We’ve said that starting a business can be an exciting experience – but it also comes with its host of unknowns and pitfalls. It’s a frequently cited fact that 60% of businesses fail within the first three years of operation. If you’ve thought about starting a business or already have, here are some ways you can make sure it thrives.
#1 – Having the right structure
Whether you’re selling handmade gifts or houses, you need to have the right business structure. If you’re starting a side hustle, you may want to opt for a sole proprietor (sole trader) which gives you an ABN, and you’re in business.
Other businesses may need to be incorporated into a company, be divided among a partnership, or set up as a trust. You may be producing intellectual property which means setting up a holding company and operating company to reduce risk. Ask an accountant or corporate solicitor for advice on which is right for you.
#2 – Outsourcing essential business services
If you’re starting out on your own, you’ll likely need to outsource essential business services. This may be your accounting and bookkeeping to begin with, then other services such as Virtual Assistants to handle administration, digital marketing firms to handle advertising and promotion, and lawyers to handle legal affairs.
Getting these services on board early can not only help your business get on its feet, but help you scale effectively and safely (e.g getting payroll right is crucial) as you grow. If you’re a more “hands-on” type of person, then consider learning it yourself, with a bookkeeping course.
#3 – Getting the right business insurance
If you’re opening a shop, selling goods, or selling your time, you’re going to need business insurance. According to comparison website Savvy, the fundamentals of business insurance are public liability insurance which protects you against legal action if a customer is hurt or injured on site; and professional indemnity insurance which protects you against claims of misconduct or negligence.
Other business insurance you should consider is business contents insurance, cyber liability insurance, and product liability insurance. Some insurers offer generalised “small business insurance”, but be sure to compare different policies to ensure you’re covered.
#4 – Cash flow management
There’s a saying in business – it’s not about turnover, it’s about what’s leftover. Cash flow is the blood that flows around a business and if it stops coming in, it can cause trouble. According to ASIC, about 20% of businesses that went insolvent did so due to poor cash flow management or high cash use.
Businesses can avoid this by following a simple business rule – taking out long term liabilities (loans) to purchase long term assets (equipment, property) and short-term liabilities (lines of credit, cash on hand) to purchase short term assets (inventory, raw materials, etc.) Crossing the two over can cause a lot of problems and if you aren’t careful, business failure.
Remember to always learn as much as you can, get advice from women who’ve been there before and as always – keep your chin up and keep going!