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Five reasons to start-up in 2012 – and five reasons to think twice

Thursday, 2 February 2012 | By Oliver Milman

Figures released this week by the Australian Bureau of Statistics illustrate what many budding entrepreneurs have long suspected – conditions aren’t all rosy for new businesses.


The last financial year saw the lowest number of new businesses established since records began, with growth dropping from 3.6% in 2009-10 to just 0.4% in 2010-11.


So, is it currently a good time to start-up, or should you keep your powder dry until conditions improve?


Below are five great reasons why now is the perfect time to start a business, along with five cautionary points as to why you should drop and think before taking the plunge. Whatever you do, good luck!




Five reasons to go for it


1. There’s more help than ever before


Granted, some start-ups are still finding it near-impossible to obtain funding from their banks, but on many other measures, you’ve never had it so good.


The past year has seen a flurry of start-up incubators (Startmate, PushStart and AngelCube to name just a few) and various co-working spaces ( such as The Hub in Melbourne and Fishburners in Sydney) establish themselves.


Australia is gradually building a start-up ecosystem that is collaborative, innovative and mentor-driven. Best of all, it’s being driven by entrepreneurs themselves, rather than the government.


That said, the public sector has pitched in now and then. Witness, for example, the establishment of the small business helpline and Commercialisation Australia’s vastly more attractive funding grants.


Throw in a growing number of start-up meet-ups and countless sources of online information and you shouldn’t lack a helping hand.




2. Aussie start-ups are making a noise on the world stage


To glance at the mainstream media, you’d be convinced that Australia was a country containing one booming industry – mining – while a few near-monopolies – such as Coles, Woolworths and Gerry Harvey – dominate a rather stilted non-resources sector.


While elements of this are true, it only takes the faintest scratch beneath the surface to realise that Australian business success stories don’t entirely revolve around digging stuff up from the ground and flogging it to the Chinese.


A raft of innovative tech start-ups have received Silicon Valley funding in recent times with one, WeTeachMe, even pitching for $2 million just six months after the founders met.


Aussie start-ups are seen as nimble and overseas investors respect their strong work ethic. Whether it’s 99designs receiving $35 million or Grabble being acquired by Wal-Mart before their first birthday, it’s clear that innovation is alive and well in Australia. And, best of all, the world is sitting up and taking notice.




3. It’s easier to start (and easier to handle failure)


Barriers are crashing down when it comes to starting up. According to The World Bank, Australia is the second easiest place in the world to start a business, but global trends are also playing a part.


Falling technology costs are allowing budding entrepreneurs to get a website and start selling within hours. Meanwhile, increasingly flexible working practices have given impetus to countless home-based businesses, operated by stay-at-home parents or even full-time workers who decide to run start-ups on the side.


Australia’s remoteness to the rest of the world is also becoming less of an issue. Who would’ve thought, just a few years ago, that Adelaide could play host to one of the world’s most prestigious start-up incubators?


Or that a young woman with no business experience could convince a UK innovator to provide her with a system that would allow her to sell single-serve portions of wine to Aussie consumers?


And if it all goes wrong, failure doesn’t have to mean the end. While the recent closure of Nikki Durkin’s 99dresses caused much wailing and gnashing of teeth among commentators, Durkin herself is sanguine.


If you start lean (as the now ubiquitous Eric Ries book states) you have a decent chance of revamping your business if things go badly, or simply walk away, without breaking the bank.




4. Age and gender are becoming less of a barrier




StartupSmart’s two flagship awards from last year demonstrate that neither age nor gender are major impediments, if you have a great business idea.


Jo Burston of Job Capital and Larissa Robertson of SCO Recruitment were the stand-outs at the StartupSmart Awards, with both women overcoming seemingly huge odds to build successful, sustainable businesses.


Meanwhile, our inaugural Future Makers list highlighted Australia’s leading entrepreneurs aged under 25.


Ranging from Nathan Murphy, who overcame homelessness to launch his innovative teaching aid business, to Chanel Costabir, who flew to France to talk a dozen of the world’s leading lingerie designers into stocking her yet-to-launch retail site, age is increasingly irrelevant for investors, suppliers and customers.




5. There’s a good chance you detest your job


Sure, you could stay in your current job, clocking up the years to retirement while wondering what could’ve been if you launched your own business.


Unfortunately, you’ll probably end up hating yourself and everyone around you. A survey of 3,500 Australian managers and employees by Leadership Management Australasia last year found that 16% of staff “hate” their jobs, while half have a “ho-hum” attitude to work.


If you are not doing what you’re passionate about, or simply despise your boss, there is another option to silently seething. Why not take the plunge and start-up?




Five reasons to stop and think


1. The economic picture is looking a little shaky




Unless you have been living under a rock for the past year, you will have noticed the odd rumbling of disquiet from Europe – riots, soaring unemployment, crippling debt, that kind of thing.


What does this mean for your start-up? Well, if you believe Treasurer Wayne Swan, or his predecessor Peter Costello, the debt crisis could have a very real impact upon Australian businesses this year.


Your ability to access credit, as well as valuable export markets, could be badly hit if the situation escalates. And with the domestic unemployment rate creeping to 5.2% at the last count, it’s clear that Australia, for all its advantages, isn’t completely sheltered.


So, if you’re planning an expensive foray into overseas markets this year, tread carefully. It ain’t pretty out there.




2. Several industries seem stuck in a rut


Much is made of Australia’s “two speed” economy, but the reality is that there are several non-mining industries that are plodding along while others are wheezing on the floor.


The large retailers may have been slow to catch on that people actually like to buy things online, but it’s clear that the industry is suffering from patchy sales.


Meanwhile, the tourism sector has cried out for further government assistance, following a rather miserable 2011.


Drilling down further, if you are thinking of starting up as a florist or getting into the paper manufacturing game, you probably should take a look at this recent IBISWorld analysis.


As always, entrepreneurs that spot new opportunities in flagging industries can still succeed, but it is worth pondering which way the economic winds are blowing.




3. Who actually needs your business?


Sir Richard Branson famously once said: “I never get the accountants in before I start up a business.”


“It's done on gut feeling, especially if I can see that they are taking the mickey out of the consumer.”


Trusting your entrepreneurial instincts is important. Alas, we aren’t all in the same league as Sir Richard.


Many start-ups device interesting products or services and, with the tools to do so now more accessible than ever, plenty of innovators will be tinkering away to great effect in 2012.


However, the crucial question isn’t whether you like your business, but whether your customer does.


Or, more specifically, does your customer needs it? If you can’t properly identify why a customer desperately needs to pay their hard earned money for your offering, then you have a nice idea, not a nice business.




4. Stuttering cashflow


With consumers stuck in “save” rather than “send” mode and retailers piling on the discounts, even prior to Christmas, many businesses will be facing bumpy cashflow this year.


Modern consumers are savvy with their money – it’s not so much about price but value. If your business offers them something of use at a price they can justify, they will part with their cash.


If not, you will be hard pressed to turn a consistent profit. Cashflow problems will plague your start-up, especially if you don’t properly forecast seasonal dips.




5. It’s all a bit too hard


Starting a business isn’t for the faint-hearted. It will require long hours, little sleep and ramped-up stress levels.


You won’t have a guaranteed income, especially in the early stages, and you have to be across every detail, from tax to employment law to competitive threats, just to ensure you keep your head above water.


Many people find it all too hard. Will you?