Sometimes, business has a short memory. As we already near the end of January, we’re embracing the New Year we’re renewed vigour and vitality.
While 2013 may be but a distant memory for some; it certainly pays to reflect on the last 12 months.
While it’s important to ponder our failures, it’s equally as important to reflect on our achievements, chart a course for the year ahead with our eyes firmly fixed on our goals, sailing through the storms, riding the winds and achieving positive outcomes.
On reflection, many of the discussions we have had in our preliminary client meetings tended to focus on the very basics of starting a small business. The most important issue that we see in this regard is ensuring that each and every small business starts with the most appropriate legal structure in place.
Finding the proper balance between initial cost, personal goals (both short and long term), income tax minimisation and asset protection can be a delicate balance and has involved many discussions, all of which resulted in enlightened small business owners.
Much of what follows in setting up new businesses revolves around this step, and getting non-accountant/legal individuals to conceptualise the benefits and potential disasters that this entails is never simple but always fruitful.
Keeping costs to a minimum in the initial phases of starting a business is often the only thought of the start-up small business owner. That’s why using the services of experts can help in protecting you from yourself.
Micro-managing small businesses can often see the business owners become distracted and lose focus on the big picture. Keep both eyes firmly focussed on the long term big picture combined with carefully implemented systems and procedures will ensure that you aren’t sweating over the small stuff.
Following on from those discussions, setting up key procedures for managing your finances and paperwork is another area where many small businesses fall down.
Unless you’re starting an accounting or bookkeeping business you really aren’t going to be looking forward to the paperwork and red tape that naturally comes with running a small business. Work with your accountant, know your key dates and obligations to the key bodies, namely the ATO, ASIC and Superannuation requirements.
We find that the clients that succeed well in this area are the ones that develop regular routines to manage the administrative side of the business. Creating a virtual “too hard” basket only delays and heightens the pain.
A further side of small business that we see in our office is the growth phase. Once a small business has been successfully launched the next phase begins. The most critical aspect of growing a small business is cash flow.
It’s an old cliché but cash really is king, the greatest business idea in the world isn’t really worth anything until it results in cash in the bank. For some businesses getting to this stage can take longer than others, but it’s a destination you need to reach as soon as practicably possible.
Learning to manage the cyclical flow of cash in, through and out of a business, can be a real art. Most often, businesses that fail do so due to poor cash flow. Once it gets out of hand, the downward spiral can be difficult to reverse which is why keeping on top of your cash flow from the beginning is a key factor to success.
This aspect has been the subject of entire business books but the key pointers revolve around managing your customer’s expectations. Clear and well-known payment terms presented up front will generally result in earlier payment of your invoices. Knowing your customers well and using payment services that will suit them and make it easier for them to pay you can often be rewarding.
Chronologically speaking, a side aspect of the growth phase can often come about where potential third party investors come along and want to add to and share your journey in business.
This can be a great boost for those businesses in the growth phase that have the correct legal structure in place to facilitate such opportunities. Fresh ideas can be as beneficial as the extra cash these investor bring to the table, just be certain that their goals are aligned with your own.
If you couldn’t see it before, hopefully this point clarifies just how critical it is to create the legal structure that allows for long terms goals such as allowing new investors to become stakeholders in your business.
The adventure that is small business can be a wonderful experience filled with rewarding learning curves much like a game of snakes and ladders. Of course, you never know how the dice will roll but looking out for the right ladders to climb and planning ahead as much as possible to avoid those slimy snakes will see you get ahead of the competition now in 2014.
