Expert tips for starting a business
There’s no magic formula for starting a successful small business, but the better your decisions early on, the better your chances. We’ve asked experts for their tips.
People start their own businesses for various reasons, and everyone sets out to succeed.
But even with dedication and the best of intentions, the majority of new businesses still don't make it past the five-year mark. It takes guts and determination to persevere and make your business a success.
Check out these tips to help you when you’re starting out.
Ten tips for success
1. Know how your idea can make money
There can be big differences between a good idea and a commercial success. It pays to ask yourself some tough questions before you start.
“A good idea will only get you so far if you can’t monetise it well,” says Deloitte consultant Toby Miles.
Profitability should be a central focus in your planning. You might also want to consider whether you need special expertise or experience to make the business work.
2. Have a solid business plan
“Over half of business mentors we’ve surveyed noticed a lack of experience in business planning with the new businesses they work with, and said it was a sticking point for many of them,” says Craig Garner, Chief Executive of Business Mentors New Zealand.
Writing a business plan gives you an opportunity to think through and outline how your idea will become a business. Successful businesses research their market, and have a plan for the short term and for the future, along with informed and realistic targets. Your business plan needs to be able to clearly articulate what your business is and the value it offers to customers. It’s a good idea to monitor, review, and update your business plan regularly.
3. Protect your assets
If you don’t get your business structure right from the start, it can impact your ability to protect your assets, and to grow or sell the business further down the track. There are different ways to structure your business, each with different legal and financial obligations. Most businesses in New Zealand are sole traders, companies, or partnerships.
Get your business structure right. Use our Choose Business Structure tool to check whether you should set up as a sole trader, company or partnership.
4. Plan for lean periods
“Many industries have seasonal trends, and knowing how these will affect your business can help ensure long-term success,” says Deloitte’s Toby Miles.
Keep good records from the start. Detailed and accurate record keeping allows you to track trends and understand patterns, including where you have peaks and troughs in income, so you can accurately plan to cover your costs in the off-season, and to maximise your income in high season.
If you sell products, good record keeping will also help you manage your stock, ensuring you don’t over- or under- order.
5. Ask for help or advice
Getting professional advice is essential for many new business owners, especially when you’re making decisions that involve risk or uncertainty. There are many places you can find advice and support, whether you need a business mentor or a grant.
“When you’re running your own business, you have to work long hours, plan and review, take many risks, and do things you don’t like to do while constantly being on a learning curve that often extends you well beyond your comfort zone,” says Craig Garner from Business Mentors New Zealand. “A business mentor isn’t a consultant or a coach – they’re there to provide support and experience by being a sounding board to ideas and helping you turn them into action.”
Wherever you are in the country, the regional business partner network (RBPN) enables local economic development agencies to help a wide range of businesses get started, grow and develop. “We know it takes a lot for people to turn ideas into reality – and we get so much from helping, both personally and because we know we’re helping to create sustainable businesses that have the capacity to add to our economy, support people’s endeavours and create new jobs,” says Sarah Gauthier, Economic Development Manager at CEDA.
6. Hire the right people
“Human capital is one of the most valuable assets for a new business, so it’s important to get partners and employees who buy into the business’s philosophy and want it to succeed,” says Deloitte’s Toby Miles.
Take time to consider what kind of staff you need, eg fixed-term, employee, contractor, or casual, and make sure you check their references carefully. Rushing into hiring someone, or making poor hiring decisions, can lead to headaches later on, but hiring the right people can set you up for long-term growth.
Research commissioned by Business Mentors New Zealand found many businesses struggle to recruit staff, especially in the regions. If you’re operating in a tight labour market, think about whether you may be able to offer things like flexible work options to attract more applicants and increase your chances of finding the right person for the job.
7. Monitor and manage your cash flow
It’s really important to manage your money properly, and to collect on invoices when they’re due.
“With a lack of experience in dealing with finances and customers, over 180,000 Kiwi small businesses are paid late on a regular basis, with over half of those – 58 percent – often unable to pay suppliers as a result,” says Craig Garner.
Keep a close eye on your accounts, and chase people who owe you money. You might want to consider getting help with your business finances if you don’t feel confident or comfortable managing them yourself.
8. Look after yourself
If you’re unwell , stressed or tired, your ability to make good decisions is compromised.
Take care of yourself. Starting a new business can be very stressful, and it can feel overwhelming if you’re wearing all the hats in the business all of the time.
Know your limits, and understand when you’ve taken on too much. You don’t have to do everything yourself.
9. Set aside money for tax and ACC levies
Start putting aside money for your tax bill as soon as income starts coming in. If you put the money for your tax bill into a high-interest account, the interest may be enough to cover things like your tax agent fees, or your ACC levies.
You’ll receive your ACC invoice after you file your earnings for the year with Inland Revenue, so you need to set aside money for that, too. You can estimate your levies by using ACC’s levy calculator.
ACC levy calculator (external link) — ACC
10. Understand that failing fast can be a good thing
Not every idea is a good one , and not everyone is cut out to build a business. You can learn a lot from failing fast, and it can mean your time and resources can be quickly re-invested in areas more likely to succeed.
“Getting yourself and others into excessive debt to keep a failing business alive benefits no-one,” says Craig Garner.