.
Depends. You need to have passion for what you're going to be doing - this makes some of the long hours easier to bear. The first couple of years can be quite a rocky road. Something like half of new small businesses don't get past this period. You need stamina.
It's not enough to have a great idea. You've got to do your market research ..... What's the existing competition like? What would be your point of difference - can you do things cheaper, better or faster in some way, compared to the competition?
And, you've got to have the right mix of skills. As Michael Gerber says in his classic book, The E-Myth, there's no point going into business on the basis of just having strong technical skills (for example, you're a highly capable mechanic, or plumber, or gardener). You've got to be able to sell and market your services or product. And you've got to be able to plan and organise efficient completion of the work. Plus you've got to be able to control your expenses and manage a budget. Needless-to-say, being self-motivated is essential.
2. What are some of the mistakes new small business owners make?
A common one is neglecting to have adequate cash reserves in place. In many small businesses, cash flow can be somewhat erratic. It can take quite a while to learn the cycles of your business, so that you can anticipate the ebb and flow of your revenue. If you're not making sales, then you need to draw upon your cash reserves to meet your running costs (power bills, rental, equipment and possibly labour wages).
Another common mistake is not clearly defining your target market - and then not listening to your market. In other words, too many people have gone into business thinking they've got a great product or service, but not seeking feedback from people they are targeting as customers. What ultimately determines whether your business generates sales has less to do with what you think about your product and more about what your potential customers think. Too many entrepreneurs fail to seek proper market feedback to guide them in the design and development of their product or service.
A mistake made by many small business owners when they are in the growth phase of their business occurs when they start to hire staff for the first time. Too often not enough probing is done during the interview - and the inexperienced business owner can be "seduced" by the applicant who is simply a good talker, but not necessarily possessing the required capabilities to do the job. Enormous damage can be done to the brand of your business when you recruit the wrong person. Get some expert advice before you start hiring staff - there's a nice concise article you might find useful Hiring Tips for Small Business But even if you happen to recruit the right staff member, then you've also got to know how to train, manage and motivate staff
3. But what if I fail and it all goes pear-shaped?
Yes, there is a risk that the business may not work. But there are strategies you can adopt to help manage the risk.......
i) Get advice from experienced business people before you make any significant financial investment
ii) Trial the business on a part-time basis before you quit your job
iii) Regularly put aside some of the profit, instead of pouring it all back into the business. Use some of your profit to build up your reserves
And when you are considering the risk, remember to also think about what you stand to gain if you can find a way to make it all work. By all means take care, do your research and do not be reckless. But try not to let a fear of failure cause you to just stand still and never move forward. As Thomas Edison wisely said "The person who never failed, never learned anything". For more excellent tips on dealing with this, have a look at Overcoming a Fear of Failure
There will inevitably be many times when you are running a business that you recognise you've made a mistake - perhaps for example an error of judgement when you have responded too slowly to changing market trends. Or maybe you realise you recruited the wrong person. Or you paid too much for some plant or equipment. Hopefully, you don't make the same mistake twice. It is a measure of your mental toughness that you bounce back, seeking firstly to fix the mistake and repair any damage. Then secondly, it's about putting in place whatever is necessary to prevent recurrence - sometimes this may mean correcting procedures or processes in the business.
4. What should I name my business?
Some small business owners elect to combine their family name with the nature of the business, such as Taylor's Gardening Service, or Murray's Garage, or Mitchell's Plumbing Solutions. Other owners elect to go for something that is a bit quirky, such as Google or Twitter ..... believing it will be more memorable.
Whatever you choose, you can register it online with the Australian Securities & Investment Commission (ASIC) - just check with their data base that the name you desire has not already been registered.
5. What's the best way to promote my small business?
For a start, get the basics right ...... deliver a great product or service, at a good price, consistently. If you can do this, then your satisfied customers themselves will naturally work on your behalf to promote your business
Then, think about digital marketing. Make sure you have a compelling website - and that does not need to be an expensive one. Learn about how to get found by Google. And support your website with some social media - try to develop a blog and a Facebook page that allows you to engage with potential customers.
Think about sponsorship of some of your local sporting clubs or school events, if you need to raise a local profile. For some further ideas on growing your business, look at Marketing for Small Business
6. How do I value my small business if I want to sell it?
There are many different methods and formulas that can be used. Obviously an accountant can give you a more detailed answer, however as a simple guide to get you started, you might consider the following components in calculating the value of your small business
Firstly, consider the nett asset value. This is determined by adding up your total assets (cash, stock, plant and equipment) and subtracting your liabilities (bank debts and outstanding payments you owe). This would be the money you walk away with if your business closed today.
However, this figure alone does not take into account the ability of a business to generate future profit. This is where the concept of adding the value of goodwill comes into the equation. The value of the brand and reputation of the business, plus the value of the location of the business. Location can be in terms of either the physical store or the digital location - and the online authority of the business to generate traffic and therefore sales.
Different accountants can attempt to use different methods for different industries to estimate the value of goodwill ..... sometimes a multiple, say 3 or 4, times annual profit has been used for example. But ultimately, the goodwill value of your business will be determined by the marketplace.
7. Should I sell my small business?
If you're contemplating selling your business, step back and ask yourself why. Selling the business will mean a major change in your lifestyle and is as big a decision as when you first decided to start the business.
Is it maybe that you simply need a break, perhaps some of the stress and frustration has been getting you down and some time-off will help you rejuvenate?
Or maybe there are specific parts of running your business that are getting to you - and perhaps you could consider outsourcing these eleemnts? ..... But at the end of the day, if you feel that you've lost your passion for the business and you no longer experience the drive and enthusiasm that you used to possess, then it's likely time to sit down and discuss preparing for an exit with a trusted financial advisor.
Carefully consider the timing of any sales decision. When your industry is peaking and your own business is generating healthy sales, then there will likely be greater interest from prospective buyers. Maybe even some of your competitors might be interested in the business. The WA Small Business Development Corporation offer some good advice on when and whether to sell a business.
For more small business tips on running and growing your business, have a look at some of the articles in the Sydney Morning Herald's My Small Business
Copyright 2013. Brian Carroll is the founder of Performance Development - a corporate training and coaching company based in Melbourne, Australia that delivers management training and leadership development services.
