It is of the utmost importance that adequate consideration is given to planning when starting a small business. The initial planning stage should include discussions with a financial institution, solicitor and professional accountant. Lack of professional advice (especially from Accounting Firms) when a small business is being commenced is one of the most significant reasons for the high failure rate of small business
Insufficient capital at commencement of business
Inadequate management especially in the areas that are not the strong points of the owner/manager
Ineffective bookkeeping systems
Adverse accounting systems to highlight performance results
Lack of understanding of the term ‘cash-flow’ and the significant role it plays within the business’ operation, in particular to the payment of GST (Goods and Services Tax) and PAYG (Pay As You Go) tax
Insufficient capital for growth and expansion
Over-dependence on debt financing
Poor cash management
Deducting funds from business income, especially in the beginning. Living too high!
Not understanding the meaning of profit
Poor debtor, stock and work in progress control
Inadequate bank relationships
Poor location
Unsuccessful choice of a partner
Failure to delegate
Implications caused by larger exterior organisations
Disinterest by owners (often the second generation)
Owner’s inability to lead a management team – need for people management
Lack of sources of equity finance for “larger” small firms
Failure of owners to provide for succession
Not allocating adequate time to address potential problems and solutions faced by the business
Not separating spending on personal needs from business
Poor staff relationships – Lack of acceptance of the need to build a committed staff team
Lack of contact with major customers
Not determining what business you are really in
Not understanding the market
Need to be careful with the employment of relations
No formal Business Plan
No Budget of Cash-flow Forecasts
Lack of effective outside advice
No strategic planning sessions
Having not developed empathy with customers
Disclaimer: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in this article is for guidance only and should not be relied upon without obtaining professional advice having regard to your specific circumstances.
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