The stats are sobering for small business owners in Australia, with more than half of small business start ups ceasing trading in the first three years.
However, this CGU executive shares some first-hand advice to ensure your business doesn’t succumb to this fate.
Starting a small business can be one of the most exciting stages of anyone’s working career but heeding advice from others will certainly make it an easier journey.
CGU’s Amanda Whiting, has been with the company for nine years but she’s also been a small business owner and has plenty of lessons to pass on.
Amanda says 60 per cent of small businesses close their doors in the first three years, but there are vital lessons to be learned in the early days that can help you avoid premature closure.
Running a small business is a tall order
Her first foray into business ownership was a three-year stint owning a motel and restaurant in the middle of the Goldfields in Western Australia, just two hours from Kalgoorlie.
Having grown up in country WA, it was familiar territory, but moving from corporate jobs in the insurance and mining sectors in Perth to running her own business in the hospitality industry was a completely new experience.
“I always wanted to be my own boss. I had two small children with my husband and we were looking to create flexibility and work-life balance, so we sold up everything and moved from the city to the country."
“In the first six months of owning the business, there were some big realisations. We thought we were moving there for the lifestyle but it ended up just being our life ¬– we began to live and breathe it 24/7.”
Amanda notes that she could definitely relate to CGU research that indicates more than 60 per cent of Australian small businesses work more than 40 hours a week, while 10 per cent work more than 60 hours a week.
“It’s a hard slog owning a small business and it can wear you down if you’re doing long hours continually.”
See the forest, not the trees
While it’s no surprise that owning a business can be time-consuming, Amanda says she was genuinely overwhelmed by the amount of overtime. After their first 12 months, Amanda and her husband realised they hadn’t done any planning for the future and hadn’t managed to take more than five days off in the first year.
What about a business strategy or business objectives?
“We had a financial plan and we achieved most of that in the first 12 months but because we didn’t spend more time on high-level thinking, we were focused on the day to day and keeping our heads above water. We were working in the business, not on it.”
She says it’s important to carve out time for future planning.
“You need to consider how your goals may shift over time. Also in today’s dynamic environment, you need to be mindful of how your business could be disrupted, or how you can disrupt your competitors.”
Jack of all trades
Another challenge was managing all facets of the business. She says while many small business owners have passion for their business idea, the reality is they need to learn how to be the IT person, the bookkeeper, the HR person and “sometimes the chef, in my case”. Being resilient is incredibly important, she adds.
She says she also underestimated how important the issue of access to capital was. In fact, cash flow is one of the biggest factors influencing the success of small businesses. For this reason, she said it’s vital to also be comfortable to managing regular balance sheets and profit and loss statements.
“We were successful in winning large contracts but the cash flow impacts were huge – not being paid until three months later was a shock. We learnt quickly about having access to lines of credit or cash flow to assist during those times.”
However, she adds with proper planning these issues can be managed.
“You need to understand what you’re in for from the beginning and dedicate time for strategic planning because this is vital in the success of running a small business.”
Aside from the dedication it takes, she says it’s extremely rewarding to be your own boss.
“The stakes may be high, but for those who take a well-considered approach, who seek advice in the early days and remain diligent, the payoff can be huge – both in terms of satisfaction and business income,” she adds.