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The 10 biggest issues facing start-ups in 2013: #6 Growing pains

Monday, 20 May 2013 | By Gunilla Haglundh

What are the main issues Australian start-ups are grappling with? Accountancy and business advisor network DFK recently conducted a survey of its clients and staff to identify the top 10.


We’ve already highlighted number 10, cloud computing, and number nine, exit strategies. The beefy Australian dollar is in at number eight, while political uncertainty is seventh.


Today on our countdown, we look at why fear of expansion is the sixth biggest challenge facing small firms.


Is your start-up merely observing while the competition is reacting to the market?


This isn’t the smartest approach, although it’s tempting to fall into this trap. It’s perhaps not surprising, then, that fear of expansion is cited at the sixth most common challenge facing start-ups in a DKF survey of its accountants and clients.


For many people the biggest expansion is to go from nothing to something, meaning starting a business. That is an incredible change in a person’s life, to go from being employed to self-employed.


It is up to you now. A business is forever changing and hopefully growing, but it needs to be acted upon.


Hard financial times force many business owners not to expand and sit on what they have, hoping that times will miraculously change for the better.


That strategy may work for a while, but the longer the hard times remain, the more likely it is that you need to act, otherwise you may go backwards.


Expansion can occur in different ways – new products, opening up in a new location, franchising, licensing your products (such as branded clothes), forming an alliance with similar businesses, diversifying, targeting new markets or merging with another business.


Opportunities present themselves more often than we think. Most of the time, however, we let them slip us by.


Take for instance Linfox, started by Lindsay Fox fifty years ago. In the early days it only had one truck. The story has it that when Fox won a major contract, the contractor asked him; “do you have the fleet?” and his answer was “yes, I do”.


He expanded overnight, but what if his answer was “no I don’t?” Where would Linfox have been today?


Opportunities appear many times, but it is all about being prepared so you can say “yes”, like Fox did. So how do you do it?


“If you have an answer to all the below questions, then you are ready to act when an opportunity arises,” says Cheree Woolcock partner of DFK Australia New Zealand.


Ten ways to prepare for expansion, no matter what direction you want to go:


  1. Know your product. What are your advantages compared to your competitors?


  1. What are you expanding into? Why? What time frame?


  1. Who funds the expansion? Own funding? Loan? Grant?


  1. What will it demand from you as a business owner? Do you have enough skills? Should you hire more staff?


  1. Prepare a budget and cashflow – and be honest! Seek assistance in preparing these. Talk to your accountant if you’re unsure. There is only one loser if you have overly-rosy budgets.


  1. Develop a plan that is realistic and achievable, in terms of numbers and time involvement. Be conservative. Reality shows over and over that it takes a longer time and costs more money than expected.


  1. Work on your business, not in it. Stand back from the day-to-day running of the business and discuss growth options with your business advisor or board.


  1. Do the research to confirm that the opportunity you have identified is actually there.


  1. Be aware that expansion means taking a risk. Expansion demands foresight, planning, flexibility and determination to succeed.


10) Believe in your strategy and ensure your decision making is in line with the overall strategy, but don’t be afraid to reassess and make adjustments for learnings along the way.


“It is really important for a business owner to step back from the daily routines and work on the business instead of in it. Many owners find that very hard, but it is necessary,” says Woolcock.


The reason for expansion failure is that too many people start a businesses or expand into a different area for the wrong reasons, most of which relate to making more money or doing less work or to escape a job they hate.


None of these reasons will give you a successful business, but passion and a strong desire to work with what you love may do.