Is owning a business right for you?
This is a very important question to think about. We may all dream of being our own boss, but the reality isn’t for everyone. It can bring with it the freedom to make your own choices and greater control over your life, but it can also mean longer hours, harder work, more stress and greater financial risk. You should also consider whether you’d like to work as an independent or buy a franchise. As ASB Business Manager Aaron Cooper points out, buying a franchise may incur some extra costs, but can come with its own benefits.
“With a franchise you do have to pay all the fees that go with it, but conversely, you also likely get support, systems, an established brand and in some cases, an existing customer base. Part of that work has already been done. If you go into an independent business you don’t have that support, but you do have the freedom to build your business and your brand on your own terms.”
Understanding the challenges you’ll face, and planning ahead for how you’ll deal with them, will put you in a better position.
Define your success
What does success mean to you? Success could be fame, fortune, freedom or fixing a problem with your product or service. The answer will be different for everyone, but defining your success will help give your business direction. Knowing what you want to achieve means you can focus on what will contribute to your overall goals – and avoid wasting time on endeavours that don’t hold any value.
Do your homework
It may seem obvious, but the more you know about your business, your market, your customers and your competition, the greater your chance of success. You don’t need to know every minute detail, but it’s important to know:
1. Your product or service to ensure you can speak with authority
2. Your market so you can best respond to trends and account for demand
3. Your customers so you can best meet their needs
4. Your competitors so you can stand out from the crowd
A lack of knowledge of your industry can make it harder to receive support from your bank, says Aaron.
“Make sure you do all of your background and homework on that particular industry. Bringing as much information as you can will really help us understand that industry. If you don’t know anything about it, it’s going to make it difficult to get the capital you need.”
Need a little help researching your industry? Figure.NZ has plenty of useful resources available.
Calculate your costs
Can you actually afford to go into business? Figuring out how much you will need is paramount during this early stage, as is determining where that funding will come from. Aaron says one of the biggest hurdles customers face is not being able to fund their business, and not knowing just what a bank can provide.
“We usually sit down with customers looking to start a business and talk through what they are looking for and how we can help them fund their purchase or set up costs. How much we can fund will depend on a number of factors. A customer that is able to contribute financially will often be in a much stronger position to secure funding for their business. My advice to anyone looking to start a business is to sit down with your banker early on to work through your options.”
Next, determine your net cash flow and your break-even point. It’s also important to ensure you have enough cash saved to weather any potential storms that may arise. If business is slower than anticipated, will you have enough savings to live on?
The financial viability tool on BusinessNZ can help you get an idea of how much you might need.
Put together a plan
This is when that idea in your head starts to become a reality. A business plan is a great way to give your thoughts some clarity and to really shape the different aspects of your business. Now that you know what success looks like, what steps will you take to get there? This is the blueprint for your business, a tool you can continually come back to for guidance. Your thoughts can change over time, and you may find your plans completely change after you assess what works and what doesn’t, but having them recorded provides you with a strategy you can return to for guidance. You can always put together new plans, but you can’t break the rules until they’ve been written. As Aaron notes, a business plan also provides a bank the detail they need to help you in your journey.
“We need to understand a little bit more about the client and their background. We don’t always need a business plan, but it does help when looking at funding.”
Check out our helpful guide on writing a business plan for a place to get started.
Want to discuss your business options in detail? Give us a call on 0800 272 222 or visit your local branch.
1. http://www.mbie.govt.nz/info-services/sectors-industries/sectors-reports-series/pdf-image-library/the- small-business-sector-report-and-factsheet/small-business-factsheet-2017.pdf
ASB’s lending criteria and terms apply.
This document does not have regard to the financial situation or needs of any reader. As individual circumstances differ, you should seek appropriate professional advice.