Three major reasons cited for business failure are lack of planning, lack of capital and economic conditions. Economic conditions are hard to influence, but good business planning and capital management is in your hands. Here are some tips to help:
Do your homework
If you are just starting out or currently in business, undertake sufficient market research. There are many organisations which can assist you to research your business idea, use them, and use all other information at your fingertips. Research can assist you to know your product, your customers and your competitors. It can also help you anticipate or react to competition technology and or other changes in the market place.
Have adequate capital
Ensure that you have sufficient working capital (enough money) to continue operating through a full business cycle, this may be three months or two years for some businesses. Take into consideration all expenses that you may incur, including cost of the business, rent, wages including your own, legal fees, accounting fees, taxes, etc.
Have a business plan
Develop a business plan which is workable, achievable, realistic (in terms of expectations for income and expenses) and offers you flexibility if your situation changes, refer to Business planning.
Set a realistic budget
When setting a budget, plan for the worst case scenario not the best. Businesses commonly underestimate costs, fail to price their product or service correctly, over-estimate income and do not recognise that money may be slower coming in than expected, refer to Cash flow planning.
Consider all your finance options
Shop around for the best deal you can when seeking business finance or advice. Feel free to negotiate, and ask what incentives are available to you. Ask lots of questions and expect thorough answers. A good financier should be prepared to give you advice on all your banking needs, refer to Business finance.
Manage your debtors
Unless you deal exclusively in cash you will have debtors (people who owe you money) and creditors (people to whom you owe money).
Establishing a credit policy that is legally binding is essential, for example, payment required within 30 days. If payment extends beyond the credit period follow-up immediately by telephone. Ensure your credit policy does not extend beyond that of your creditors, because you will need the income to pay your suppliers and other creditors. Offering discounts for prompt payment may assist in avoiding delays in payment, refer to Bad debts and Cash flow planning.
Be a good debtor
Pay your debts on time and within the discount period, if a discount applies. Preparing a regular list of creditors and payment dates will also assist you with cash flow planning.
Use a good accountant
A good accountant is one who communicates with you and provides you advice that is ethical, correct and appropriate to your business.
Keep good records
The day to day bookkeeping is extremely important in keeping your business on track. Keeping accurate records of receipts received, debts outstanding, reconciling bank statements etc are all your responsibilities. If you are not experienced in this area it is worth considering employing a bookkeeper, refer to Understanding your balance sheet.
Know your suppliers and landlords
Build a positive relationship with your suppliers and landlords. Be prepared to negotiate on price, location and goods. Seeking legal advice on any contracts you enter into can also save you heartache in the longer term.
Keep your customers happy
A happy customer is a repeat customer. Know your customer and show them respect, always be courteous and kind and remember the old adage, the customer is always right!
Marketing can be time consuming but it will pay off. A simple marketing plan can be useful in helping you to identify what you want to market, how and at what cost. The plan may include a list of objectives you wish to achieve a description of your customer and a time frame for implementing your plan, refer to Marketing.
Make technology your friend
In today's business world technology can no longer be ignored. The use of electronic banking, on-line transactions, on-line advertising, trading on-line and email are becoming essential tools for small businesses - so embrace technology and make it your friend! Refer to What is eBusiness?
Get the right staff and keep them
Employees can make or break your business, so take the time to select the right person for the job and train them so that they become an asset to your business, refer to Employing people.
Have the right attitude
Finally, be happy doing what you are doing and be open to ideas and suggestions from friends, customers and suppliers. Good businesses recognise that no matter how well their business is operating they can always be improved.
For further information contact your nearest Territory Business Centre.
Disclaimer: The material contained in this web page is intended for use as a guide and for general information only. It is not intended to be a substitute for independent professional advice. The Department of Business of the Northern Territory Government accepts no responsibility or liability for the correctness, accuracy and completeness of any of the material contained in this web page and recommends that users of this web page exercise their own skill, care and judgment in the application of the information contained in the web page.