You’ve probably heard it before but never really given it much thought: something like 80% of new businesses fail in the first 18 months, and of those that survive, another 80% fail in the 18 months after that. But think about it for a second, and what that means.
For every 20 businesses that start, only one of them will be around in three years’ time.
So what’s the difference between those that survive and those that don’t? To answer that, let me tell you a story about Barry.
I met Barry (not his real name) in October 2016. He was once of the victims of the end of the mining boom, having been made redundant a year or two earlier. He’d managed to pick up a bit of work here and there, but really nothing special.
He was lucky to have invested wisely, and as well as owning his own home, there were three investment properties: a townhouse, a vacant block (in a nice part of town) and a house on a decent-sized block around the corner from where he lived.
We initially met because he wanted some advice on the tax implications of developing either the block or the house, but he rang me out of the blue a few months later to say he had met a couple of guys and they were about to start a business.
We chatted about their plans and as part that, I offered to spend some time putting together the best business structure for them, considering their different needs, income levels and asset positions. “No, thanks”, came the reply. “We’ll just do it ourselves”.
Occasionally I would get calls from Barry. Business was tough. They weren’t doing as well as they thought they would, they were finding it hard to get paid and one of the shareholders was thinking of quitting. “How much have you made so far, Barry?”, I asked.
“Not sure how to work it out. Can I send you over the Excel spreadsheets?”
“Are you serious, Barry? Didn’t you look into any of the invoicing and accounting software packages like you said you would?”
“Yes, but they were all too expensive. Oh, and why is ASIC going to charge us to change the shareholders of our company? We’re doing all the paperwork? No wonder the Australian economy is going downhill.”
Now, Barry had always refused our offers of help, but this time, I wasn’t taking no for an answer. It was time for some Tough Love.
Very slowly and very calmly, I said: “Barry, your business will be dead in three months unless you make some very serious changes, and you make them now. It doesn’t have to be this way.
“I’m going to come back to you in a week with a comprehensive report that tells you everything you need to know about running a business. Not just any business, but YOUR business.
“You’ve lost tens of thousands of dollars so far, and you’re very close to losing the same amount again. Now, I know you hate spending money, but you can either spend hundreds of dollars for this report, or lose tens of thousands. Your call.”
The next day I saw Barry and his remaining business partner and asked them all about their business, what they had planned for it, what they hoped to achieve, what their business model was and about their family and financial situation.
I took my findings back to the office and the team got to work, doing all the research and planning that we could have done for Barry at the start. We treated it as if it was a new business, because that’s how they had to treat it as well.
It was the first bit of actual business planning they had ever done.
Six months later, Barry’s business is going strong.
We provided Barry with our BEAT Report. (BEAT stands for Business Evaluation and Assessment Tool, but BEAT Report is more of a catchy name.)
The simplest change for Barry and his team was to implement a few of the thousands of tools and systems that can help you run your business in a super-efficient way, and let you focus on getting out and winning more business – in Barry’s case it covered invoicing, time tracking, project management, and electronic payments, but there are heaps more.
They fluked the right business structure, although there were some risks they needed to keep an eye on. It was right for now, but it won’t be right forever. Once they have recouped the losses from the first year and start making the profits they should, there is the potential for them to pay far too much tax, so we’ve pencilled in a meeting every year for the next few years to review the situation.
It also emerged that Barry had put up most of the cash used in the business so far, so we put them in touch with a lawyer to draft up some agreements to make sure Barry would get his money back, and to spell out how the directors would make decisions if they disagreed on anything.
And so there was no more “ASIC bill shock” or missed deadlines, we gave them a full rundown of expected costs and due dates, including for some things they didn’t realise they needed to do. It also answered one of their other big questions: do I need to register for GST?
We provide the company with our Back-Office and Accounting Support Services, taking the bookkeeping and BAS off their hands, while being always just a phone call away if they ever need to ask a quick question. His business has improved because he can now focus on the important things – like going out and winning more business.
He knows exactly what to expect from the Tax Office and ASIC, and hasn’t missed a deadline in six months.
After implementingXero and the other apps (and giving his team some training on how to use them properly), the business is running as smoothly as it can – ridiculously efficient.
And we provide Barry with customised monthly management reports so he has greater visibility over his business, and can make the right decisions when he needs to.
Of course you can. It’ll take ages, though. And will you get the right information? Things are changing all the time – from new apps, new tax rules, even new business risks emerging.
Getting help with your business plan from the start will save you hours that is better spent on other stuff – like working on how to make your business as profitable as possible - and can help your productivity and potentially save you thousands in tax right from year one. We do this for a living, so not only will we always get the right answers, but we’ll also know the three things that most people don’t even think about before starting their own business.
But what if I’m not ready to start my business yet?
Two things. Firstly, this report is perfect for when you're still planning your business, as it will help to fill in the blanks, and can be done in the background while you're doing other stuff.
And secondly, you'll never be 100% ready. No-one is. Read the story of the founding of Amazon and you'll know that when Jeff Bezos left New York to start the business, he didn't even know which state they would start it in.
There will always be things that need to change, just about every day, so get the business open and you can tweak things once you get actual feedback from your customers.
But this report will give you certainty and peace of mind about some of the big questions facing every entrepreneur and business owner.
So contact us now to discuss if a BEAT Report is right for you. Click here to book a time for a free 15-minute phone call to see if it’s right for you. Or email us at firstname.lastname@example.org and tell us what you want to know about how to start your new business.