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4 big tips for a successful small business

18/03/2019 by Pascoe Partners Accountants

4 big tips for a successful small business

 

There were approximately 2.3 million businesses actively trading at the end of 2018, according to the Australian Bureau of Statistics. Of these businesses:

  • 2.06 million businesses had fewer than four employees
  • 2.15 million businesses had a turnover of less than $2 million.

These stats give you an idea of the size of the small business market in Australia. They also give an indication of the high level of competition faced by small business owners.

The statistics around small business failures are quite alarming. Small businesses – especially small family businesses – have to work hard just to stay afloat, let alone succeed.

4 ways to set sail for success

In order to be successful, a small business should have a clear understanding of these elements:

1. the division between business and family

2. the direction of the business

3. ownership and management expectations

4. good governance and control.

Let’s look at these in a little more detail…

1. Balance business and family

Most small businesses demand a great deal of time from the proprietor and their family. This can impact on the amount of time available for family activities. It also means that family life can overflow into the business space in ways that aren’t always ideal. We have all probably heard stories where members of the family walk into a business as if they themselves are the owners, which may not be appropriate.

It’s important to have strategies in place that:

  • preserve some quality time with your family away from work
  • create a healthy separation between the business and your family.

2. Know where you’re going

You need to have a clear intention behind your business. Is it a commercial activity? A wealth-creation exercise? A small business can be a replacement for a wage for some owners, and that’s fine.

Your intention for the business will help determine what your exit strategy will be. It could be that the business is in its infancy and that you intend to build it up to a point where it could be sold off to a larger concern, or there are ideas to list it on the stock exchange. This will mean a very different direction compared to a business that you intend to pass on to your children.

3. Know who’s in charge of what

Being the boss and employing members of your family can be tricky. Being clear on who owns the business and what family members are expected to do in the business is important in terms of preventing family conflicts. This is especially true where more than one generation of family members is working in the business.

Generally, family members working in a business take a share of the business profits, rather than a commercial salary. But in some situations, it would be better to pay commercial rates and have set guidelines, roles and key performance indicators, so that all family members know what is expected.

4. Know the ship is on course

Good governance and control is about making sure the business has good record keeping, accurate and on-time reporting of results, and a robust approach to managing it. This not only gives you better clarity and less stress when running your business, it also makes it easier to value and sell your business when and if that time comes.

An experienced business advisor can help you set up your governance and control systems. This gives everyone peace of mind.

 

Considering some of these suggestions will help you steer your small business to success. Contact us for expert advice and help reviewing your small business.