Make or break: The cost-of-living survival guide for small business
By Emma Koehn
Launching a business is an exercise in calmly staring risks in the face. From cybercrime to cash flow woes, there’s no shortage of hazards to trip you up on the way to success.
Inflation and slowing consumer spending are additional challenges. The most recent Business Risk Index figures from credit reporting bureau CreditorWatch revealed business failures are at their highest rates since January 2021.
Starting a new business often comes with a steep learning curve. Credit: Paul Jones
The good news is that experts believe it’s perfectly possible to grow a thriving company even in the toughest conditions, provided you cover your bases. Here are ten things to consider before launching a business venture.
Are you patient?
Planning for a slow start is important. Even the best ideas take time to bring in revenue, so working out your financial runway is a top priority, says Council of Small Business Organisations Australia (COSBOA) chief executive, Luke Achterstraat.
“The real cost of launch is needing to realise that it might actually take you two years to become profitable,” he says.
Are your expectations realistic?
National statistics on business revenues and profits suggest that running your own operation is no guarantee that cash will flow freely.
The “Small Business Matters” report, from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) in 2023, found that three quarters of business owners working full-time earn less than the average adult wage. Two out of five small and micro businesses don’t turn a profit, the report found.
What is your mental health blueprint?
Being your own boss involves a rollercoaster of emotions, and you need to have a game plan for managing your own wellbeing.
“Have a strategic plan in place that addresses those days where you might need to take time off work,” small business mental health expert Leanne Faulkner says. State and territory governments provide guides for writing founder wellbeing plans.
Is your tech secure?
In the 2022-2023 financial year, cyber crimes cost affected small businesses an average of $46,000, according to the Australian Signals Directorate. Chief executive of cybersecurity firm Tesserent, Kurt Hansen, says smaller operators are often targeted because of their weaker security measures.
The Optus and Medibank cyber hacks have put cyber security at the top of every company’s agenda.Credit: Aresna Villanueva
“Specific actions to mitigate these threats are important. This includes training employees to recognise suspicious emails or links, ensuring up-to-date software and systems, and employing defensive security software on endpoints.”
Are you being smart about space?
Getting a commercial lease is one of the biggest start-up expenses for any business, with most landlords demanding up to six months’ worth of rent as a bond before you even get the keys.
Director of independent tenants’ advisor LPC, John Reed, says founders must think ahead about the location, building type and lease terms that best suit their business and put these front and centre when negotiating conditions.
“Business owners do well to require written representations from the landlord on important attributes about the location, [like] foot-traffic if the business is a retail business, and the building characteristics - grade, services, capital plans - and aim to include these as guarantees in the lease,” he says.
Are your protections in place?
Insurance is a non-negotiable start-up expense, and it’s worth factoring in that the cost of policies will remain stubbornly high. The price of premiums jumped 14 per cent in the 12 months to the June quarter, according to Australian Bureau of Statistics consumer price index data.
Protecting a business is about more than just buying an insurance policy, however. It also a matter of deciding ahead of time how you’ll respond when your business faces an unexpected hit, like an attack on your systems. “Being prepared to respond to a cyber incident is essential for any business,” Hansen says.
“This includes having a clear incident response plan, conducting regular data backups, and knowing the steps to take in the event of a breach.”
Are you ready for employees?
From advertising for staff to paying superannuation, the cost of hiring goes beyond hourly wages.
“Before hiring someone, you need to know whether they will be full-time, part-time or casual, which award will apply, [and] the minimum wage for the role (and whether your business can afford it),” the Fair Work Ombudsman says in its guidance for small businesses. Business owners can get across minimum hiring standards and obligations via the ombudsman’s website.
How will you share with your community?
Building a strong connection with your client base is a top priority for any small brand, so it’s important to plan how you’ll connect with them via social media. Founder of The Meaningful Social Club, Natalie Lasance, says you don’t have to invest in every single platform from the beginning.
Social media manager and owner of The Meaningful Social Club, Natalie Lasance.Credit: Julia Forte
“Instead, pick the ones where your target audience is most likely to be active on, and focus your energies on building a presence there before you try to be everywhere at once,” she says.
Who are your mentors?
Running your own operation doesn’t mean you have to go it alone completely. Founders should think about seeking out a mentor to help them negotiate their business growth, BDO partner Mark Pizzacalla says.
“What you want is a mentor that’s invested in you as a person – and is very happy to guide you and watch you grow both personally and professionally.”
Do you want to go global?
From Canva to Atlassian, countless Australian companies have started out as small start-ups only to one day blossom into multi-billion dollar global powerhouses. Government bodies like Austrade can help you learn how to go global before you make the leap, offering online toolkits and grants to promote your ideas overseas.
Next in the series: How to create the perfect product
This story was created in partnership with Google. The content is independent of any influence by the commercial partner.