Brendan
14-11-08, 09:28 AM
I was just reading this article, and found it a great view on the current climate, and those wanting to start a business;
A start-up? Don't wind me up (http://smallbusiness.smh.com.au/starting/finance/a-start-up-don%27t-wind-me-up-909240870.html)
Many entrepreneurs would be forgiven for thinking the current environment is the worst time to be launching a business.
The reality is the financial crisis is stalling growth around the world but Australia is probably the best placed of the modern OECD economies to ride out the stormy times.
There has arguably never been a better time to launch a business in the market if we learn from the history of economic fall out.
There is an old saying in finance: ''when the tide goes out you work out who has been swimming naked'' and the recent collapse of ABC Learning Centres only reinforces this point.
On every occasion of tougher economic times the recovery has been marked by a time of the strong getting stronger, the weak weakening or ceasing to exist and the new having a far more level playing field to advance.
One of the key reasons for new players finding a level playing field is that the end, consumers or distributors, stockists or alliance partners are often more open to change given their own financial performance.
This provides opportunities for meetings, contracts and growth that was not possible during the more successful times.
It is critical that anyone starting a business now remain focused on cash flow, access to debt, the core product or service offering and just how to close the deal.
Far too many entrepreneurs get caught up in the emotion or culture of their business early on at a time when deal closing and cash flow are the two most critical elements.
The three critical areas to focus on are the strength of the value proposition, target market and a sustainable business model.
These three areas will provide the foundation throughout the early years and as a consequence it is critical to be honest about how well understood the fundamentals of these areas are.
It is much less about the perfect business plan and much more about understanding exactly what your proposition is, how it will reach the customer, at what price and importantly, if success presents itself will the business actually scale on a profitable business model.
The most common pitfalls in launching a business at any time are:
not closing the deal or sale
failing to commence the business in the form or at the price point that you seek to continue
not understanding the sustainability of the business model and assuming profit will just arrive after effort
underestimating the amount of cash the business requires and how it should be utilised
bringing the wrong people into the business
a lack of financial management discipline and reporting in the business
These do not change during tougher economic times and the big advantage a new business has at this time is an all round stronger focus on the basics out of absolute necessity to survive.
Another consequence of this tougher economic time is the loosening of the labour market which creates an opportunity for a new business to be more patient and selective in bringing the 'right' people into the business.
Starting a business is an exciting, challenging and potentially very rewarding time. Statistics and history tell us 80% of businesses fail in the first 12 months but the continual belief in innovation and the ability to be better than others in the market is what underpins the entire modern economy.
There is every reason to be optimistic about the Australian economy despite the current economic challenges and as the average bear market has lasted 14 months throughout history we are already well on the way to recovery.
Adrian McFedries is the Managing Director at DC Strategy.
A start-up? Don't wind me up (http://smallbusiness.smh.com.au/starting/finance/a-start-up-don%27t-wind-me-up-909240870.html)
Many entrepreneurs would be forgiven for thinking the current environment is the worst time to be launching a business.
The reality is the financial crisis is stalling growth around the world but Australia is probably the best placed of the modern OECD economies to ride out the stormy times.
There has arguably never been a better time to launch a business in the market if we learn from the history of economic fall out.
There is an old saying in finance: ''when the tide goes out you work out who has been swimming naked'' and the recent collapse of ABC Learning Centres only reinforces this point.
On every occasion of tougher economic times the recovery has been marked by a time of the strong getting stronger, the weak weakening or ceasing to exist and the new having a far more level playing field to advance.
One of the key reasons for new players finding a level playing field is that the end, consumers or distributors, stockists or alliance partners are often more open to change given their own financial performance.
This provides opportunities for meetings, contracts and growth that was not possible during the more successful times.
It is critical that anyone starting a business now remain focused on cash flow, access to debt, the core product or service offering and just how to close the deal.
Far too many entrepreneurs get caught up in the emotion or culture of their business early on at a time when deal closing and cash flow are the two most critical elements.
The three critical areas to focus on are the strength of the value proposition, target market and a sustainable business model.
These three areas will provide the foundation throughout the early years and as a consequence it is critical to be honest about how well understood the fundamentals of these areas are.
It is much less about the perfect business plan and much more about understanding exactly what your proposition is, how it will reach the customer, at what price and importantly, if success presents itself will the business actually scale on a profitable business model.
The most common pitfalls in launching a business at any time are:
not closing the deal or sale
failing to commence the business in the form or at the price point that you seek to continue
not understanding the sustainability of the business model and assuming profit will just arrive after effort
underestimating the amount of cash the business requires and how it should be utilised
bringing the wrong people into the business
a lack of financial management discipline and reporting in the business
These do not change during tougher economic times and the big advantage a new business has at this time is an all round stronger focus on the basics out of absolute necessity to survive.
Another consequence of this tougher economic time is the loosening of the labour market which creates an opportunity for a new business to be more patient and selective in bringing the 'right' people into the business.
Starting a business is an exciting, challenging and potentially very rewarding time. Statistics and history tell us 80% of businesses fail in the first 12 months but the continual belief in innovation and the ability to be better than others in the market is what underpins the entire modern economy.
There is every reason to be optimistic about the Australian economy despite the current economic challenges and as the average bear market has lasted 14 months throughout history we are already well on the way to recovery.
Adrian McFedries is the Managing Director at DC Strategy.