The small business failure rate in Australia ranges from 32 to 50 percent, depending on the overall company size. Many factors impact this figure, but the most important thing you can do as a small business owner is to create a safety net. Many failed companies failed to plan for the unexpected, such as key equipment failures or a market disruption. By creating and building your business safety net, you can adapt to these situations rather than losing out to them.
Focus on an Emergency Fund
Start with an emergency fund. This money covers your operating costs for a set period. Give yourself a good cushion, such as three to six months, at the beginning of this process. Eventually, you want to grow this fund until it’s capable of covering multiple years.
Smooth Out Your Cashflow
Do you find yourself in a feast and famine cycle when it comes to your cash flow? Seasonal businesses get hit by this the hardest, but you still have ways to avoid sharp spikes and valleys in your revenue. Explore ways to engage your customers in between the typical buying seasons. You may need to add new product lines or services that are popular during your slow periods or look for ways to keep consumer interest all year-round. Incorporate easy ways for clients and customers to pay, such as direct debit and credit card payments to help speed up your cashflow. If possible as well incorporate subscription based or recurring payment models into your business to help solidify your cashflow.
Create a Predictable Pipeline
Don’t let your marketing efforts fall by the wayside when you reach your busy season. If you’re not consistently putting your small business out there and reaching new audiences, you can’t sustain your growth rate. Keep new buyers coming in and current customers happy.
Evaluate Risks and Opportunities
Avoid impulsive decision making for your small business. An opportunity might look attractive, but could it spell disaster if it goes wrong? Look at the risks associated with potential moves and changes. While you don’t want to play it safe all the time, doing your due diligence can save you a lot of frustration.
Your business safety net protects you against events that could cause the end of your company. You create a financial foundation that improves your growth rate and maintains consistency in your business activities. It simply makes sense to put this plan in place, especially when you’re a less-established organization.