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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
- Veröffentlichungsjahr: 2021
Get inspired to build a profitable business with this essential guide In the latest edition of this bestselling and authoritative reference, Small Business For Dummies explains how to set your business on the path for success. Using this guide, you'll discover how to nurture your entrepreneurial spirit, build a winning edge over your competitors, and respond to the increasing challenges of everyday business. From the basics of setting up a budget to working out your exit plan, this book explains how to grow a profitable business that responds quickly to opportunities. You'll learn how to identify what's different about your business, and how you can use this knowledge to build your brand and generate above-average profits. This new edition also covers: * Using business plans to stay one step ahead * Building positive teams and managing employees * Creating financial projections that actually work * Attracting the kind of customers you really want * Expanding your online presence Whether you're a small business veteran or new to the game, this guide provides practical advice and inspirational guidance for every step along the way.
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Small Business For Dummies®, 6th Australian Edition
Published by
John Wiley & Sons Australia, Ltd
42 McDougall Street
Milton, Qld 4064
www.dummies.com
Copyright © 2021 John Wiley & Sons Australia, Ltd
The moral rights of the author have been asserted.
ISBN: 978-0-730-38484-7
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Cover image: © Carlina Teteris/Moment/Getty Images
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Small Business For Dummies®
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Table of Contents
Cover
Title Page
Copyright
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Where to Go from Here
Part 1: Getting Started
Chapter 1: Is Small Business for You?
Working for Yourself — A Dream Come True?
Working for Yourself — Reality Strikes
Getting the Timing Right
Staying Safe or Inventing the Wheel?
Getting the Government to Help You
Setting Yourself Up for Success
Chapter 2: Figuring Out What’s So Special about You (And Your Business)
Understanding Strategic Advantage
Justifying Why You Can Succeed
Understanding How Risk Relates to Gain
Figuring Out Who Your Competitors Really Are
Choosing Your Competitive Strategy
Chapter 3: Starting from Scratch, Buying a Business, or Joining a Franchise
Weighing Up the Good and the Bad of Buying a Business
Asking the Right Questions
Calculating the ‘True’ Earnings of a Business
Valuing an Existing Business
Dotting Your I’s, Crossing Your T’s
Buying a Franchise
Exercising Due Diligence
Part 2: Finding Your Entrepreneurial Spirit
Chapter 4: Separating Yourself from Your Business
Deciding What Path You Want to Take
Wearing Different Hats
Building a Business with a Life of its Own
Appreciating the Limitations of Your Business
Chapter 5: Staying One Step Ahead
Taking an Eagle-Eye View
Rating Your Capabilities
Identifying Opportunities and Threats
Doing a SWOT Analysis
Creating a Plan for Change
Chapter 6: Creating a Business Plan
Getting Started with Your Plan
Charting a True Course
Assessing the Environment
Declaring Your Battle Plan
Outlining Your Marketing Plan
Describing Your Dream Team
Presenting Financials
Chapter 7: Getting the Legals Right
Picking a Business Structure
Matching the Name to the Game
Protecting Your Brand
Registering with the Powers That Be
Working with Contracts
Negotiating Lease Contracts
Part 3: Planning for Profit
Chapter 8: Figuring Out Prices and Predicting Sales
Choosing a Pricing Strategy
Building a Hybrid-Pricing Plan
Forming Your Final Plan of Attack
Monitoring and Changing Your Price
Building Your Sales Forecast
Creating Your Month-by-Month Forecast
Chapter 9: Building Profit Projections
Understanding the Cost of Your Sales
Forecasting Expenses
Building Profit Projections
Understanding the Whole Deal
Factoring Personal Expenses into the Equation
Chapter 10: Calculating Your Break-Even Point
Identifying Your Tipping Point
Changing Your Break-Even Point
Looking at Things from a Cash Perspective
Chapter 11: Creating Your Marketing Plan
Laying Down the Elements of Your Plan
Defining Who Your Customers Are
Analysing Your Competitors
Setting Sales Targets
Building Sales Strategies
Expanding Your Reach Offline
Keeping Yourself Honest
Part 4: People Power
Chapter 12: Making Service Your Business
Creating a customer service culture
Going the Extra Mile
Evaluating Your Performance
Showing That You Care
Dealing with Complaints
Chapter 13: Becoming an Employer
Becoming an Employer: The First Steps
Meeting Minimum Pay and Conditions
Playing Safe and Playing Fair
Chapter 14: The Art of Management
Drawing Up a Position Description
Playing the Recruitment Game
Picking the Best
Offering Someone a Job
Learning to Lead
Don’t Worry, Be Happy
Managing Difficult Employees
Part 5: High Finance
Chapter 15: Financing Your Business
Budgeting Enough for Start-Up
Separating Start-up Expenses from Operating Expenses
Sizing Up Your Finance Options
Choosing Your Lender
Chapter 16: Cooking the Books
Figuring How Often to Do the Deed
Choosing Software that Fits
Creating Recordkeeping Systems
Keeping Track of How Much You’re Owed
Meeting Bookkeeping Deadlines
Chapter 17: Understanding Financial Statements
Discovering What Reports You Need (and When)
Telling a Story with Your Profit & Loss Report
Taking a Snapshot with Your Balance Sheet
Why Profit Doesn’t Always Mean Cash
Budgeting As If You Mean It
Looking at Cashflow
Chapter 18: Taming the Tax Tyrant
Getting a Grip on GST
Growing Some Recordkeeping Smarts
Planning Ahead
Staying Out of Trouble
Budgeting for Tax
Part 6: The Part of Tens
Chapter 19: Ten Things to Do If You Hit Hard Times
Work Out How Bad Things Really Are
Get Breathing Space
Innovate!
Slash Those Expenses
Pull Back Personal Spending
Get Rid of Dead Weight
Chase Up Overdue Accounts
Run Special Offers
Re-Jig Your Margins
Don’t Be a Shag on a Rock
Chapter 20: Ten Tips for Selling Your Business
Start with a Game Plan
Prepare Well in Advance
Give Your Financials a Make-Over
Get a Professional Valuation
Go for the Max
Plan for a Few Bills
Woo the Buyer
Do Due Diligence in Advance
Be Straight Up with Employees
Spread the Word
Index
About the Author
Connect with Dummies
End User License Agreement
List of Tables
Chapter 2
TABLE 2-1 Rating Businesses According to Potential Strategic Advantage
TABLE 2-2 Rating Head-to-Head Competitors
Chapter 4
TABLE 4-1 Moving from a Small Business to a Big Business
Chapter 5
TABLE 5-1 Industry Analysis — Regional Accounting Firm
TABLE 5-2 Summarising Opportunities and Threats
Chapter 6
TABLE 6-1 Customer Analysis — Fit and Fun Personal Training
Chapter 7
TABLE 7-1 Summary of Different Business Structures
Chapter 8
TABLE 8-1 Calculating Maximum Billable Hours per Year
TABLE 8-2 Examples of Sales Estimates for Different Business Types
Chapter 9
TABLE 9-1 Variable Costs Examples for Service Businesses
TABLE 9-2 Cost of Producing One Bottle of Pickle
Chapter 11
TABLE 11-1 Example Competitor Analysis
TABLE 11-2 Supporting Sales Goals with Strategies
Chapter 12
TABLE 12-1 How Many Complaints Have You Received This Year?
Chapter 13
TABLE 13-1 When You Have to Pay Super (and When You Don’t)
Chapter 15
TABLE 15-1 First Four-Week Budget for Retail Business
TABLE 15-2 Start-up Expenses versus First Four Weeks of Operating Expenses
List of Illustrations
Chapter 2
FIGURE 2-1: Using your strategic advantage, competitor analysis and competitive...
Chapter 3
FIGURE 3-1: Calculating average profit (also known as EBIT).
FIGURE 3-2: Your total start-up costs involve much more than the initial purcha...
Chapter 5
FIGURE 5-1: Rating your business on key areas of performance.
FIGURE 5-2: The principles of a SWOT analysis.
FIGURE 5-3: Plotting business strategy using a SWOT analysis.
Chapter 6
FIGURE 6-1: A mission statement.
Chapter 7
FIGURE 7-1: Digging around for names in the ASIC business names register.
FIGURE 7-2: Check the Australian Trade Mark Search for relevant trademarks.
Chapter 8
FIGURE 8-1: Building a 12-month sales forecast in Excel for a service business.
FIGURE 8-2: Building a 12-month sales forecast in Excel for a business selling ...
Chapter 9
FIGURE 9-1: Start by estimating an amount for each expense, along with how ofte...
FIGURE 9-2: Forecasting expenses for the months ahead.
FIGURE 9-3: Building a gross profit projection for a service with employees or ...
FIGURE 9-4: Building a gross profit projection for a business selling products,...
FIGURE 9-5: Compiling a monthly profit projection.
Chapter 10
FIGURE 10-1: Calculating business break-even point.
FIGURE 10-2: Calculating break-even point to cover both business and personal e...
FIGURE 10-3: Understanding your break-even point enables you to plan ahead for ...
FIGURE 10-4: Calculating what you need to do to break even in the first 12 mont...
Chapter 13
FIGURE 13-1: Your employer checklist.
FIGURE 13-2: Workplace health and safety is an ongoing process.
Chapter 14
FIGURE 14-1: Checklist for what to include in a letter of employment.
Chapter 17
FIGURE 17-1: A simple Profit & Loss report.
FIGURE 17-2: A Balance Sheet shows where your business is at.
FIGURE 17-3: Stay realistic using budgets.
FIGURE 17-4: Keep budgets real by comparing against actual results.
FIGURE 17-5: A sample cashflow report.
Chapter 18
FIGURE 18-1: An invoice or receipt needs to include all the right details.
FIGURE 18-2: Generate reports regularly to find out how much GST you owe.
Chapter 20
FIGURE 20-1: Checklist for preparing your business for sale.
Guide
Cover
Title Page
Copyright
Table of Contents
Begin Reading
Index
About the Author
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Introduction
Every once in a while, I work as a mentor for start-up businesses. I find it fascinating to sit in a room with half a dozen people, and listen to the hopes, dreams and business ideas of each person. Many people are planning to start businesses that others have done before, such as opening a hairdressing salon or a lawn mowing business; other people have ideas that are new in some way, such as a business specialising in making homes safe for toddlers, or a start-up delivering mental wellbeing training to corporates.
I’ve realised that no matter what the idea, every new business benefits from strategic thinking. If you’re starting a business that others have done many times before, such as hairdressing or lawn mowing, strategic thinking helps define your point of difference and how you can set yourself apart from others. If your new business involves an entrepreneurial idea that nobody else has done before, strategic thinking is the key to safeguarding your business idea, and transforming creativity into practical action.
Despite the challenges of Australia’s rapidly changing business environments, with the pace picking up ever faster, I believe that most people are capable of running their own business. With the right software in place, you don’t need to be an accountant in order to understand your finances; with a decent product or service and an understanding of what makes you different, you don’t need to be a marketing guru in order to make a sale. Instead, all you need is some capital, a willingness to work hard and lots of straightforward advice. This book provides the straightforward advice bit — in bucketloads.
I find small business exciting. For me, being self-employed is about helping other people, having flexibility in my working life, and making a few dollars to boot. I hope you enjoy the journey too, and I wish you the very best of luck.
About This Book
Despite the branding, I don’t think you’re a ‘dummy’ — far from it. For me, For Dummies books are about a ‘can-do’ attitude. No matter how inexperienced you are, if you’re ready to give something a go, this book is here to help.
The whole For Dummies outlook helps me a great deal when I’m writing, reminding me to stay creative and think positive. I can be a little risk-averse at times, worrying more about profit margins and making enough to pay the mortgage, and sometimes, I need that push of encouragement to let my entrepreneurial side flourish. Hopefully, I find a balance between practicality and creativity throughout this book, and you can benefit from that, too.
This book (all 20 bite-sized chunks of it) is designed so you can pick it up at any point and just start reading. Perhaps you want to know about hiring your first employee (Chapter 13) but you’re not the least interested in legal structures (Chapter 7). That’s fine — just skip the first 12 chapters and start off from where you want to be.
One more thing. Throughout this book you’ll see sidebars — text that sits in a separate box with grey shading. Think of sidebars in the same way as you might do about designer brands: Nice to have, but not essential. Feel free to skip these bits.
Foolish Assumptions
When you work with small business, you learn to assume nothing. I see everything from clients who time all strategic decisions to fit with the stars (no kidding!) to multimillion-dollar enterprises that have grown out of nothing in a matter of months.
So, in this book I try to assume very little about you. You don’t need to know anything about bookkeeping, business planning, marketing or tax, and I try to explain all concepts in the simplest possible way. I focus on the kinds of things I reckon most small businesses are concerned about, combining positive advice about promoting your business and planning for success with practical guidance about the really tricky stuff — such as dealing with unhappy employees or digging yourself out of financial difficulties.
Icons Used in This Book
Want to be streets ahead of the competition? Look for this handy icon.
Get out your calculator and start doing those sums. This icon flags money stuff, highlighting vital information for anyone with an eye for making a dollar or two.
Tie a knot in your hankie, pin an eggtimer to your shirt but, whatever you do, don’t forget …
This icon flags tricky, slightly nerdy stuff that’s nice to have, but that you can probably live without!
This icon indicates handy advice or insights into how to improve your business or make life easier.
If you can’t learn from history, you’re doomed to repeat your mistakes. Real-life stories from businesses and people who’ve been there provide all the history lessons you could ever want.
A pitfall for the unwary. Read these warnings carefully (and then you can’t say no-one told you …).
Where to Go from Here
Small Business For Dummies is no classic work of literature (one day, I promise myself!), and so you don’t need to start reading from page one and plough through to the end. Instead, jump in and start reading from whatever section is most relevant to you:
New to business? I suggest you read
Chapters 1
,
2
and
3
before doing much else.
Chapter 1
asks if you’re ready to run your own business,
Chapter 2
looks at how you’re going to stand out from the rest of the pack, and
Chapter 3
looks at whether to start a business from scratch, buy an existing business, or go for a franchise.
If you think you’re ready to start,
Chapters 4
to
7
are about developing your entrepreneurial spirit — thinking about how big you want this business to be, what risks lie ahead, creating a business plan and choosing a legal structure that best fits your needs.
Chapters 8
to
11
talk about planning for profit, covering everything from pricing your goods and services, building your first budget, checking the financial sense of your business idea and establishing your very first marketing plan.
You don’t get anywhere in business without people skills so, in
Chapters 12
to
14
, I share lots of advice about developing an exceptional customer service ethos, and talk about being an employer (including knowing your legal obligations and understanding how to recruit good staff) and an effective manager.
Need help with money?
Chapters 15
to
18
delve into the nitty-gritty, looking at financing your business idea, bookkeeping systems, budgets and grotty subjects such as GST and income tax.
Finally, my favourite part of any Dummies title: The Part of Tens.
Chapter 19
offers ten tips for what to do if you hit hard times, and
Chapter 20
provides a few handy pointers of what to do when you’re ready to move on and sell your business.
Thank you, dear reader, for taking the time to read Small Business For Dummies. I hope you find something along the way that helps you and your business to grow.
Part 1
Getting Started
IN THIS PART …
Find out whether you’re ready to be a small business owner.
Uncover where your winning tactic lies.
Decide whether to buy an existing business, start from scratch, or purchase a franchise.
Chapter 1
Is Small Business for You?
IN THIS CHAPTER
Working for yourself — the good things that make it all worthwhile
Working for yourself — the bad things that no-one wants to talk about
Making sure the time is right (now, where is my crystal ball?)
Figuring out your business strategy
Digging up government advice, free of charge
I love small business. For me, small business is about believing in yourself, being passionate about what you do and creating opportunities. Our culture of getting up, getting out and giving it a go fits perfectly with this entrepreneurial existence, explaining why so many Australians are hooked on the self-employed way of life.
Although starting your own business can be daunting at first, the everyday challenges don’t leave you with much time to regret your decision. Besides, being self-employed is a pretty addictive thing: Working your own hours, being responsible for your decisions and raking in handsome profits (here’s hoping) are just some of the attractions of being your own boss.
In this chapter, I talk about what it means to start your own business. I take you on a roller-coaster ride over the highs and lows of small business terrain (for every upside to being out there on your own, a downside exists, too), through to making the decision when to actually ‘open shop’. After all, the success of any venture depends on timing — the best time for the business, the best time for the economy and the best time for you.
So, put on your Stackhat, hold on tight and get ready for the trip of a lifetime …
Working for Yourself — A Dream Come True?
If you ask most small business people what they like the best about working for themselves, you’re likely to get a pretty cynical reply — something about the delights of working for peanuts and the thrills of doing bookwork in the wee hours of the night. But dig a little deeper, and most self-employed people warm to the question.
Doing what you love to do
Doing what you’re passionate about has a lot going for it. If you want to play the trumpet day and night, you’re likely to be happiest as a professional musician. If you love hanging off cliffs on the end of a rope, you’re going to dig being a climbing instructor. And if you’ve never quite gotten over your LEGO phase, you probably need to go and build houses.
Happy people love what they do for a living. Besides, being self-employed is often the only way you can get to do just that. (Nine-to-five jobs tend to be rather thin on the ground for trumpet players or climbing instructors!)
Earning pots of money (here’s hoping)
With many trades and professions, your income always has a pre-defined upper limit, no matter how hard you work — teachers, carpenters or nurses on the regular payroll, for example, are limited in the amount of pay they can get. However, by setting up your own business, whether you’re tutoring private students, building house extensions or doing private home nursing, your earning potential immediately increases.
Statistics that compare the taxable income of self-employed individuals with those of employees working in similar industries or professions are hard to come by. However, if you start up a low-risk kind of business — home-tutoring, for example — the financial benefits of becoming self-employed are small but relatively guaranteed. On the other hand, if you start up a high-risk business — say, launching a new invention — you could end up losing everything you have. Or, you could just wind up a millionaire.
Being your own boss
No-one is going to dispute being your own boss is fantastic. And no matter how much you stuff things up, no-one can give you the boot — except perhaps your customers — leaving you with a feeling of security that’s hard to beat. Here are some other reasons being your own boss feels so good:
You get to set your own rules:
Your rules may involve anything from setting enormously high standards, to declaring mufti days seven days a week.
You choose when (and how often) you work:
Of course, choosing when you work often means working 24 hours a day, seven days a week. However, in theory you can pick and choose which hours you work and when you take holidays.
You follow your own instincts:
You can do what you think is right, as opposed to doing what someone else thinks is right. I know firsthand how frustrating it is to be forced to do stuff the wrong way, or the slow way, just because the person who is giving the orders happens to be your boss.
You can use your conscience:
You can afford to make decisions that may not be the best from an economic point of view, but are good decisions in terms of your own conscience. For example, a business colleague of mine who recently purchased an electric car was acting according to her principles, rather than seeking to save dollars.
You can take risks:
When you’re self-employed, you can take risks that you may not be able to otherwise take. Thousands of successful businesses have been started by former employees who went out on their own because their employers didn’t believe in the viability of their new ideas.
You can provide employment for family members:
Being in a business team with your family, and being able to provide employment when it’s needed, can be one of life’s most satisfying experiences. (Of course, it can also be one of life’s most frustrating experiences, but I’m not going there right now.)
You can realise your dreams:
No business book is complete unless it mentions dreams. Nothing beats putting your heart and soul into what you believe in.
Staying home
I confess that working from home somewhat lost its shine for me during the COVID-19 lockdown. However, over the years I’ve really appreciated the flexibility that working from home affords. Generally, I love walking to my ‘office’, ten seconds down the hallway, rather than commuting two hours by train to the city.
GRAB SOME INSPIRATION
A whole business community is out there for you to lean on. These links and sites may have changed by the time you’re reading this, but here are some of my favourite sources of inspiration:
www.flyingsolo.com.au is not just a website for ‘micro businesses’, but a community as well, with over 120,000 members, hundreds of articles, lots of free tips and tools, and a busy bunch of forum boards.www.entrepreneur.com is a website as well as a magazine, and has more of a start-up, corporate bent. I find many of the articles helpful and a bit of nudge to keep my thinking fresh.With an upbeat feel and great info, www.smartcompany.com.auis an Australian site dedicated to free news and resources for small- to medium-sized businesses.A favourite of mine when I’m in the car is the Goal Digger podcast, hosted by entrepreneur Jenna Kutcher (podcast.jennakutcher.com). This show is all about setting and managing goals, whether for your side-hustle (how I love that term!) or for your main game.When I’m in the mood to refresh my marketing, I enjoy the Strategy Hour podcast, facilitated by Think Tank collective hosts (bossproject.com/podcast). These practical podcasts help with the nitty-gritty details of business, with hundreds of episodes covering all kinds of different topics.According to the Australian Bureau of Statistics (ABS), home-based businesses make up over half of all the small businesses in Australia, reflecting part of an international trend towards more businesses operating from home (a trend presumably partly fuelled by improvements in technology). Home business is the spawning ground from which larger businesses are born, including iconic brands such as AirTasker, Billabong, Canva and Salt Gypsy.
Working for Yourself — Reality Strikes
An acupuncturist once said to me: ‘When you work for yourself, you work for a real bastard. No holiday pay, no sick pay, no bonuses — long hours, filthy pay and no promotion.’ As I lay on the couch, needles sticking out of my ears and my navel, I reflected on my 60-hour weeks and wobbly bank balance. I had to agree with him.
Teetering on the edge
As the years have passed by, I’ve developed a sniffer-dog instinct for which businesses are likely to succeed, which are going to struggle and which are doomed to fail. Although I usually wish I wasn’t so chillingly accurate (especially when I predict failure), occasionally life delivers a surprise — the success of an overpriced French restaurant with a mad chef, for example, or the survival of a bed and breakfast in the back of beyond.
Running a business is an inherently risky game. Sometimes, this risk makes things exciting and, other times, just plain old scary. Of course, business success is a fantastic feeling but, on the other hand, failure can be quite catastrophic. You can lose your house, your job, even your family, all in the one hit, not to mention the disillusionment of having precious dreams crushed by harsh reality.
How well you cope with risk depends on your age, personality and health. Certainly, investing your life’s savings in a new venture is infinitely scarier when you’re 60 than when you’re 30. I recommend you always minimise risk by keeping a tight control on your finances, a topic I explore in detail in Chapters 15 to 18.
Working night and day for little pay
Unfortunately (or maybe fortunately), the brilliant business ideas that earn $10 million in the first year are very few and far between. For many people, the only sure-fire way to succeed is to work loooong hours in the first year or so, taking on the roles of bookkeeper, marketing consultant, salesperson and managing director all in one.
These long hours do tend to settle down as your business becomes established, however, and the ABS reports that the average self-employed owner-operator works 42 hours per week. And, at the other end of the spectrum, many people choose to only work part-time in their business, content to choose lifestyle and flexibility over income.
One of the hardest things about being self-employed is staying motivated. Not just in the first year, where everything is interesting and different, but year after year after year. Of course, as your business grows, you can hopefully employ staff to help. (Chapters 13 and 14 talk more about becoming an employer and building an effective team.) Ideally, you can arrive at a point where your business earns money, even if you’re not working in it every day of the week.
Weathering feast and famine
Sometimes, the highs and lows of small business profits make even Melbourne’s weather look reliable. A bumper year, and the bank account is rosy. Then you lose a client or two, interest rates go up, and before you know it, you’re wondering how to pay the rent.
In Chapter 15, I talk about creating budgets for business set-up expenses, and share tips for securing business finance. Some consultants advise you not to expect to make any money at all in your first year of business, and to have savings put aside to pay for your living expenses during this time. Such advice is prudent, but the truth is that sometimes businesses take even longer than a year before they make a profit, and even businesses that have been cruising along happily for years can strike hard times.
I used to find the feast and famine of running my own business very stressful, but I’m getting better at managing this dichotomy as time goes by, even managing to put money aside when things go well. How you cope with the effect of this insecurity depends not only on your personality, but on your family commitments as well.
Getting the Timing Right
Weighing up the good and the bad about being self-employed is tricky enough, but when you add the ‘you’ factor into the mix, you may decide to rethink some issues. You have to consider not only your own skills and expertise, but also whether you have the timing right: The right timing for the business idea, the right timing for you and your family, and the right timing for the business environment.
Timing it right for your idea
An experienced entrepreneur once said to me: ‘If real estate is all about position, position, position, then business is all about timing, timing, timing.’ He’s right, of course. If you were selling fondue sets in the 1970s, chances are your business would be successful. Try to sell the same fondue sets for a living these days, and it would be slim pickings indeed (although my mother does have very fond memories of cheese and chocolate fondue dinner parties).
If you’re not sure whether now’s the right time to start your business, consider the following:
Fickle fashions: Humans are capricious creatures and what’s hot today may be ice-cold tomorrow. Whether the latest craze is kids going nuts about a Disney action doll or adults getting worked up about a big sporting event, make sure you’re not the one who suffers when everyone gets bored and tired. Try to jump on the bandwagon near the beginning or during the build-up — don’t leap in at the peak.
Industry trends:
The difference between a trend and a craze may seem hard to pick at first, but the difference is both real and important. Be aware of trends in your industry and capitalise on opportunities. For example, the long-term and growing interest in low-carbon and energy-efficient building supplies is a positive trend that indicates a whole host of business opportunities.
Lead times: If you’ve got a long lead time for your project, research the project well. I remember a client who decided to build storage units in a busy country town. The demand seemed guaranteed, because there weren’t any at that time. Three years later (after prolonged development applications through council and a $350,000 construction), the units were ready. The only snag was two other developers opened units that same year, creating a glut of supply and fierce price wars.
Bleeding edge or cutting edge?
You may love being leader of the pack, but creating a product or service that customers aren’t ready for yet is pointless.
Seasonal variations:
If you’re planning a business that is highly seasonal, factor this aspect carefully into your timing when making your business plan. Give yourself time to plan carefully for the peak season so you can take full advantage of that period.
My last comment about timing is that Australia’s business environment is shifting faster than ever, and what might seem to be perfect timing right now could end up being horrendous timing in hindsight. Evaluate how robust your business idea might be in the face of natural disasters, pandemics, recessions or changes in government policy, and how you can design your new business to be as agile and responsive as possible. A business that responds quickly to change will be much better positioned to thrive than one that isn’t.
Timing it right for you
Of course, good timing is not just a question of whether the outside world is ready and eager for what you have to offer. Good timing is also about how ready you are, personally. Consider the following:
Experience:
For example, if you’re looking at buying a nursery, do you have horticulture training as well as hands-on retail experience? If you’re considering going freelance as a consultant, do you have enough consulting experience behind you? In
Chapter 3
, I explore how you might compensate for a lack of experience, and why buying an existing business or purchasing a franchise may be preferable to starting a business from scratch.
Planning:
I recommend you don’t even consider starting a new business without first drawing up a business plan. In fact, planning for your business is so important that I dedicate
Chapters 4
to
7
to this very topic.
Capital: Don’t start a business without enough capital behind you. (I talk lots more about how much money is enough in Chapter 15.) Starting a business with insufficient capital is like competing in a marathon when you didn’t sleep the week before.
Age, health and stamina:
Age can be a factor at both ends of the spectrum. Most 18 year olds are unlikely to have enough experience to cope with running their own business. On the other hand, a 65 year old may be short on motivation, ambition and energy, especially for new ventures requiring long hours and huge input.
Your family life: Don’t start a new venture without consulting your family and enlisting their support. The backing of your partner is vital during this time. (Resigning from your regular job to become a self-employed mural painter the week before your partner is due to deliver twins isn’t likely to go down well.)
Timing it right for the economy
No business is an island but, rather, functions as an organic part of the world around it. Imagine owning a fantastic, go-ahead cafe in the Pilbara region of Western Australia. However cleverly managed, this café is at the mercy of whether local mines expand or shut down, whether the economy is booming or in recession and, further still, world commodity prices. Be aware of the following economic influences:
Industry-specific events: Be alert for changes in your industry that may affect the viability of your business, such as additional licensing requirements, new government regulations or major shifts in available technology. For example, with the changes in financial planning regulations, many accountants are now restricted in the types of advice they can supply to clients.
Tax or government policy reform:
Many a good business has been sent to the dogs because of tax reform. Think of a political football such as the solar industry, which has been subject to major government funding changes every year or so for the last 15 years in Australia. Keep your ear to the ground and listen out for these changes within your industry network and via the media, before they happen.
Interest rates and currency exchange:
Some businesses are more affected by interest rate and currency exchange fluctuations than others. Importing, exporting, construction and real estate are just some of the businesses that can be affected, as well as any business with large borrowings. If you’re likely to be affected by interest rate or currency exchange fluctuations, look carefully at economic indicators and plan accordingly.
Recessions:
Even the most successful business can sometimes have a bad year, or a couple of bad years, especially in times of recession. Such businesses rely on profits built up over previous years to see them through. However, if you start a new business in the middle of a recession, ask yourself whether you’re going to be able to finance it until the good times arrive.
Stay abreast of current economic trends and how they may affect your business plan.
GO BACK TO SCHOOL
Just as you wouldn’t expect to drive a car without ever having lessons, I recommend that you don’t plunge into a new business venture without any practice or instruction. Instead, check out what courses are available.
Probably the most practical approach is your local TAFE. Although the courses on offer vary from campus to campus, look for a particular small business course that focuses on getting a business started, and which includes formulating your very first business plan.
Similarly, you may find something relevant through your local community college, but be aware that the quality of these courses varies. (Community colleges don’t always stick to curriculums in the same way as TAFEs do, so the quality of their courses depends on the individual tutors, and whether or not the course is working towards a particular certification.)
If business management is what turns you on (and this doesn’t necessarily mean working for yourself), an undergraduate course at university may be your best bet. For example, I completed a joint major in Accounting and Business Management, and the subjects provided a great all-round understanding for all kinds of things.
If you have a university degree under your belt in a different area, a Master of Business Administration (MBA) is another option. But, be aware — while an MBA is an impressive achievement, it isn’t a hugely practical option if you’re thinking of running a small one-person enterprise, because the overall emphasis of such courses is on larger enterprises and organisations, rather than on small business.
Staying Safe or Inventing the Wheel?
Businesses fall into three broad categories. The first type of business is one that has been done before, and therefore, has been tried and tested. The second type of business is one that finds its own niche, thereby doing something especially tailored to a small group of customers. The third type of business is one that launches an entirely new concept on the world.
Playing it safe
Probably the safest and most reliable approach is to go for an established kind of business; one that lots of people have tried and succeeded in before you. Most retail shops and many service businesses fall into this category — for example, bookshops, florists or hairdressers, builders, electricians or plumbers.
One good thing about going into the kind of business that many others have done before you is that you can find out what to expect in terms of sales, profit margins, expenses and more. With this kind of business, success depends not so much on the strength of your original idea, but more on good business sense and your ongoing capacity to differentiate yourself from your competitors. If possible, this difference should capitalise on your skills and resources, so that this difference is hard for competitors to imitate.
Do bear in mind that changes in technology are shaking up even the most traditional kinds of businesses. For example, bookshops used to offer solid business profits, so long as you selected a good location and you knew your trade. However, the changes brought about by ebooks and online distribution mean that, nowadays, opening a bookshop would be a very different proposition indeed. Similarly, a bookkeeping business may have been a safe bet in the past, but cloud technology and new accounting software solutions are rendering many bookkeeping services obsolete.
If you choose to go with an established kind of business, you may prefer to purchase an existing business, rather than starting from scratch. For many kinds of established businesses, franchising is also an option. Skip to Chapter 3 to find out more.
Finding your own niche
The next type of business is called a niche business. Developing a niche means doing something specialised and catering to a small but (hopefully) dedicated market. A niche business can cover anything from manufacturing custom guitars to producing hand-stitched silk lingerie, or from designing permaculture gardens to cooking special food for diabetics.
The best thing about niche businesses is that you can start off on a small scale. Starting small means low risk, less expense setting up and an opportunity to try out your idea and test the response. The best way to promote a niche business is usually through online advertising, where developing your own e-commerce site along with a social media presence can mean generating business all around the globe. For lots more about social media and building your marketing plan, check out Chapter 11.
Going out on a limb
The last type of business is called the entrepreneur type, reserved for new inventions or new market concepts. Untested and unknown, this type of business can occasionally experience resounding success but (sadly), more often, spectacular failure. (I still feel a pang whenever I remember my friend’s invention of a solar-powered windmill-hat, a great idea but scarcely a hot fashion item.)
With the entrepreneur type of business, you’re taking a gamble. Though the chance of failure is high, if you do succeed (and success is always possible), the rewards can be huge. I talk about market research, and how to find the products or services that customers really want, in Chapters 2, 5 and 11.
Assessing your chances of survival
Australians are a pretty entrepreneurial bunch. With a population of 25 million (give or take a few), almost 2.4 million businesses are alive and kicking. Impressive, don’t you reckon? Almost 10 per cent of the population run their own business.
But what about business survival? Are all these businesses fly-by-nighters, that start up one year and are gone the next? Not so long ago, a business coaching franchise advised a client of mine that 80 per cent of businesses go bust in the first year, and only 8 per cent of businesses survive five years or more.
Pish tosh. Business is tough, but it’s not a suicidal mission. The ABS reports that half of new businesses without employees, and 30 to 40 per cent of new businesses with employees, cease trading within the first three years. However, these figures don’t shed light on how many businesses chose to cease trading (as opposed to going broke or ‘failing’), and how many businesses actually experienced financial loss upon closing their business. In my experience, very few business people rate their overall experience as a negative one.
A QUICK QUIZ FOR SUCCESS
So, you’re not sure if you’re cut out for the world of business? Then don’t leave your steady (but mind-numbingly boring) government job quite yet. Instead, complete this illuminating questionnaire to see how you rate in the success stakes.
Your most recent power bill is unreal (as is your newest love). You know you can’t pay the bill on time. Do you …
Think ‘what the hell’ — this is what love is all about.Stay awake at night wondering where you’re going to find the readies.Contact the power company and ask for a fortnight’s extension.Live on Vegemite sandwiches and take cold showers until you’re flush with cash again.It’s horror hour. Dinner needs cooking, the kids need help with homework and your mobile is ringing. What do you do?
Have a beer and ignore everyone.Scream at the dinner, stir the homework and pour soy sauce on the kids.Cook, call out instructions to the kids and take the phone call. All at the same time, of course.Do one thing at a time, logically one after the other.How are you with maths?
Okay, so long as you can make figures up whenever you have to.Just the thought of maths makes you feel inadequate.You can use Excel and don’t mind doing simple stuff.Fine, especially if the maths has a practical application that’s relevant to you.You’re playing Pictionary with your partner at a local fundraiser. How do you behave?
You act the goat. It’s a game, after all.You get cranky and wish it weren’t so slow.Relaxed. You’re naturally good at Pictionary.You play with dogged concentration and a will to win.Describe your relationship with bureaucracy.
You chuck bill reminders and letters from the government in the recycling bin as soon as they arrive. They’re not even worth reading.You feel anxious about completing forms correctly, and anxious that if you get something wrong, you might get fined.This kind of stuff is okay. You whiz through most forms pretty quickly.You enjoy the orderliness of completing forms and having everything in order.It’s Sunday afternoon, you’re painting the verandah and some old friends drop by unexpectedly. Do you …
Ask them in and let them help themselves to tea. Shame that there’s no milk.Pull up a chair and talk until the cows come home.Get them to help you paint the verandah. Free labour!Feel irritated they didn’t ring to tell you they planned to come by.How important is it for you to have a regular, steady income?
You couldn’t care less. You don’t need much to live on anyway.You dream about a regular income but life doesn’t usually work out that way.It’s important in the long term, but you can do without it right now.You want more than a regular income. You aim to succeed and make your first million within the next five years.It’s midnight and your new online ordering system has crashed. What do you do?
Switch off your computer and give up.Swear, curse, and blame everyone including the cat.Ring your night-owl IT friend and offer homemade chocolates in exchange for their help.Work steadily till dawn, solving the problem.Mostly As
It’s good to be laid-back, but you may not get much done lounging in that hammock all day. Being in business is hard work and you need to be inspired and motivated. If 60-hour weeks aren’t your cup of tea, you’re best to start a part-time business where you can pick and choose your hours, have lots of fun, and make a modest amount of money.
Mostly Bs
You may be a bit of a stress-bucket, but your creative talents are there for expressing. Being your own boss may suit you well, although financial success may be elusive, especially at first. Do be careful: If you lack business experience and you already have significant financial commitments, the stress of starting out on your own may take its toll.
Mostly Cs
Aha. You’re not only super-cool and enterprising, but you’re also resourceful and a natural multi-tasker, making the perfect personality for the small business person. When you can be web designer, manager, salesperson and bookkeeper all in the one day, and stay calm and collected to boot, you know you’re on your way to success.
Mostly Ds
Slow and steady wins the race, and a bit of dogged persistence along with a healthy dose of ambition helps, too. These qualities all help in running your own business, although you may need to choose a business that matches your conservative personality. A strong network of advisers and business associates are particularly important to your business success.
However, I am a realist when it comes to recognising that many small businesses face significant challenges from time to time. In Chapter 19, I share lots of tips for carrying your business through tough times, and in Chapter 20, I take the more optimistic perspective of how to sell your business and how to ensure you get the best price when you do.
STICK TO THE KNITTING
I recall a client of mine, a highly experienced business manager, who purchased two hairdressing salons as an investment. Despite relatively sound business practices, both salons floundered, simply because my client didn’t have any experience in the hairdressing industry: He failed to understand that most customers didn’t come to the salon looking for value for money, but came looking for a chat and a confidence boost; he didn’t appreciate that several of the hair stylists in this particular salon expected ‘cash’ wages as part of their weekly pay (something the previous owner had offered); and he had difficulties maintaining hygiene and dealing with money going missing out of the till.
My client made an elementary mistake in that he didn’t stick to doing what he did best.
My point? If you’ve been a musician all your life, you’re going to be much better starting a music school than opening a florist shop. If you’ve always worked as a landscape gardener, you’re probably ill advised to open a bookshop.
Stick to what you’re good at: Business is competitive enough without trying to do something that you have little or no experience in.
Getting the Government to Help You
You’re paying out all these taxes, so you may as well get something back. The quality of available government advice is luck of the draw: Some advisers are great, others are a bit dodgy. However, most government advice is free and can often be just what the doctor ordered. Here’s a summary of what advice is available and where to find it:
The Wild West:
The Small Business Development Corporation is a government agency focused on developing the small business sector. They offer advice on finance, marketing, business planning and regulations. Visit
www.smallbusiness.wa.gov.au
.
Tassie tigers:
Business Tasmania has a good portal for small businesses at
www.business.tas.gov.au
.
The Top End:
Head to
www.nt.gov.au/industry
for territory-specific planning advice, business licence information, and business support. This website also links to business advisory centres across the territory, known as Small Business Champions.
Brash and brazen:
www.business.nsw.gov.au
is a good resource, and I can recommend the Business Connect program. This heavily subsidised (and indeed, often free) service provides face-to-face support and expert advice to help develop your business.
Eureka and Ned:
Business Victoria is a central organisation based in Melbourne offering information and referral services for small businesses. An excellent website at
www.business.vic.gov.au
offers links to a whole load of business services, including business mentoring and workshops.
Don’t you worry about that!
The best source of info in Queensland is
www.business.qld.gov.au
. Here you can find a whole range of resources, plus access to training seminars and workshops.
The lost city:
ACT Innovation, Industry and Investment (
www.cmtedd.act.gov.au
) offers small business advice and administers a range of business support and development programs.
Home of the white pointer:
For South Australian business advice, start at
www.business.sa.gov.au
. They offer great small business support and advice, including several Business Enterprise Centres and Regional Development units.
National Business Enterprise Centres:
In addition to the state government business development departments listed here, a national network of Business Enterprise Centres is available to help you get your business going in the right direction. Go to
www.becaustralia.org.au
to find a BEC near you.
For more about business planning, and other business resources, skip ahead to Chapter 6.
Setting Yourself Up for Success
I talk a lot about the pros and cons of small business in this chapter and, as you’ve probably gathered by now, I speak from a somewhat conservative standpoint because I know both how tough small business can be and also the amount of commitment required.
However, don’t imagine for a minute that you’re not capable of success. With careful research, willpower, financial backing and a healthy dose of inspiration, you’re going to be hard-pressed to think of a reason you can’t succeed in the way many others have done before you. (And, of course, that’s what the rest of Small Business For Dummies is all about!)
Chapter 2
Figuring Out What’s So Special about You (And Your Business)
IN THIS CHAPTER
Identifying what gives you an edge
Ensuring your business idea is strong enough to fly
Understanding the relationship between risk and gain
Analysing your competitors (complete with cloak and dagger)
Matching competitive strategy to strategic advantage
What is it that makes you, or your business, so special?
Even if you have a business that’s similar to thousands of others — maybe you mow lawns, have a hairdressing salon or tutor high school students — I still recommend you come up with an idea that makes your business different from others in some way, or that provides you with a competitive edge.
Similarly, if your business caters for a very specific niche — maybe you sell gluten-free cookies or baby clothes made from organic cottons — you need to identify what it is about your skills or circumstances that enables you to service this niche better than others.
In this chapter, I help you define the essence of what makes your business special, or more likely to succeed than others. This quality is called your strategic advantage and is the single most important ingredient for ongoing business success.
Understanding Strategic Advantage
Many business people use the terms competitive advantage and strategic advantage synonymously. However, to be really precise, you could argue that these two terms relate to slightly different aspects of your business.
A competitive advantage is something that’s different from, better than, or not offered by your competitors. For example, if a town has two hairdressing salons and one offers a mobile service but the other doesn’t, the first salon has a competitive advantage because they’re providing something their competitors aren’t.
A strategic advantage
