No one goes into business thinking they will not succeed. But while some emerging businesses’ definition of success means creating enough money to replace a job and be their own boss, others want to employ staff, create iconic brands and wealth.
Zero-employee businesses are disproportionately represented in the New Zealand business landscape, with 70% of NZ enterprises falling into this category. According to MBIE, 58% of Kiwi businesses with zero employees will cease to exist within five years, so why is the risk worth taking?
The Secret to Success
Successful people work hard and possess dogged persistence to achieve their goals. Stories of high growth start-ups and those that create wealth and prosperity in everything they touch are plentiful, yet when businesses fail, it's treated like a dirty little secret. Starting a business concept, ‘failing fast’ and redirecting into new ideas and opportunities is not failing; it's the right thing to do. Hanging on to a dream and losing all your savings and assets, or worse losing other people’s money and ending up insolvent, is when things take a turn for the worse.
The Secret to Success – Part 2
Every business, like their founding entrepreneur, is unique. Those that achieve their determined success, which inevitably must include financial prosperity, have incorporated the following three factors:
- Access to diverse business skills and knowledge
- Robust planning and
- Financial backing
Most new business ventures start with just one of the above, or too often, none of them.
Even Great Ideas are Destined to Failure
We describe people who start a new business as entrepreneurs - defined in the dictionary as someone who "takes financial risks in the hope of profit". The reality is that most people who go into business in New Zealand do so because they are in pursuit of an idea, not financial profitability.
Being a business owner is not easy - it requires long hours, risk, and doing things you don't necessarily like doing. As your business grows it brings new challenges as you move from independence to interdependence – become a manager and empower and utilise employee skills. In a paradoxical situation, businesses can also fail from being ‘too successful’ – either from growing too fast, not keeping up with client demand or simply losing sight of their original defining values and mission.
Why Start a New Business in this Current Environment?
Job losses and redundancies, those retiring and looking for something to occupy their time, a change in career path, and a sudden financial windfall are all reasons people venture into the small business world.
Despite gloomy financial forecasting and low business confidence, there will always be consumers who need product or services. Find a way to improve either a product or service, and you could be on to a business success story. New industries are continually emerging that didn't exist previously, one example being the internet. New initiatives such as renewable energies or Artificial Intelligence will create sub-industries that will mean new jobs and earning opportunities very soon.
Earlier in this post, I referred to three things that will help reduce the likelihood of failure.
1. Access to diverse business skills and knowledge
Starting new requires that you do most things yourself, so knowing when to delegate when you don't have the skill or time is essential – accounting and book-keeping being good starting points. A Business Mentor can give you real advice, and when you can afford it, find a consultant to help you grow. Don't rely on your mates or your life partner for guidance as they aren't equipped for strategic business decision-making. When you are ready, establish an advisory board, but be prepared that they may tell you to step aside because you are restricting the very thing that you built.
2. Robust Planning
Planning is a work in progress - your skills in your chosen area can be built over time. Ensure your plan is relevant and start small. Plan as far as you can see, but keep at it. Don't get caught up with it being perfect but keep modifying it, so it remains relevant to you. When you achieve your goals, you are then in a position to recognise and celebrate your success milestones.
3. Financial Backing
Most small businesses are undercapitalised. They have little or no financial reserves and cashflow is confused with profit. If you are spending more money than your business is earning, then technically you are insolvent. Putting your house up as collateral is risky and if you can't convince your bank or investors your idea is worth backing, then you may have to rethink your plan. Banks and investors will want to see 1 and 2 well prepared and presented before any investment is considered.
There are numerous support mechanisms for start-ups and new business ventures. High growth and high risk may look at incubators that often have university or sector industry support, which may lead to angel investor opportunities.
Bringing a Mentor on board via Business Mentors New Zealand is a great way of getting good advice during the formative stages of those either buying or setting up new business ventures.
BMNZ is presently developing a New Business Programme offering access to Subject Specialist Mentors and microlearning opportunities in a supported group environment.
Contact www.businessmentors.org.nz for more information.