More than 60 per cent of small businesses in Australia fail during the first three years of establishment. Research has found that those initial three years are crucial in determining the fate of the business. Here are the biggest challenges and how you can overcome them.
Rising energy bills
Rising energy bills are an alarming issue for everyone, but especially crippling for small businesses. Energy costs can be a significant percentage of a small business’s turnover but there are ways to mitigate this. Firstly, have a look at what a broker can do for you. Energy brokers can perform an audit and inform you of the best supplier depending on your business’s needs. Look at the different providers’ contracts and compare them. Alternatively, explore different forms of energy, such as solar, where you can sell power back to the grid. The upfront cost is larger but these installations can save you money if you have a long lease.
On 1 July the visa, that allowed skilled overseas workers to work temporarily in Australia, was abolished and replaced with a new Temporary Skills Shortage visa. So, small businesses need to work within the landscape – working with who we have in this country. Invest in your staff and train them to be who you need. There is no quick fix. You need to actively check the productivity of each staff member with timesheets and monthly reports – by keeping track of these you will identify any inefficiencies and work with your team to rectify them.
If you employ staff on a full-time contractual basis, they should be working 9-5, not coming in on a Saturday because that means your small business is understaffed. Overworking your staff means they will burn out a lot faster and leave, wasting the time and effort you’ve invested in them.
If you need to pay your expenses before you recoup money owing to you, you have a cashflow problem. Whether it is gas, water, waste or rent, small businesses must monitor all expenses. There are benchmarks for business and wage costs. A way to keep an eye out for these things is to invest in a good piece of accounting software that integrates with your business. The last thing you want to do after managing the business all day is to go home and work out figures and numbers – smarter technology will help you with that. If possible take payment via credit card or direct debit. This gets you paid on time, improving your cashflow.
Fearing a big tax bill
There’s the saying that there’s two things that are inevitable in life: death and paying taxes. As accountants, we do our best to minimise the amount of taxes you have to pay. However, I advise my clients to try to change their mindset when it comes to paying tax. Ultimately, the bigger your tax bill, the better your business is doing. It’s encouraging to see that Australians believe they are paying the right amount of tax (51 per cent of the population) and this figure is rising every year.
Not considering legal and accounting aspects of the business
Often when small businesses are looking for accountants or lawyers to solve a big problem, it’s too late. If you cannot afford a lawyer or an accountant when starting your business to make sure everything is set up correctly, then you should think twice about starting your own company. The cost of fixing problems is significantly higher than preventing them. It’s similar to buying a house and not being able to afford insurance – it’s just too risky.