A hard road to riches - Tony Featherstone, BRW

This is a great article on the basics of getting up and running in business in Australia...Sue Ellson
A hard road to riches
Getting a fast-growing business up and running is no easy job.

By Tony Featherstone
BRW. 16 February 2006

Daydreaming about starting your own business? This week's BRW Upstarts report features 75 fast-growing start-up companies, some with revenue well over $1 million after two years. But before you fall for the glamour of entrepreneurship and quit your job, here are 25 basic ideas that you should think about:

1. Are you an entrepreneur? If you bring your lunch to work and sit at your desk all day, forget it. Entrepreneurs are outgoing. They excel at selling a story to customers and staff, and cold calling.

2. Have a fall-back position. There are lots of anecdotes about entrepreneurs livin g on baked beans as they chase their dream. What you do not hear about are the failed entrepreneurs still living on baked beans, courtesy of the Salvation Army.

3. Why are you doing this? Hate the boss? Sick of corporate life? The only reason to start a fast-growth company is a strong belief that you can satisfy an unmet demand.

4. Do you enjoy your own company? Would you miss the social interaction of working for a big company? Entrepreneurship can be glamorous, but at times lonely and isolating.

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5. Do you have the mental constitution? If you break out in a rash every time you are stressed, entrepreneurship is not for you. Start-up companies are high-risk and full of anxious moments.

6. Are you disciplined? Can you work long hours, day in, day out, without supervision? Entrepreneurs need to be self-starters with great stamina.

7. Can you multi-task? People often overlook the resources in big companies. Can you be accountant, marketer, salesperson, human-resources manager and chief executive all at once?

8. Are you focused? Too many entrepreneurs get sucked into the next big deal and let their core business suffer because they are distracted.

9. Straddle full-time work and your own business. If your business idea competes with your employer, do the right thing and leave. If not, be open with your employer if you can. Take leave or a sabbatical to plan your venture.

10. Have one partner stay in full-time work. Why both take the risk? Often it makes more sense for one partner to keep a secure, full-time job while the other starts a business, and joins later.

11. Lift your profile before you quit. Become more visible within your organisation and outside it. Go to more trade conferences, get your name in the papers, and build your personal brand.

12. Find a mentor. Ask somebody who has built a successful company what their biggest mistakes were and what they would have done differently.

13. Tap networks. Tell everybody about your business before you start. Get friends, family and former colleagues to tell their contacts about you.

14. Plan the business. Do a 10-page, one-year business plan, and a 10-page, five-year business plan that forces you to think about where your customers are heading. Be flexible.

15. Do scenario planning. Model three basic scenarios: the business does 20% worse than you expect; it meets your expectations; or it does 20% better. How would you cope with each situation?

16. Get proper advice. Run your ideas and business plans past an accountant who specialises in helping start-up companies. Put the right structure in place to minimise tax and protect assets.

17. Manage risks. Put some basic systems in place to safeguard against employees stealing money, client lists, intellectual property and the like before you start.

18. Systematise the business. Most entrepreneurs rightly focus on winning business to stay afloat, only to find their enterprise is a mess when the work arrives. Set up basic management reporting systems before you start.

19. Record everything. It sounds basic, but keep great records. Poor record-keeping wastes time, loses money, maximises tax, makes your business harder to sell and erodes its value.

20. Plan the exit before you enter. Your first question should be: who will buy my business? You may never sell, but thinking about who would buy your business, and why, is great discipline.

21. Think about the sale multiple. How can you sell your business for four times earnings instead of two? Proper records, stable management, intellectual property, a clear plan ... the list goes on.

22. Get proper finance. Some entrepreneurs boast about living on their credit cards as they pursue their dream. Question your business model if the only source of finance comes with 20% interest and a $5000 limit.

23. Treat equity like gold. Fifty per cent of nothing is nothing, right? So why not give lots of equity away at the start if it means getting finance or attracting staff. If you do not value your equity, you probably do not have enough belief in your idea.

24. Be frugal. Watch every cent. Having a clear business plan safeguards against wasting money on unnecessary expenses. Remember that you will probably need to earn at least $3 for every dollar you spend.

25. Take a deep breath. You'll love it!