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How to Pick the Good from Bad in Small Business
If you’re running or consulting
for a small business, you’ve no doubt heard the oft quoted statistic
that something like 50 percent of all small businesses fail within two
years of opening.
While it’s true that it’s not easy to run or consult for a small
business, it can be a fantastic experience. But to attract success, it’s
important to recognize the difference between a good small business and
a bad one.
Has Anybody Got a Map?
The first step in developing a solid small business is a good business
plan. All too often, a small business owner happens upon what might be
great idea – only to fail because of a lack of forward planning. A
business plan is what gives all parties involved forward planning. It
allows people to think through where they are now and where they want to
be in one, five or even ten year’s time.
Writing a business plan takes considerable time – a very valuable
commodity for small business owners. And although people often have good
intentions about writing a business plan when they start a business,
operational necessities like buying hardware and software take a lot of
time, which means the plan often gets forgotten. After all, sitting down
to write a business plan doesn’t actually make the business money,
right? Wrong. This attitude can be big mistake, akin to building a
rudderless ship.
Instead, take the time to develop a business plan before putting things
like IT systems in place. But remember there’s no point in writing a
business plan and then sticking it in the bottom drawer. It should be
referred to and amended constantly to ensure you, and everyone else
involved in the company, knows where the business is going.
To Market, to Market
Another important building block in any small business is decent market
research. Someone might have a fabulous idea for a product or service –
but unless there’s a market for it, it’s not a good business idea. This
is where market research comes in.
Whether you own or are in another way involved with an established small
business or a start-up, market research can point out whether there’s
anyone out there willing to buy this great idea, how many potential
customers there are, how much they’re prepared to spend on the product
or service, what the market share is likely to be, and whether the
market is shrinking or growing.
Importantly, market research will also show who the competitors are,
what they charge and how they do business. This kind information is
extremely valuable – in fact it’s difficult to compete in small business
without it.
The Midas Touch
It almost goes without saying that a prudent approach to managing money
is a necessity in any good small businesses. It’s also important to
remember that good business management is not just about making sure
more money comes in than goes out – it’s also about making sure the
business has access to finance if need be.
Businesses can need extra money for all sorts of reasons: to grow, to
help survive during downturns and to fund capital acquisitions. A good
business plan and evidence of good financial management can go a long
way in helping small businesses attract finance, so make sure the
business plan and accounts are always up to date. You just never know
when a fantastic business opportunity will walk through the door, and
the day it does, you want to be able to finance it properly.
A Balancing Act
Perhaps surprisingly, another ingredient for a good small business is a
principal who’s not a workaholic. Running a small business can be very
seductive - people become excited by their own success, and want two
throw everything they have at the business to ensure its success.
Unfortunately, this often happens at the expense of a full and balanced
life, which is ultimately to the detriment of the business.
A small business owner should make sure they spend time with their
family and friends and don’t always arrive early and work late. Being a
workaholic sets a bad example for the rest of the team who, in an
attempt to impress the boss, think they should also work unsociable
hours.
They should give their team and themselves a rest – they will be much
more productive and interested in the business if they have a life
outside it!
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