Yes, it is. But you need the right skills to build a successful business. Entrepreneurs find it far easier to surround themselves with optimistic people who reflect their viewpoint of the world. So they naturally gravitate towards people who are similar to themselves. They hire family, friends and old work colleagues. “Don’t tell me no, tell me how”, is the common maxim.
But sometimes entrepreneurs need to be told no. They need to be told the truth, not just have their views confirmed. They need to build teams with different types of people who will challenge them in a non confronting way.
In 2003, Lui Venturini and Cameron Newman started VN Power Solutions after observing the shortage of professional trade services. But the company almost didn’t make it after employing inexperienced and lowly paid workers, and expecting more than they were capable of delivering without training.
Another entrepreneur Tony Douglas, of EMC, says: “I also didn’t understand you don’t get ready-made staff and that the investment in their skills and development have major pay-offs for your business.”
Smart successful entrepreneurs look back and say that one of their biggest mistakes is not starting with more money. Why? They underestimated the financial requirements of launching a business or a new product. Many entrepreneurs are optimistic by nature, so they overestimate the size of the market and underestimate the cost of reaching the market.
They start in a fancy office, with too many staff and a big marketing budget. They forget to factor in insurance costs, pay roll and bank fees. Before long their costs have spiraled and they are running losses month by month.
The rule of thumb? It takes at least twice as long and costs double trice what you expect.
Start small, set very tight budgets and stick to them. Staff will whinge, but they don’t lie in bed at night worried about the health of the business – you do.
I have sympathy for this one. Things can change that are outside your control.
But by staying informed, entrepreneurs can often predict where things are going and can develop a contingency plan. Interest rates are going up, the dollar is soaring, petrol prices are heading skyward, the government changes the regulations… outside your control.
But there is no use hoping it will improve.
No they don’t. Establish a vision, culture and identity that feeds through the company. Make sure the marketing staff are integrated into the middle of operations so that the business has a very clear identity and focus. Are you high-quality, blue chip? Or fun, savvy and cheeky? What are the three words that describe your business?
OK, entrepreneurship can be terribly lonely; but there is help around. There are mentors, consultants, business coaches, networks, industry associations, government bodies and so on. Helen Jarman of Infoactiv Group says not accessing help was her biggest mistake.
“Back then I felt that I needed to do everything myself, and I just became very head-down rather than sort of reach out to the many networks available that I utilise now. I just wish I’d sort of wised up to that,” she says.
“I would have definitely accessed a lot more of the business and government network and grants and assistance that are available now. I’m very much part of the YEO (Young Entrepreneurs Organisation) network, the Entrepreneurs Organisation network as well as CEO Institute. We’re now working with the Australian Government, Austrade and so forth.”
Well, learn! Unless you are an accountant, most entrepreneurs have a very poor grasp of Take Guy Sigston who was founder of Lloyd Morgan. The bank foreclosed in 2002. It wasn’t from lack of reporting. “I didn’t understand the information that was being reported to me and frankly I was cheesed off with my accounting firm because, knowing what I know now, they saw this,” he says.
His advice? Don’t be afraid to spend a fair bit of time with your external accountant. “You need to sit down and drill them on ‘what does this actually mean?’,” he says. This becomes crucial as you build scale.
Yes, you can – once that cash stops flowing. Carmelina Pascoe, who runs My CoffeeShop, says one of the most frustrating parts of running a business is to know you are in the black but you have no money to pay the wages.
When you are designing the business model, look for ways to ensure businesses pay you regularly, either through a retainer arrangement, weekly or monthly. Have strict seven day terms on all contracts and approach the most officious and best organised person in the office and make it part of their job description to ring the accounts department of companies and get that money in the door the day it is due. Make sure all the paperwork is correct and record the trail of invoices so they cannot get “lost” at the other end.
William Scott, founder of Smart Group, also suffered. “Friday would come along and you need to pay everyone the wages. We were always profitable, but sometimes clients don’t pay on time. So your credit cards are always worn out. We didn’t get our debtor finance structured until a year later than we should have.”
No, they can’t. Often the people you hire to start the business are incapable of taking it to the next level. All the training in the world will not help. They simply do not have the right sales instincts, marketing flair, financial acumen or operational skills.
All entrepreneurs hate moving people on. But if you don’t move them on, you end up doing their job at night after they leave early, after you have finished your own! Monitor and measure staff performance through written job descriptions, informal chats and performance reviews.
So do mistakes! Tom Potter from Eagle Boy Pizza says it took him 10 years to set up a board. He wished he had done it in the first two years. “You can’t afford not to, even if you just have a quarterly meeting of people who are there for no other reason than to help you. They’d tell me I was off my head, go away and think about it and re-present the upsides and downsides.
“By the next board meeting I would either turn up and say ‘you were dead right’ or I would re-present, giving a lot more thought and realising there were more opportunities or more risk involved.” Surround yourself with two or three advisers and have structured meetings every month or every two months.
A venture capitalist once told me the biggest problem with start-ups was not having to kick out the entrepreneur because they could not take the company to the next level. It was the entrepreneur walking out or being carried out.
Burnout is a huge risk factor in the first few years as the lack of staff and resources means the entrepreneur takes on a heavy workload and multiple roles. There is also the pressure that entrepreneurs put on themselves to be successful – and to pay the bills. Use good time management to avoid disorganization and procrastination needs to include time out. Make sure you are clear about the possibility it may take longer for the business to take off and plan for that.
Kikki.K’s Kristina Karlson reached the end of her energy when she had reached 20 stores. “We had been doubling revenue every year, but I was really struggling and at the end of my energy,” she says. Her solution was a mentor, cash injection and a finance person. “You get so tired you can’t see the business with fresh eyes.”
Set your business up from day one to sell. Keep accounting records, minutes and all documents as if an astonishing offer was going to arrive on your desk tomorrow. Have your trademarks up to date, meet your potential buyers on a regular basis and keep them informed about your progress. Think of your business as a product. Is it fresh, organised, up to date? Is it operating at peak performance? Is it something the marketplace wants?
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