You have to be a little bananas to start a business. And most people know that I am just as happy to talk you out of business, as I am to help you develop it. That doesn’t get me a lot of work as a business coach but I have to be true to myself when working with people.
People start businesses, and not all people are capable of doing so. While business can be one of the most rewarding endeavours it can also be the hardest, most frustrating and humiliating journey.
It is relatively easy in Australia to start a business. Grab a free ABN and off you go. Book a market stall and start sewing; create a show on ebay / esty / gum tree and watch the dollars come in.
No one likes to talk about how hard business is. In every networking event we attend everyone waxes lyrical about how good business is, how well they are doing. Most of them are lying.
Business costs more and takes longer than you ever expect. It is rare to see a profitable, sustainable business emerge after a year or two of business without it being propped up by something else.
A recent report by the Reserve Bank of Australia report identified that there were over 2 million small businesses that were actively trading in Australia. This figure represents over 95% of firms trading in the Australian economy – of which more than two-thirds do not employ staff (ie. the owners are “self-employed”). And one quarter employ 1- 4 staff, and are defined as micro-businesses.
Furthermore, the report identified that over one-third of small businesses are trading within the “business services” industry.
The report (The Economic Trends, Challenges and Behaviour of Small Businesses in Australia) also referred to recent research in the United States which identified three of the most common motivators for those entering small business ….. Typically it was a life-style choice, with a combination of the following –
- To be your own boss
- To have more control over the hours of work,
- To engage in a passion and hobby, that also produces income
The Reserve Bank report identified that “….. less than half of the firms that were established in 2009/10 are still operating” Although some of these figures would likely represent owners who had decided to retire, and some businesses that may have merged – the report concluded that the vast majority of these businesses that are no longer operating were the “consequence of business failure“.
In the same way, it could be said that just because a small business continues to operate and trade, it does not mean that it is doing so successfully.
The report confirmed some of the major challenges we all know:
- Marketing constraints
- Unpredictable fluctuations in demand
- Cash flow strains
- Difficulty to compete on prices
- Compliance costs
- Access to and availability of capital
- Management deficiencies
- Succession planning
So running a small business isn’t easy but one of the keys is to keep on learning and improving. You need to have a plan to succeed and address all the issues as listed above.
And if you don’t find the success you want in your first venture – try something else. I couldn’t find a statistic but I know plenty of people whose second attempt at business is their most successful.