How To Successfully Survive The Small Business Start Up
New figures from the Australian Bureau of Statistics show that there were more than 2.1 million active businesses in Australia in June 2012. That number is dominated by very small operations: more than half those businesses have an annual turnover of less than $200,000 a year.
Here’s how those numbers break down:
- 597,930 businesses had between $0 and $50,000 in turnover;
- 739,890 had between $50,000 and $200,000;
- 673,065 had between $200,000 and $2 million;
- 130,416 had more than $2 million.
Only 2% of Australian businesses make it to seven figures breaking the elusive million dollar annual revenue mark.
There’s no doubt that starting a profitable business is hard. Very hard! Like most entrepreneurs, I’ve found it incredibly challenging and an epic adventure. One I’d prepare and plan for very differently next time around. The funny thing is, with so many great helpful hints, tips and how to books on the market, we still tend to try to reinvent the wheel by going it alone, without help, or proper planning.
It’s incredible how many people I know who have attempted to start a business without any real knowledge of how to do so. As best selling author and one of the world’s small business gurus Michael Gerber says in his popular book ‘The E Myth’, being a good technician (mastering your trade), and selling it through the running of your own business are two totally different things …
This he refers to as the entrepreneurial myth, or “The E Myth”.
Although being your own boss and starting your own business sounds incredibly appealing it brings with it responsibilities and duties that are often overlooked during the planning process. Things you are not good at, have done previously or will ever enjoy.
One of the biggest mistakes people make, and I personally made time and time again, is to market to themselves, creating and attempting to sell a products that they like themselves without doing any prior product or market research to determine whether there is any demand or need for the product.
In fact, growing up I watched my own father make this mistake over and over. You’d think by the time I decided to start my own business I would have learned from his mistakes. Hell no!
Michael Gerber describes this as an entrepreneurial seizure. I really like his description of the process. It’s both funny, and very accurate at the same time.
Often referred to as the Uniformed Optimist, a new business owner is overly confident that what they do, will become an overnight success, leading to a very short term mindset and a failure to adequately plan.
Unless you buy into an existing franchise model that is already very successful (I will go into more detail on that topic another day), short term, inadequate planning leads to one thing; PAIN! You experience extreme frustration and inevitably pain because your plan never goes the way you plan it to.
Short term planning means that if you have a bad month, quarter or even year it becomes a motivation destroyer and often leads to failure.
So what is the answer?
Plan properly, and plan long term. I recommend planning 5 to 10 years ahead.
Long term planning puts you in a much safer mindset and prepares you for the inevitable. Failure to launch. Failure to launch is what I call the natural process where you must outgrow your uniformed optimist state of mind that is a totally natural and normal part of the entrepreneurial journey.
Once you come to the all too common realisation that you might not make your first million dollars in 6 to 12 months you can re-focus and get on with the task of building a business.
“Take a step back, dust your shoulders off and take another run at the mountain”!
Once the dust settles after your initial launch or start up period you’ll usually become what’s referred to as an informed sceptic, but this is a totally normal piece of the journey and now you make smarter decisions based on the knowledge you’ve gained thus far.
This is the point that so many businesses fail. It’s exhausting. You’re overworked, underpaid and depending on how much capital you’ve invested into the startup, maybe in a ton of financial debt. This period can be bloody scary!
But it is critical to stick with it at this point. Often the tipping point, the point where things start to fall into place and become more rewarding are just around the corner. Giving up now seems so appealing, especially if you have other business ideas. Commonly new business owners blame the lack of success on the idea or product itself, rather than the process, or lack of systemisation.
But trust me, this failure to launch is a totally normal part of new business start up and it will happen to your new idea also. The process of continued startup is commonly called the entrepreneurial cycle, referring to the continued cycle that most new (uniformed optimists) go through over-and-over again.
Sticking with the original idea you’ll become what’s referred to as an informed optimist. An informed optimist now has the experience of the start up and understands that the business is evolving at a natural rate of growth.
The informed optimist understands that to achieve their business goals their attention must be focus on building the business and developing the systems that will support growth, and not focused on making money. As the business grows and develops it will make money and profitability will be a result of the growth and systemisation that occurs through development.
Planning for success and including the systemisation, automation of those systems (I will discuss this another day) and having a long term planning mindset is absolutely crucial for your sanity and the success of your business.
Having a longer term plan will assist this process and will ease the stress related to slower than expected growth and lower than expected profits or higher than anticipated losses.
Having a long term plan will allow room for mistakes, and inevitably, allow room for natural evolution and growth.
Long term planning is the only sustainable way to run a business.