Running your own business can be very rewarding but success is not always guaranteed. Businesses are most vulnerable to failure during their early years of trading – statistics vary but one commonly quoted is that half of all small businesses fail within their first couple of years.
Running your own business requires you to be a jack-of-all-trades. Dealing with marketing and finance functions among many other aspects whilst still trying to maintain and grow your business isn’t easy. There are an endless number of traps to fall into. Here are five ways to give your business the best chance…
Does your business have a clear mission, yearly goals and a long-term game plan? Having a business plan in place will help you to focus.
Ensure your goals are specific, measurable, achievable, results-focussed and time-bound. Review your goals regularly and set yourself new ones when appropriate. Most importantly communicate your plan and goals to your employees and ask them to contribute to this process. Don’t keep them in the dark. Their livelihood is tied to the success of your business too, so make sure they know what they and you both need to do to keep your business healthy.
It’s worth remembering the old business saying “turnover is vanity, profit is sanity but cash is reality”. Cash crunches are generally what sink small businesses so learning to monitor that metric is critical. Simply forecasting your cash outflows and cash inflows for the next 12 months will ensure that you will have sufficient cash to run your business. Check the date of key outgoings (such as VAT and payments for rent and rates) to ensure that those are correct and test your forecasts with someone you trust. Always be prepared to re-adjust.
Picking the right person to help you is key, particularly in a tight knit and specialised market. Think carefully about the good, the bad and the ugly of being in business with a particular family member, friend or former colleagues.
Put in place an agreement which sets out the rights and obligations of each partner in the business. All parties should be clear from the outset as to where they stand. The agreement should also deal with what happens when things go wrong, for example, does one partner have the ability to buy the other out (which may favour the wealthier partner) and continue to run the business or should the business simply be wound up (which could result in the destruction of a successful business).
Knowing your market and accurately assessing trends and clients is paramount to your business success. It all boils down to understanding why clients would rather buy from you than your competitors.
5. Professional Advice
Get it when you need it. It is all too easy to skimp on professional fees by dealing with issues that you shouldn’t be doing yourself. It’s better to spend your time focussing on running and growing your business rather than re-inventing yourself as an accountant, lawyer or other professional advisor.
The key is knowing when to call upon a professional advisor and most advisors will tell you when you are asking them to do something for which they are adding no real value or which you would be better of dealing with yourself. They may even be willing to give you some free advice!