Start your new business venture on the right track with these tips from a small business veteran with 25 years in the industry.
Start your new business venture on the right track with these tips from senior partner of MAS Accountants, John Corias and his 25 years' experience in the industry.
Over half a million Australians are involved in the early stages of setting up a start-up business, and it is a well-known fact that most small businesses fail within the first few years.
The question remains, what are they doing wrong?
MAS, which began in 1961, is the first accounting office in Australia to cater specifically for small businesses, and has been running for over 50 years. Brothers John and Peter Corias have been involved in the business since 1981. Their clients range from doctors to dentists, construction companies to restaurants, interior designers to solicitors.
“We have a lot of businesses come to us in the early stages, and we are able to spot the red flags,” Corias says.
LEAVE EMOTION AND EGOS BEHIND
Most small businesses are built from the ground up, so of course it is natural to grow emotionally attached. However, this is where so many people go wrong.
“Being emotionally invested only sets you up for failure. It clouds your judgment and stops you from seeing clearly. These emotional investments may include the ego factor. Egos are bad for business. However, the ego can shroud judgment and can cause even the most sensible people to make stupid business decisions. Take a step back, assess it as business, and find the best ways to move forward.”
UNDERCAPITALISATION
When creating a business, funding is the key. Having the right amount of capital can turn the business from non-existent to booming; however, lack of capital is a common mistake most start-ups make.
“Either the business was not able to get the bank loan approved, or they financed the business with short-term capital rather than permanent capital, or simply made business purchases that exceeded their means. It is important to manage cash flow, and the best way to handle this is to make sure you have a financial plan, a business plan, and that you are prepared.”
DIDN’T DO YOUR HOMEWORK?
Some small businesses jump into the sector without giving it a second thought. However, many of them do not have a legitimate plan in place to secure the future of the business.
“Most businesses are making mistakes because they are not thinking things through. There is a lack of research, which includes questions such as ‘How much rent am I paying?’, ‘Am I getting ripped off?’, ‘Can I get a better deal?’ I cannot stress how important it is to have a strong foundation and plan before you even think of starting a business."
SEEKING INVESTORS TO FAST-TRACK GROWTH
Most start-ups want to grow quickly and seek investors to solve this problem. However this doesn’t always work in the business’s favour.
“Finding an investor for rapid business growth is not ideal, and it is much better to grow the business organically. Growing it naturally is more sustainable as you have invested the time to create the right foundations and systems to ensure long-term sustainability. When mismanaged, fast growth can cause the company to crash."
JUMPING INTO PARTNERSHIPS WITH FRIENDS
Partnerships with friends can seem like a fantastic idea when sharing a drink on a Friday night. However, reality tends to be less than amicable.
“Partnerships are tricky, especially those with friends, because it not only involves an extra element to the business but an emotional element as well. Partnerships work when all parties complement each others’ strengths. Remember that most business partnerships do not survive, so make sure to think it through before going ahead.”
This article originally appeared in Australian Broker issue 11.20.
Over half a million Australians are involved in the early stages of setting up a start-up business, and it is a well-known fact that most small businesses fail within the first few years.
The question remains, what are they doing wrong?
MAS, which began in 1961, is the first accounting office in Australia to cater specifically for small businesses, and has been running for over 50 years. Brothers John and Peter Corias have been involved in the business since 1981. Their clients range from doctors to dentists, construction companies to restaurants, interior designers to solicitors.
“We have a lot of businesses come to us in the early stages, and we are able to spot the red flags,” Corias says.
LEAVE EMOTION AND EGOS BEHIND
Most small businesses are built from the ground up, so of course it is natural to grow emotionally attached. However, this is where so many people go wrong.
“Being emotionally invested only sets you up for failure. It clouds your judgment and stops you from seeing clearly. These emotional investments may include the ego factor. Egos are bad for business. However, the ego can shroud judgment and can cause even the most sensible people to make stupid business decisions. Take a step back, assess it as business, and find the best ways to move forward.”
UNDERCAPITALISATION
When creating a business, funding is the key. Having the right amount of capital can turn the business from non-existent to booming; however, lack of capital is a common mistake most start-ups make.
“Either the business was not able to get the bank loan approved, or they financed the business with short-term capital rather than permanent capital, or simply made business purchases that exceeded their means. It is important to manage cash flow, and the best way to handle this is to make sure you have a financial plan, a business plan, and that you are prepared.”
DIDN’T DO YOUR HOMEWORK?
Some small businesses jump into the sector without giving it a second thought. However, many of them do not have a legitimate plan in place to secure the future of the business.
“Most businesses are making mistakes because they are not thinking things through. There is a lack of research, which includes questions such as ‘How much rent am I paying?’, ‘Am I getting ripped off?’, ‘Can I get a better deal?’ I cannot stress how important it is to have a strong foundation and plan before you even think of starting a business."
SEEKING INVESTORS TO FAST-TRACK GROWTH
Most start-ups want to grow quickly and seek investors to solve this problem. However this doesn’t always work in the business’s favour.
“Finding an investor for rapid business growth is not ideal, and it is much better to grow the business organically. Growing it naturally is more sustainable as you have invested the time to create the right foundations and systems to ensure long-term sustainability. When mismanaged, fast growth can cause the company to crash."
JUMPING INTO PARTNERSHIPS WITH FRIENDS
Partnerships with friends can seem like a fantastic idea when sharing a drink on a Friday night. However, reality tends to be less than amicable.
“Partnerships are tricky, especially those with friends, because it not only involves an extra element to the business but an emotional element as well. Partnerships work when all parties complement each others’ strengths. Remember that most business partnerships do not survive, so make sure to think it through before going ahead.”
This article originally appeared in Australian Broker issue 11.20.
