Hayley Newton-Holroyd, Head of BDODrive, BDO SA
Having worked in the accounting profession for more than 20 years, largely assisting small and medium-sized businesses across a diverse range of industries, I have gained some valuable insights into what makes a small business thrive, or fail.
As my husband is a bit of a serial entrepreneur, I have had the added benefit of witnessing first-hand the good, the bad and the ugly! It’s been an interesting, and sometimes painful journey, but it has highlighted some insightful trends.
With us both being accountants, we have often wondered how entrepreneurs who don’t have a financial background, or at a minimum, access to financial advice and hands-on help from the very early days of their business, even stand a remote chance of success.
The business world is a maze of regulatory and compliance requirements, making it very difficult for most entrepreneurs to navigate whilst they are trying to start-up a business; and bring their vision and dream to life. I have found that many are hamstrung, if not completely strangled by the administrative burden of running a business, before they have gained any kind of traction in the marketplace.
Many SME surveys and statistics reveal that access to finance is one of the biggest stumbling blocks for SMEs. Whilst there is no doubt that this is true, it is often the underlying lack of reliable and accurate financial records that prevent these businesses from approaching funders; those that are lucky enough to access capital in the early days, don’t have the financial acumen or access to real-time financial information to make the right business decisions about how best to utilise the capital injected into their business.
Very few small businesses will invest in accounting and financial infrastructure or support in the start-up phase of their business. Ultimately, a limited start-up budget is unlikely to be spent on accounting, finance or administrative support because it’s just not considered an urgent or pressing issue from day one. Most small businesses struggle through, with the visionary entrepreneur being caught up either in mundane admin or being blind-sided by a cash flow crisis or unplanned tax payment.
Based on my experience, here’s my short list of what I believe thriving small businesses have done right:
- Before starting, they understand their market and have done the research to demonstrate that there is a need for the product or service that they are looking to offer
- They are experts at what they do
- They are willing to take risks
- They are willing to completely reduce their living and lifestyle expenses in the short term
- Their vision or dream is clearly documented and communicated
- They surround themselves with a core team – they don’t necessarily go it alone
- They have sufficient capital and cash reserves to give the business 6 – 12 months to get off the ground
- They engage a trusted business advisor and accountant to assist with setting up processes and systems from the beginning. It’s much less costly to set systems up when the business is small than fix a mess months or years down the line
- They formalise all agreements with stakeholders upfront – shareholders, employees and customers using the guidance of their business advisor
- The entrepreneur is relieved of administrative functions by outsourcing the accounting and admin – their job is to “sell the dream” both internally and externally
- Their accountant or advisor engages with them regularly, mentoring and developing their financial acumen
- They continually evolve and have an unwavering focus on their business, rather than only working in their business
- They work hard and put the customer experience at the forefront of everything they do
- They have fun, never losing sight of why they started their business in the first place
I encourage every entrepreneur and small business owner to use the above check-list to ensure that they’re business doesn’t just survive, but thrives.