The courage to go it alone
When added up, small businesses are very big. Ninety six percent of Australian businesses are small and they employ almost half the population. They also contribute more than $330 billion to our economy.
But the failure rate is very high. According to the Australian Bureau of Statistics, only half of small businesses run by sole proprietors survive for four years.
Even so, building a business has the potential to offer huge personal, professional and financial rewards. This is especially true earlier in life, as taking career risks often becomes more difficult as you get older. And who knows, maybe your small business will one day be very big.
The common challenges for small businesses
One of the biggest challenges in setting up a small business is getting the right advice and support. It is also difficult to access funds and get cash flow. And you also have to find the best people. Maintaining a work-life balance is also tricky.
These were the findings of a major report, Entrepreneurial Britain, published earlier this year by the Telegraph newspaper and the media agency OMD in the UK. It surveyed more than 1,000 small and medium-sized business owners.
Starting your own business – regardless of size – takes courage and good planning. You need to have a good strategy - a roadmap, of sorts - which you will adjust regularly to your circumstances and the economy. And in case you did not know, growing a successful business requires hard work and a huge amount of time.
These are six important principles for any small business operator.
- Dream big - but start small
When you start out, you may be tempted to provide everything at once so that your customers regard you as a one-stop-shop. This fear of losing opportunities could drive you to branch out too soon, and mean you will set unrealistic standards. Instead, make sure you establish your business with one specific product or service. And keep it simple.
You must also consider what makes your company different. What is your ‘secret sauce’? What is your competitive niche? You need to be distinctive and provide compelling reasons for your customers to return.
You can use this distinctiveness as a rallying point, for your customers and employees. From a marketing perspective, this means ensuring every new prospective customer receives the same consistent message.
- Learn everything you can about your job
Owners of growing businesses need to initially have a hand in running all key parts of the company, including operations, marketing and distribution. Having attention to detail and first-hand experience should help you spot small issues before they escalate into large problems.
As a small business owner, you will have the opportunity to put into practice everything you have learned during your working life. It is also important to keep acquiring new skills, particularly those related to your industry and profession.
- Listen to your customers
Without customers, you do not have a business. Carefully listen to what they tell you, particularly what motivates them. You will also need to ruthlessly seek out and listen to their feedback.
For a small business, this often happens one customer at a time. By focusing on what brings in one customer, and keeping that customer happy, you may be able to replicate the success.
Tesla CEO Elon Musk says knowing how to take criticism is vital. "Take as much feedback from as many people as you can about whatever idea you have,” he said in a Google Hangout interview with Inc. magazine. “Seek critical feedback. Ask them what's wrong. You often have to draw it out in a nuanced way to figure out what's wrong… People don't like to complain or point out faults, but that's what will make your business stronger.”
In the age of social media, your best salesperson could be your customer. If you treat that person well, they may do the selling for you.
- Think of your business in global terms
Jack Ma, founder of the Chinese internet company Alibaba, says the future is global - and even small businesses should operate internationally to survive in the long term. Alibaba is now taking on Ebay and Amazon in the race to become the retail giant of the digital age.
"If you do not try to globalise your business through the Internet, you may not have a business opportunity," Ma told a company conference in Detroit this year. He encouraged small businesses to think about how they could sell products across the world.
In the digital age, there are many more opportunities and channels to access global markets. Yet, according to one recent survey of over 350 small business owners and managers, nearly half did not even have a website.
But that does not mean you promote yourself to the masses. Marketing to ‘the world’ is the biggest, and most costly, marketing mistake small business operators make. Even multinational corporations with huge marketing budgets cannot afford to market to everybody. Instead, focus on a specific niche market.
Social media is also a great tool to reach large audiences. However, small business owners need to be very strategic about how they use social media and how this links to their websites.
Instead of spreading energy and resources across too many social channels, pick one or two – such as Facebook and Instagram. Just choose whichever best complement your products, services and customers.
- Beware those offering advice
Not all advice is good. In a recent survey by UK insurer Direct Line, one in every six businesses said they had suffered from poor professional advice. And they suffered financially - on average, this advice cost each business nearly $35,000.
Almost half these companies attributed the bad advice to information technology consultants. Also to blame: management and marketing consultants, property, communications and advertising specialists, accountants and lawyers.
One of the best ways to reduce the risk of bad advice is to seek recommendations from entrepreneurs in a similar industry. Tapping into local business associations and industry groups is a great way to access these referrals and also to grow your professional network.
Also, it is a good idea to start small. By testing a consultancy or supplier through a discrete, ring-fenced project, you can assess the provider while minimising the investment and risk.
- Lead with integrity
Small business operators can sometimes be tempted to bend the rules for immediate and short-term gains. This can be a costly mistake.
One successful small businessman, Mike Rosenbaum, said in an interview with the Sydney Morning Herald that you must “always wear the white hat”. He founded Spacer, an internet company that set up a marketplace for people to rent space and cheap storage. In referencing the ‘white hat’, Rosenbeaum stresses that integrity comes first – even in challenging situations: “stick to your values and do the right thing".
This also means being the one to break your own bad news. By doing so, you will be regarded by customers and employees as honest and trustworthy.