At its most basic level, being in business requires only a few customers and an ability to sell at a higher price than you buy. Even if you have nothing more than these fundamental money making skills, there is still a wealth of other skills required to build a business.
Starting out, it helps to know your industry well and the rules and regulations that govern it. In many industries, failure to comply with the myriad of government rules could get you banned from the industry, heavily fined or serving a prison sentence.
Even before you make your first sale, the Australian Government also imposes a compulsory administrative and taxation reporting regime on all businesses, large and small. This makes bookkeepers and accountants very valuable resources from the outset.
Although bookkeeping and accounting concepts are tricky to grasp, a rudimentary knowledge makes a conversation with your financial advisers a lot easier.
As your business grows, you need more people because you can’t do everything yourself. People need training, supervision and guidance. When your business evolves to something more than you only, a degree of organisation and few systems become necessary. Employing people also introduces a new layer of administration and compliance.
At some point, you will need to exercise some leadership to imprint your own culture and do some planning from time to time. An expanding business also needs financial control and management. There have been many examples of businesses going broke because of their inability to fund rapid expansion.
Whilst you may not do the financial tasks personally, it helps a lot to understand the basic concepts. For example, the ability to read an ‘Income Statement’ and a ‘Balance Sheet’ opens up a new world of understanding and opportunity.
Developing a basic understanding of cost control concepts like product costing, budgeting, cash flow, and break even point will also make management of your business a lot easier.
Until next time!