Many people looking to start a small business often face failure within their first year of operation. In most cases, they tend to rush in unprepared and it leads their businesses on a downward spiral.
Australia has a unique business environment and the 97 per cent of the businesses fall into the small and medium business category. Despite the vibrant and growing market opportunities, roughly 20 percent of them do not make it past the first year. About 60 per cent of those that make it past the first year do not survive past the third year.
Among the leading causes of this high failure rate is poor money habits, accounting for about 40 per cent of the failed firms. This does not have to happen to your business. Thanks to the presence of numerous small accounting firms in Melbourne, you have access to affordable professional bookkeepers.
Don’t follow your passion
Although bandied around as a key ingredient in business success, ‘follow your passion’ is a terrible advice. The key to business success is the ability to create a product that solves a problem for people who are willing to pay for it. People who are starting their business to follow their passion tend to learn this lesson the hard way when failure slap them in the face.
Instead of trying to wing it, you stand a better chance of success if you take the time to research the market. Doing so allows you to identify market needs that you can fill or meet.
Do vet your clients
It is common for small business owners to bend over backwards to win a client. This might include offering big discounts, flexible payments terms and long invoice grace period. While this might give you a leg up in a tough market, you need to approach it with a great deal of caution. If you are dealing with unscrupulous clients, this might hurt your business.
Instead of taking chances, carry out a thorough credit check on all prospective clients. Avoid offering credit facilities to clients with a reputation for not paying their debts in full and on time. Dealing with such firms could leave you cash-strapped, which would cripple your operations.
Many small businesses fail to make it past the first year of operation because they overlook some factors that are essential for success. By addressing these aspects, you can avoid the pitfalls that ruin many start-up companies.