How to start or scale a business.

In 2019, the Small Business Association (SBA), stated that 70% of new businesses succeed during the first two years of being open, and further noted that success rate at the five-year period dropping to 50%. Whilst these are solid statistics, taking into account the tough conditions that small businesses are facing today, starting up any business is a challenge with much to consider. 

While setting up a small business may bring your dreams alive, get your juices flowing, energise you and put in place your passion and commitment to serve others, having a vision and being armed with a few key strategies will help grow your chances. 

No matter the type of business you’re planning on starting or the economic condition at the time, the following points have been identified as key elements that will provide you with more clarity.  

They are also a great list to come back to when the time comes to scale your business.

Capital requirements

At a high-level, small-business owners usually understand 2 key areas: the base cost price of their service/product and the sale price /retail price. However, even as a sole trader, there are many other items that make up the business operational costs. Being able to identify them and knowing what your net income will be is a critical component to success. 

When identifying your ongoing costs, keep in mind that some costs are paid, monthly, quarterly, half-yearly and annually. And don’t forget about tax!  

Being able to understand a budget and a cash flow is important to assess when money will be coming in (income) or going out (expenses). Poor cash flow management can significantly impact your business and may prevent you from growing. 

Your accountant can help you set some fundamental tools initially but you shouldn’t be solely relying on them. Being able to review your accounts yourself and to make adjustments that shows you the impact of your decisions on cash flow will ensure you are better equipped and you will gain the confidence to take control and manage your destiny. 

It's not uncommon to see businesses that have been running for years but whose owners never got the guidance on how to set up the proper tools. Once they finally take the time to review and understand the numbers, they usually feel a great sense of relief knowing that they now have an in-depth understanding of what is happening in their business. More importantly, they can see plan the changes they make to products and services and know the impact these changes will have on their business – it’s at their fingertips. It really is a leap forward in their success story. 

Business acumen

Knowing your skill or your strength in business is vital, but it is equally important to know where you stand in respect to actually running a business and managing people. 

Taking that leap to go out on your own can be daunting. Starting off small and testing the waters can be a great way to begin You can, for example, start a side hustle whilst you stay in the comfort and security of your current employment. 

Running your own business in many ways is like taking that step from being in a job where you know and control everything to managing a team. Whilst you are an expert in your field, taking that step into leadership adds a little more complexity to your expertise. 

Just like taking on a leadership role, setting up a business, requires you to invest in yourself. Becoming a leader requires training and support – we all need to take that extra step in knowing ourselves and our triggers so we can understand the impact we may have on others.  

To start a business, not only do you need to invest time in preparing a proper business plan (that is more than a one-page document) that will provide clarity, vision, and a solid foundation, but you also need to know that you have to allocate time to work “on the business” just as much as “in the business”. 

Having business acumen is part of the learnings that need to be considered. It goes beyond your skills and across all areas. 

Start with your business plan. 

Planning and infrastructure

Now that your business plan is ready, it’s time to start seeking the support you will need: identify your strengths and who you will need as part of your team. 

Whilst you may start as a sole trader, knowing what skills to look for in people as you expand the business is necessary and forms part of your vision. When you can identify people in your proximity that hold traits, skills or perhaps knowledge that you can rely on, start to formulate your bigger picture and the roles these people could fill in in the future. 

As you do this, you will also need to adjust your Business Plan to identify when you can afford to bring people on board while maintaining your margins. 

Understanding the interdependencies that exist between people, costs and revenue in a business will ensure that you stay ahead of the game. It will also enable you to know what each person needs to deliver so that the business can be sustainable.  

Most of the time people bring staff on board with little or no clarity on what the key objectives are and whilst you may have the right person, if you can’t provide them with clear direction, they may not be able to achieve targets and start to feel like they aren’t contributing. You want people to succeed with you so ensuring you know what you need them to achieve from the onset is essential. 

Remember, being able to share your vision with each person you bring on board is the key to get their buy in and achieve greater impact. 

When scaling up, go back to your business plan and adjust your new vision. Build in additional costs and new potential income. Be conservative with your income – perhaps create a stress test to allow for some room to adjust and create a cashlow with variables to see which model provides the best outcome. 

Marketing

Knowing your target market from the onset is critical to create the right messaging and identify the correct sales channels. Unfortunately, small business owners tend to neglect this research even if, let’s face it, getting sales without marketing is tough. 

Knowing your client is critical to your success. Covid 19 or not, people somewhere will need your service or product so knowing your point of difference or which pain point you’re solving needs to form the base of your marketing strategy. 

These costs need to be built in, more importantly, you need to accept that marketing, especially for a new business will take time. Set realistic expectations or you risk giving up too early.  

External help

It’s also important to know when you need to seek out external support and guidance. 

Over the past few years, many businesses we’ve supported have gained great traction by taking these 4 measured steps on board. Remember: you don’t know what you don’t know so, do the work and that additional clarity may enable you to step into your new Vision with a key point of difference. 

When starting your own business, the question of timing is all about knowing when or if you are ready to step into a path where you can take ownership and be accountable to yourself and your family. 

If you feel ready, then start with these four steps and then ask “what else” and “who else” can better support you? 

Create your vision – your passion with measured steps. 

Are you ready to start or expand your business? Solutions2You can provide you with the guidance you need to take that next step and take control of your success story.