According to Statistics NZ, 3 out of 5 new businesses fail in the first 3 years of business.
#1 Cash flow is KING
The whole point of being in business is to make yourself some money.
If you aren’t making any money, you would be wiser to go and get yourself a job and get someone else to pay you.
You need to be very aware of what you are owed and what you owe others.
Do not be slow to follow up overdue payments that are owed to you, and always pay your bills on time.
Accounting programmes such as XERO and MYOB make it easier to track cashflow.
#2 Travel with wise guides
Do not underestimate the value of a wise accountant, a wise lawyer, a wise business mentor/business coach.
These people are often worth their weight in gold.
Yes, it may cost you to get their advice, but the reality is that they will both save you money and save you time. By helping you to avoid pot holes and by getting you to where you want to be by a much more direct route rather than wandering in the wilderness for months/ years.
#3 Do it once and do it RIGHT
Some mistakes are costly to make and even more costly to undo.
You need to get your business structure right – both in terms of minimizing taxation and compliance costs and reducing your liability.
You need to get your financing right to reduce your finance costs, build in some flexibility and protecting your personal assets.
#4 Set tangible and achievable goals and track your progress
There is no question that the first 3 years of any new business are hard.
Money can be tight.
You may have to call on all of your courage to make decisions about things that you really have no idea how they will turn out.
You may have to make financial commitments to rents, wages, suppliers that bring on mild panic attacks. HOWEVER, you need to have a plan.
As Lewis Carroll said
“if you don’t know where you are going, any road will get you there.”
Make your goals realistic.
Do not set a goal of world domination in the first 12 months.
It is unlikely that you will earn the market rate for your job in the first 3 years – be prepared to go backwards to go ahead.
#5 Be sure that this is what you want
When you own your own business, there is nowhere to hide.
If you are sick, there often is no-one to cover for you.
If you are not working, there is no money being made.
It can be a lonely thing to work on your own, or in a small business. The buck stops with you.
You need to have a why – a reason for setting up the business.
It is more than just a vision – it is a fundamental cry of your heart about what you are offering to the world, and why it matters.
This why needs to be strong enough to carry you through staring at the ceiling at 3am, fretting about your business.
It needs to carry you through days when you just want to pack up, go home and hide under the duvet.
It needs to carry you through dealing with clients who don’t seem to appreciate or value what you are doing for them.
If you can survive the first three years in business, you are on your way to success, so make your business into what you want it to be!
Janet Natta is a financial adviser and director of Smart Money Advice, offering investment portfolio construction and management services to clients throughout NZ, as well as comprehensive financial planning advice to assist clients to build and protect wealth to achieve their dreams.
DISCLAIMER: The information contained in this article represents the views of the author. It is based on information believed but not warranted to be correct. Any views or information, whilst given in good faith, are given with an express disclaimer of responsibility and no right shall rise against any of the authors or Smart Money Advice or their employees either directly or indirectly out of any views, advice or information.