling existence than working for a big, grey corporation.
It’s important to take the time to properly plan for your business’s future. To help with this important process, here’s a comprehensive guide to what you need to consider if you’re going out on your own.
First things first
First, think about whether the business is viable. What’s the market for your business? Initial market research to identify your customers and competitors will help you find out if the venture will fly.
It’s also crucial to have a concrete concept for the business – vague ideas about doing something with the internet from home aren’t enough. Conceptualising the business is an exciting part of the development process, so use your imagination and do research to inform your decisions.
The right skills
Also reflect on whether running a business is right for you. Do you have the technical and business skills to run a company? And think about whether you have the financial and other resources to get the business going.
Many people know Jim’s Mowing for its eye-catching trailers with founder Jim Penman’s smiling, be-hatted face on the side.
Jim started his lawn mowing business as a one-man band. Now, the Jim’s Group is one of the world’s largest home services franchises. It has 2200 franchises across Australia and New Zealand.
Says Jim: ‘I recommend to anyone starting business to pick the worst job they can find. People say they want to be rock stars and sports professionals – but they are the hardest professions to make money from. Don’t pick something where there’s heaps of competition. I started in gardening when there wasn’t much competition around.’
Look to the long term
Making sure you are opening a business in an industry with long-term viability is also essential.
‘You need to look at the industry you want to be in and assess whether it’s growing or declining. For example, unless you plan on filling a niche spot in the market, now might not be the time to open a CD shop, because people buy music from the internet these days,’ says PricewaterhouseCoopers’ Jason Daniels, who consults to PwC’s private business and entrepreneur clients.
Take time to learn
CPA Australia small business specialist Gavin Ord says ‘learn as much about your industry and market as possible, do additional study in your field, speak to your industry association and your accountants, and observe successful and unsuccessful competitors. And work hard – that’s very important.’
A key consideration is whether being in business is right for you. ‘The Business Brain Surgeon’, Dr Greg Chapman, who is a director of The Australian Business Coaching Club and a specialist small business consultant, says it’s not like having a job where there’s always someone there to make sure you’re doing what you’re paid to do. ‘For most people, running their own business is a step outside their comfort zone, which is why most people remain employees,’ he says.
‘One of the big differences between being an employee and owning your own business is promotion. If you are not comfortable about marketing, being in business may not be for you,’ he says.
On the analyst’s couch
Chapman advises ‘serious self-analysis’ before deciding to go it alone. ‘Think about whether you want to create a business or buy an established concern – there’s less risk buying someone else’s business than starting from scratch.’
‘And do your research – it might be time consuming, but it avoids expensive mistakes. For example, think about your location. You might be tempted to take a cheap location – one with no passing traffic. But a more expensive place with more passing traffic might pay for the additional rental cost.’
Chapman says it’s crucial to get advice when starting a business – but not just any advice. Use specialist services wherever possible. Using a lawyer with extensive experience negotiating commercial leases for small businesses is one example. Finding an accountant who has helped businesses like yours is another good idea.
The cost of failure
‘If you think advice is expensive then think about the cost of failure. If you plan on running a small business with a turnover of say $1,000,000, then $10,000 in advice is not much to spend,’ he says.
Free resources
Take advantage of the many free resources available to small businesses – for example free government seminars and online blogs.
There are also grant schemes open to fledgling businesses. Check federal and state government websites for details.
Don’t forget the staff
One of the biggest resourcing issues facing small business is staff. In its start-up stage, a business can usually rely on the hard work of a dedicated few. But as the business grows, a more formal human resources policy needs to be put in place.
‘You need to be creative with your HR to ensure that clients have the same experience with your firm, no matter if they deal with you or someone else,’ says Daniels. ‘It’s hard to find good people, so work on retention strategies like performance bonuses and workplace flexibility arrangements, and think laterally about how you manage people,’ he says.