Five Things I've Learned, Running a Small Business
Tuesday, May 13, 2014
I’ve been running a small business, a digital advisory company, for around seven years. Here are my top five business tips that I’ve learned during that time.
1. Have a business plan
One of my favourite quotes comes from Lewis Carroll, who said: If you don’t know where you’re going, any road will take you there.
Think about it. If you don’t know where you want to take your business next, you will simply operate on a day-to-day basis, and your business will drift where it will drift. You won’t see what your competitors are doing, you mightn’t see a big change coming and you may miss out on a really big opportunity.
A strong business plan is essential, I’ve found, in helping you understand your market, know what you are offering, and know how you are going to price things to generate a sustainable (and strategic) income. Having a business plan forces you to think these things through, and will guide every decision you make for your business, going forward.
2. Choosing a business name
Choosing a business name can be a very tricky thing. You want it to reflect what your business does and you want it to sound interesting.
Create a list of potential business names and then check to see if they are available at ASIC. Once you know what is available, consider the following things before choosing:
Will my customers know what my business name means?
If your company name explains what the business does then that is going to make all communications and marketing with potential customers much easier.
Will I spend the rest of my life spelling out the business name in conversations?
Don’t underestimate this one. Is there a potential that people will misspell your business name? Know that you will be spending time in conversations and on the phone, spelling out your business name or, at the very least, your email address. Don’t make this harder on yourself than it needs to be!
Is the domain name available? (Check here)
If the online domain name is not available for your business, reconsider the name. There is nothing worse than having a great business name but your company website and email addresses not reflecting the name of the business.
3. Separate work from home life
My business operates from my home office. If you are starting your business from home, it is extremely important to be able to separate your business life from your home life.
There are a few reasons for this.
The first one, is it will preserve your sanity. You need to be able to switch off the computer, put down tools, close the door and walk away into your real life. Most people achieve this when they leave their place of work for the day.
But, if you work from home, you need to still create the same outcome even though your office may be metres from your kitchen, lounge or bed!
Without this separation of work and life, you will find that you work long hours but do not make substantial progress. It will become a tug-of-war between your work and your life, family, partner etc.
Secondly, if you are claiming any rent or mortgage as a part of your operating costs, you need to have a physically separate office within your home. Check with your accountant about the right way to make these kinds of claims.
4. Have good experts on speed-dial
Having a good accountant, bookkeeper and lawyer is vital for any business. You may not need a lawyer all the time but it’s good to know one that you can call on when you need to.
Bookkeepers can make the administration side of running a business much easier. Having sound advice about business expenses, taxation, and accounting is vital.
Don’t try to be an expert on everything. Find the right people to support this administration side of your business so that you can get on with the bigger picture stuff, or working on the places where your skills give your business its edge.
5. Managing small business money
One thing that genuinely surprised me when I started my business is that not everyone honours invoices. Sometimes invoices are paid late, and other times they are not paid at all. Sometimes you have to spend your precious time chasing down outstanding monies owed, and that’s fun for neither party.
This makes managing your business tricky as companies live and die by cash flow. If you have more outgoings than you have incomings, then things become stressful, fast. Here are a few tips to make things easier:
Make sure you have your business bank accounts are set up to hold your operating money separate from your tax payments. Set aside GST and tax owed with every invoice received. Using an online accounting system like MYOB, Intuit, XERO can take a lot of pain out of this process.
Depending on your business, it may be advisable to have an overdraft on your main business bank account. Talk to your accountant and business banker about how an overdraft can help smooth cash flow in and out of your business.
Create a three-month cash flow forecast. That is, know what payments are due to your business in the next three months and what are the anticipated outgoings. This will give you an instant snapshot view of the business that can help you anticipate what may occur.
Make sure that on every invoice, the terms of payment are clearly stated. Be prepared to negotiate these terms with clients based on their accounting and payment cycle. Be flexible but ensure you get paid to avoid a cash flow crunch.
Unfortunately, you will also need to include a clause in your terms of business about the steps that will be undertaken if you are not paid. You will need to consider if interest is will accrued on the amount owing after a specified period of time. Plus, you will need to state that any fees and commissions charged by a debt collector used to retrieve the money owed will be passed on directly to the client. Check how to phrase this with your lawyer or accountant.
So, those are the top five tips I’ve learned from running my own small business. If you’re already running a small business yourself, what are your tips? Where have you had difficulties, and what methods have you used to solve them?