Is your company experiencing financial problems? A study by the University of Technology Sydney found that one-third of Australian small businesses fail in their first year. Many factors could have come into play, including unforeseen events such as the ongoing COVID-19 pandemic. In other cases, business downturns resulted from mistakes companies made that could have been easily caught by a business recovery specialist. Here are a few of the main reasons why companies end up facing major financial problems.
Bad Financial Management
Studies show that 40% of Australian small businesses have problems with cash flow. Even if your company is earning big in revenue, mismanaging its finances can negate your net income and eventually lead to financial issues.
One of the biggest mistakes people make is holding 100% of the company’s finances to save money. It might seem practical at first, but it can result in financial disaster if you don’t have specialised training.
It’s important to make wise financial decisions for your company, especially for a small business that makes less revenue.
Studies show that it takes Aussie startups an average of two or three years to become profitable. On the other hand, financial mismanagement can alter that timeframe and make it impossible for you to get out of the red.
It’s only practical to outsource your company’s bookkeeping and accounting if you don’t have the training or experience to handle it. Having a professional onboard can help your company manage money better and improve overall operations.
It would be best if you considered this step a business investment. Practicing financial discipline can help you earn net profits faster.
Wrong Reasons for New Business
While making money is one of the most common motivations, it isn’t always the only reason. Some people might launch businesses to change careers or in the hopes to change the game of a particular industry.
Sometimes there are interesting trends, like the spate of Australians starting new businesses in New Zealand. The big problem is many entrepreneurs do not take the time to consider their reasons for launching their startups.
Failing to take this step or going forward with business for the “wrong” reasons could affect your startup’s success. Do you want to make money to finance buying a new home, take a vacation, or pay for your kids’ college?
There’s a lot of hard work involved in launching a startup, and it could take several years to break even. However, even small business owners can stay on track if they have strong passions and a clear vision.
No Business Plan
A business plan is critical for any new company, especially for Australian startups. Besides having a business plan, it is also good to create a vision and mission statement. You can create a solid blueprint and goals for your business to work towards.
The process all starts with a game-changing business idea. However, it’s also important to create a business plan that takes into account issues like:
- Possible Problems/Solutions
- Main competition
- Marketing and advertising
- Workforce needs
- Company growth
These are just some of the issues you’ll need to consider when developing a business plan.
When launching a startup company, it’s important to take the necessary steps to boost your chance of success. Knowing why you’re launching a business, creating a business plan, and hiring a good business recovery specialist is one of the best ways to prevent your business from failing.
