Two questions that need answering before going into business

Businesswoman surrounded by question marks

Just received a redundancy payout and thinking about investing this in becoming your own boss? Here are the two questions that must be answered before you start your own business.

As banks, car manufacturers and large financial organisations continue to announce redundancies, MYOB CEO Tim Reed has some advice for those looking to invest their payouts in becoming their own boss.

According to Reed, these job losses means a trend first seen in the UK in 2010, where the number of start-ups boomed as redundancies grew, could emerge locally.

Before taking the plunge into business ownership, Reed suggests potential SMB owners answer two key questions.

“The first question to ask is how long you and your dependants can live off the redundancy package and any other income without extra cashflow,” he said.

“Then ask yourself how long it will be until your new venture becomes cashflow positive – then double your initial estimate. Industry average is typically six months,” he added.

Reed says start-ups must follow a well-planned path that ensures accounting, inventory and customer relationship management records are constantly updated.

“Your customer service and communication methods, website and business partnerships must be rock solid so you gain momentum quickly,” he added.

Reed has these top five tips for potential business owners to follow:

1. Start with good advice – get help from an accountant, business mentor and/or bank advisor.

Most potential SMBs expect they’ll need do a lot on their own. That doesn’t have to be the case. The best tool for a start-up is good advice and there’s plenty available; the key is knowing where to look.

2. Do your research – check out the market, the costs and the competition.

First time business owners should always test the water in their potential market. Rather than handing in notice the first week back, spend time beforehand on the business development process. Research the area you are considering, the terms you can get for things like leases and equipment, the size and possibilities of the market and, of course, the competition.

This used to be fairly challenging, but now the internet can provide many answers ranging from competitors’ price and stock lists to a detailed business map of your area.

3. Write a plan – make a thorough, honest assessment of your goals and the road to achievement.

Having a passion for what you’re doing is very important. That will carry you through the late nights and the long weekends, though it’s not a substitute for a solid business plan.

You need to go in with your eyes open, preparing an honest assessment of your objectives and how you will get there. Importantly, this includes how to fund it throughout. Having a way to measure that progress is also crucial for any SMB, not to mention the Australian Taxation Office.

4. Set up a system – set yourself up with a good software system so ‘the books’ won’t be a worry.

The days of running a business on pen, paper and a shoebox full of receipts are long gone. There are so many inexpensive options for business management software today both online and for the desktop that there really is no reason to start a business without a system in place.

5. Get online – get a website and tell the world where you are.

If you don’t have your own website, start one! Being found online first can make a real difference to your success.  Having a website will give you a real competitive advantage. Around two-thirds of this country’s population search online first for a product or service, yet only one third of businesses are online.

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