Lifecycle of a Business – the good, the bad and the ugly
By Joanna Dunlop and Garrett Douglas
Businesses come in different shapes and sizes but all share one thing in common. There is a start and an end of the journey for every business owner and possibly for the business as well. Along the way there are a few phases that every business will go through. No matter where you are in the lifecycle of your business, make sure you sit down to plan for the future and learn from the past experiences of those who have gone before you. The good, the bad and the ugly.
The Planning phase
Turning your business idea into a reality takes planning. The worst thing that you can do for your new business is to skip steps as this can come back to bite you down the track. The following areas are critical to getting off on the right foot:
Get good advice – Do you know which legal structure will provide you with the best tax outcome, both right now as well as later in the future? Will your family assets be protected if something goes wrong with the business? If you’re buying a business, how do you know you’re paying a fair price unless you get it professionally valued? It’s important for you to understand the implications of these early decisions, so talk to your accountant and get their advice.
Build a strong team – This can include your accountant, lawyer, bookkeeper, bank manager, insurance broker as well as family and key staff. You probably won’t have the time or inclination to do everything yourself and that means you’ll need to rely on other people. Having a good team is every bit as important as having a good business idea.
Learn! – Would you hire yourself to run a business, right now? A business owner needs to be across everything including bookkeeping, inventory management, cash flow, financial reporting, income tax, GST, HR, employment laws, sales, marketing and everything in between. Find a course on business management and train yourself up for the role, particularly for any areas that you are currently not so strong in.
The Startup phase
There’s a reason why the start-up phase of the business cycle is also known as the ‘survival phase’. You must make it through this phase to keep your business dream alive and not lose your passion in the meantime. Mastering these three skills will be essential for your success:
Cash Flow Management – You need to generate enough turnover and enough cash flow to (at least) cover your running costs. If you’re not achieving that, you need access to borrowed funds to get you through until you reach your break-even point. And if you can’t reach break-even… you’re bust! Understanding what feeds into your cash flow and how to manage it over time, is crucial. This is not something you can leave to chance.
Communication – How you communicate with your customers, suppliers and staff has a real impact on the success or failure of these important relationships. These are the people you need to run a successful business. So learn to be a good communicator, especially when you’re under pressure.
Adaptability – Not everything will go according to plan. To get through this early phase (and for ongoing success) be prepared to make changes and respond quickly to your circumstances. You should continually observe, learn and adapt. A great example of this is how some cafes cut holes in walls, so they could switch to take-away, because of COVID.
The Establishment/Growth phase
After a while you may feel like you are starting to get on top of all that is required of a business owner and you are seeing growth in your sales and profit. Following years of hard work, you can now hopefully start to see the fruits of your labour.
The most common mistake business owners make is getting too busy working in the business and worrying about the small stuff. If this is the case for you then the best thing to do is getting help with the tasks that maybe you don’t enjoy or aren’t good at. This may involve training up some or your staff or hiring some outside help. Learn to delegate.
If you have an established business or are looking to grow you need to be able to take a step back and make the time to work on your business. Take the time to revisit your business plan, understand your financials and reflect on what you have achieved. Set aside at least one whole day in your calendar each year, to think about the future of your business and make plans without any outside distractions.
Making the right decisions are important so make sure you take the time to consider all options and seek professional advice.
The Maturity/Exit phase
There will come a time where you may want to retire, pursue a new challenge or perhaps your business has just run its course. There are a number of ways that you can exit the business, which all need some level of planning.
Ideally you have been planning for your eventual exit from the business well in advance or, even better, when you first got into business. Hopefully this was also part of the original business plan that you prepared right back at the very beginning. If, like many business owners, you don’t have a clear end point, your accountant will be able to help with getting a retirement plan in place. Ask them about this.
If you are planning to sell your business, often the biggest issue that owners have is putting an unrealistic value on their business. If the business has little value without you in it then a buyer isn’t going to be offering much for it. Getting a business appraisal done a few years before you might be looking to sell, will allow you to get a better grasp on where you are at and what you can do to improve this value before a potential sale.
If you want to get the most out of your business when time comes to sell or want to make the transition to the next generation, your accountant can help you with this.
Need assistance?
While you can’t plan for everything and the world does throw up the odd curve ball, planning for your business no matter where it is at will help it and you succeed. If you are unsure where to start, we are here to help. Call us on 9841 1200.
Whether you are just starting in business or looking for resources to help you along the way, check out the Business Resources on our website. https://www.lincolns.com.au/business-resources.
Albany’s big sleepout
Later this month, Tam, Jen, Bec, Caitlin, Rod, Paul, Gavin and Deb will be participating in Albany’s big sleepout.
Homelessness is a major issue across the country and Albany is no exception. The Albany Community Foundation is again leading from the front as a community organisation in tackling the homeless issues in our community.
Be part of the movement by donating to the Lincolns team:
A coffee with …
Pam recently spent an informative and entertaining half hour with Nikki Milne of The Perth Collective via Zoom.
Nikki has become an expert in her field and has scaled a successful business, after identifying a niche in PR and Digital Marketing. Today, Nikki owns an online educational school and a successful PR and Marketing Agency.
