Why starting a business is so hard

Why starting a business is so hard

Starting a business is so hard and is it really for you? here we look at the ways to make it easy and lead to a profitable result.

The Sat-Nav analogy to business

My god what has a Sat Nav got to do with this subject and the answer is everything.

Today, driving to a new location I entered the details into the car computer.

  • Where did I want to go. Not roughly but exactly.
  • Which route should I take fastest, safest or scenic.
  • The Sat system then told me the distance plus
  • The time I would arrive
  • and a dotted line to follow so I would not get lost.



Thirty minutes later I arrived without a lot of problem because it was all planned.

This got me thinking about business and starting up. Having done this many times and in fact at one time I went from a single person to a Stock Exchange listing in three years.

Firstly it is not done by luck, it is all achieved with a well laid out plan that is written in stone.


What is the hardest thing about starting a business?

My belief is knowing where you want to go. like my Sat Nav I had to know the exact location
before I could start the journey.
Once I understood the destination we could start planning the route
but not before or during the trip. Yes, you can change along the way and take the odd diversion but I am still travelling to a point on a map.

Lets say your destination is the ultimate sale of your business so you can spend all the profits.
In fact this is a wise choice and an exit plan should always be written into a plan.

The exit may be to hand it to family members to run, sell it to shareholders or grab a big buck and take off to a beach somewhere and lay in the sun drinking Pino Colada's

Knowing where you are going and the planning will follow.



What are the most successful small businesses

When you know where you are going then select the best route to travel.

  • Fixed location
  • Online store
  • Blogging ( yes it is a business)
  • Affiliate marketing
  • Virtual operations, training, support etc

This is not all that hard when you understand what you are selling. Your choice may include several options packaged into one and that will help you achieve your objective.
For example a fixed location may include an Online store as well and indeed a blog page to support the operation.

No one can tell you the best business to start because it depends on you and what you want. Start to formulate the destination and the rest will follow.



Is the first year in business the hardest?


It is certainly not the hardest , in fact it is probably the most exciting time as it all comes together for you however it may very well not be all that profitable. Planning will tell you all you need to know.

Planing includes cash flow analysis down to a daily or weekly basis. After my 50 odd years in business I still maintain a daily cash flow sheet. There is a real problem when bills hit and there is no money, creditors are screaming and staff are hurting as you scrape together the funds to meet your obligations, this is when business is hard and all from your preparation.

You can buy great software or use a simple excel spread sheet, “as I do ” to forecast all sorts of events.
Times are never equal, holidays , religious days, Black Friday. Spring and winter as well as Summer and Autumn all have there own peaks and troughs depending on your business.
Your daily planner then becomes a monthly total , a quarter result and a years activity.

An Ideal product for Investment requirements

Your summarized planner shows that you understand what you are doing and where you are in the journey. You may need a short term loan or even a long term facility to even out the path.

 Planner for your business .com
  
Sales month 1month 2month 3
 Product a10005001200
 Product b10001100300
  
cost of salesProduct a200100240
 Product b20022060
  
Gross profit 160012801200
  
Expenses 
 Rent100100100
 insurance505050
 Advertsing1001000
 Wages100010001000
 Freight11000
 Total136012501150
  
Net Profit 240 30 50
very rough

Cash based system

You can work on a cash basis on invoice basis and consideration needs to be made for any taxes that may be involved.Creditor payments will be reflected when you pay them.

Remember to allow for unpaid invoices, debtors, when you are selling on credit. An amount equal to the total may have to be put into the business to cover your costs.

Should you need to borrow money you can show lenders that you have a real understanding of your future and an investment comes with little risk

How do I know if I am making a profit?

The cash flow will come from your sales planner which is built on your forecast.
In the above example you are going to sell $1000 a month of product A. Now suppose the product retails for $15 each so you need to sell 66 every month to meet your budget of 800 a year.

Remember that in Black Friday and Christmas sales may go up however your profit margin may come down. In year two you would expect sales to increase however you may need more staff or bigger premises to handle the extra load.

If you do your budget and your cash flow whilst remaining realistic to the expected result many of your problems will be eliminated before you open the doors.

What do startup businesses need most

Your planning and budgeting will give you some answers and are fundamental to your future however a realistic approach is also necessary.


Let me give you an example. As a blogger I am building a business based around affiliate income and advertising revenue.

My choice is to write a blog every second day and they take me about five hours to finish properly.
Not expecting a huge following until I have about 250 blogs behind me or a bit over a years work.

During the first year my income will be very limited, my costs as well, but I am working to an end result. Because I have a fixed business to provide my revenue I can afford the wait.

The blog also feeds my fixed business so it is not as bad as it looks

Your business might start by selling just 10 of product A in a month and need to grow to the 66 sales over a year so you will be out of pocket in many months.


That is why your written plan and cash flow are the vital parts of making a start up business easier than downright hard.

Why do businesses fail?

Most businesses will fold in the first five years and there is no reason they should fail unless it is because of outside affects.

One of my customers has a recruitment service for part time workers. Mostly back packers and seasonal travelers. As I write this during COVID-19 times there are no backpackers allowed in the country so his labour supply has dried up and severely affected his business.

Another runs a Pet / house sitting service for those going overseas. Our borders are blocked and the business gone down..

Lastly one runs a cleaning service and business has trebled with Covid- cleaning and prices increased to match demand.

Most businesses fail because they don't have a road map and make corrective actions along the way.

A local Coffee/ Pizza shop had to close with the lock down, When they re-opened they changed
to a fresh bread baker/ scones/ Cinnamon buns and coffee, while many stayed shut they made a killing through simple innovation.

Is running a business stressful

It sure is if you take an ad hoc attitude to managing your operations and think it will run itself.

I have been my own boss for many years because I believe that working for your self has many advantages. Your pay packet is unlimited if you are really successful and there is no one to curtail too.
OK I don't take enough holidays and your mind is on business a lot of the time but you are the result of your efforts and can be justly proud of the many accomplishments you will have over the years.

A story about business customers

One of your most important assets will be your customer list, this should be maintained meticulously through out your journey and recognized as a valuable asset.

Your customers need constant attention by Newsletter, email, SMS or a simple phone call so they remember you at top of mind. There is an old marketing saying in that it costs less to keep a customer than getting a new one. Life time customers are your lifeblood as they continue to return year on year..

A friend of mine had an Aquarium based business that went broke because of a lot of reasons.
I tried to help her with closure and found a buyer that wanted to buy her customer base. The amount he offered was about what she had lost so a great deal for her. Alas she had never kept her customer records and had no list. A terrible result because of lack of attention.

Furthermore a close friend of mine runs a clothing store, she has both online and walk in traffic and markets using Facebook and Instagram. It is a small community so easy to approach.
One of the staff recently processed a sale, when asked if she got the customer details she replied it was not necessary because it was a cash sale. That customer is as important as any and I am sure it won't happen again.

Is profit a good motivation for business?

I believe you can bet your life it is. Maybe you will work longer hours than an 8/5 job, have extra stress and spend a lot of your time thinking about business.
You are not doing it for love. Profit, or the money you can spend on your lifestyle and family is the top of the list.
However at times we may suffer short term losses for long term gain and that is why your initial planning is important.
Businesses are measured on Profit, that is the yardstick on which you will sell your enterprise when the time is right.
Depending on the industry you may get two, three or four times the annual profit as a selling figure.
That is profit before your personal takings and expenses. So a hundred grand profit may be a four hundred thousand dollar selling price. Your past results will dictate the future so remember to keep this at the top of mind.

What are the disadvantages of starting a business?

The disadvantages to starting your business are many and varied.

  • You will work longer hours
  • Plus thinking about work more often
  • Take less holidays
  • Chew up all your cash
  • Manage staff problems and personalities
  • And demands on all your skills and expertise put to the test

There are many more however my aim is not to put you off but to simply say it is not all easy.

How do start up businesses start?

You have been given many things to think about and when you do a rough draft business plan of your idea you will get some idea to go forward.

If it is a fixed location go to the local business Bureau near you and find out all the local laws.
they will give you most of what you need.

You need a location, an idea about competition and traffic before you say go. Find an accountant and run your ideas past a knowledgeable head to get feedback.

Talk to businesses near you and see what they have to say because they know the area and often have great local knowledge.

Don't necessarily believe all you are told, balance opinions with an open mind but importantly recognise that your excitement may be tinged with colored glasses. Be reasonable.

If you are going Virtual do some basic training on the internet before you embark on a full time occupation. I always recommend Wealthy Affiliate as a great starting place to get your starting ideas and long term support. By clicking below you can get a free entry and make your own mind up on the opportunity

Franchises and you

The franchise system has many benefits for the operator and can be an ideal venture for those new to business. You get a bundle of training, support as well as walk in customers.

Every franchise is different so don't believe the brochures. Talk to those in the business, attend some meetings do your homework before you commit to the journey..

I would recommend some reading on the experience of others so you go in fully knowledgeable>
Once case I am aware of was a friend bought into a Franchise after attending their seminar. When he got in he found must were disgruntled holders that would sell out for a song.

There is generally a Franchise Council that you can consult to get more information and make a better informed decision

Is MLM for you and a good starter business

Multi Level marketing is really good for about ten percent of those that enter an industry. The rest of us struggle to meet the targets applied, making little but expending much.

However it is good sales experience and it could be a pathway to something bigger if you are not burnt along the way.
No I am not a believer and watched so many trying to achieve the magic numbers. Furthermore I only know one couple that made the top and the big dollars.

Ask the questions, attend the meetings have parties to really understand what you are getting into.


you will drive family and friends away as you hound them with your visions of joy.


My Conclusion on business opportunities

I have had my own business for most of my life, been at the top and the bottom so I have experienced all the ways available. There was a Franchise, listed a company on the Stock exchange, provided services of different types and still have a daily business. This is on top of my internet activity. This all makes me biased in my opinion.

Business owners are seen in a different light to workers, you are looked up to and respected in the community and have access to many advantages that normal 8/5 people do not have.

However some times it comes at a cost so that needs to be weighed against desire.

Finally my advise to you is to really think about your options and not put on those Rose Colored Glasses that we all wear in the excitement phase. Be realistic and base your results on figures that can be made not may be achieved.

Why starting a business is so hard by Peter Hanley

6 thoughts on “Why starting a business is so hard”

  1. I love this article! You have provided a detailed discussion about starting a business and keeping it running smoothly and profitably.

    Coming from a family with many small business owners, it was the natural path for my husband and I to pursue. While it does require long hours and a bit of faith in the outside world (things beyond our control, such as the pandemic) it also allows us the freedom to create our own path.

    Thanks for the insight you provide. I’ll be sharing this one with others who might be interested in the entrepreneurial world.

    Reply
    • Thank you Diane and I agree with you on running your own business. 
      I have never regretted it even in the worst of times.
      Don’t hesitate to share, it is appreciated.

      Kind regards

      Peter H

      Reply
  2. This is the truth about the world now. Many people today have decided to actually move to start their own business. Apart from the fact that a lot of people have had to endure their paycuts, some people have been completely laid off and the only way to get running and also at he same time make good money is by starting your own business whether it be small or big. You discussed the challenges here and I agree with it 

    Reply
    • Hi and thanks for the comments Suz.

      You are correct that many people are trying to escape the job situation on need or forced upon them.

      One of the things I tried to enforce is that they need to be prepared because it has many bumps in the road.

      It is true that many businesses fail in the first years and few last longer than five years.

      However with good planning and constant attention there is no need for a problem.

      Kind Regards

      Peter H

      Reply
  3. Wow, you have a lot of experience about business, I aim to become an entrepreneur too and I found your analogy really amazing. I do think that starting a business takes a lot of effort, but once you put in the required effort and use the profits to generate many streams of passive income you are good to go. I came into the internet marketing world to get me some experience starting a business in real life.

    It was a great article to read.

    Reply
    • Thanks Surya and best wishes on your journey, my advise to you is to pick one thing and make it work before moving on. Many of us, myself included, try to have too many irons in the fire.

      Kind regards

      Peter h

      Reply

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