The number of small businesses operating in financial year 2020/21 grew, with over 87,000 entering the market despite the uncertainty surrounding COVID-19.
To turn a business-idea into a successful reality, here are 5 common small business mistakes that should be avoided.
1. Failing to prepare
The phrase ‘prior planning prevents poor performance’ rings true for all types of businesses.
A successful business is based on more than just passion for the product or service the business is offering. For a business to run like a well-oiled machine the business owner must be strategic and there must be a comprehensive business plan in place.
There’s so much more than a unique business name to consider. Some additional factors include the funds required and financing available, workforce planning, inventory requirements, government obligations and the business’s structure.
It’s important to have both a short-term and long-term plan in place before the business takes off. Plan flexibility and adaptability is also needed as businesses don’t always run smoothly and an owner needs to be prepared for the unexpected.
2. Inadequate market research on the competition
Unless the business idea is extremely unique and has never been seen before, then there will most likely be competitors in the market. To make things harder, these competitors are often already established in the market and have a loyal following.
Market research on this factor is crucial. Failing to do so can be detrimental and prevent market break-through. Once research on the competition is complete, a business can start working out what their key differentiation will be. That is, what they can do differently to the competition to catch customers.
Some examples of differentiation tactics include:
- a competitive and aggressive pricing strategy
- delivering world-class customer service that goes above and beyond, or
- include service add-ons that aren’t currently being offered.
3. Entering an oversupplied market
This can be prevented by completing the second point of doing the research on the competition.
An oversupplied market with numerous competitors can be telling of the business’s likely future success. However, it’s important to remember that just because competitors are there it doesn’t mean that the business won’t be successful.
There are several ways a business can be successful in a market with plenty of options, one of which is the differentiation factors discussed in the previous point. Another option could be to see if it’s viable to enter a different location.
4. Failing to budget
Budgeting is the most crucial part of a business that is looking to get off the ground. When cash flow is low in the early stages, the budget plan will make or break how and if success will come.
There are two things that can go wrong with a budget – overspending or underspending. Overspending can cause funds to run dry and out-pace the cash coming in. While underspending can also be cause negative consequences as it stops the business reaching its full potential.
Working through a business budget is different to a personal budget. Engaging an accountant or financial adviser that specialises in business planning can be a sure way to ensure the appropriate budget is in place. It’s also important to be aware of the business incentives currently on offer to many Australian businesses and how they can help boost cash early.
5. Not claiming depreciation and missing out on thousands
Depreciation is a tax deduction business owners can claim on the assets they use and own for their business’s operations.
To better understand what depreciation can be claimed on, let’s use the example of a café. The café business owner can claim depreciation on all the fit out they ow n and use including the kitchen equipment and machines, furniture, crockery and cutlery, benchtops and point-of-sale equipment. If they also own the building (and not just rent) they will also benefit from claiming depreciation on the building’s structure and fixed assets.
Since depreciation is the natural wear and tear of assets over time, no money needs to be spent to claim it. This means it’s a non-cash deduction which can be extremely beneficial to a business’s bottom-line. But on the flip-side, it means it can also be easily missed and go unclaimed.
Engaging a specialist quantity surveyor early in the process ensures that depreciation can be claimed from the very beginning. A specialist, such as BMT, will assess the business’s assets and provide an obligation-free estimate of the likely depreciation deductions available.
Business owners can contact BMT today and start claiming depreciation now by calling 1300 728 726 or by Requesting a Quote.