Starting a business is an exciting journey, but it can also feel overwhelming with so much to learn and no single source for all the information you need.
In Australia, around 60% of businesses fail within their first three years. According to the Australian Banking Association, the main reasons for small business failure include:
- Inadequate market research
- Poor financial management
- Underestimating competitors
- Issues with products and services
So, how can you minimise the risk of business failure? Below are some of the essential steps small business owners can take when starting out to set their business up for success.
1. Do adequate market and competitor research
I’ve met many business owners who poured all their savings into their ventures, only to struggle due to lack of sales. When asked about their competitors and market saturation, they had no idea – they hadn’t done any market research.
Market research is essential to understand where your business fits in the market and whether there’s room for another player to cater to the same target audience. Here are some questions you should answer:
- Who are my major competitors?
- What additional services and products do they offer?
- What is my unique selling point?
- Can I offer my product or service at a competitive price?
- Is there a gap in the market that I can fill?
2. Manage your finances and cash flow with care
When starting out in business, it’s easy to get so caught up in daily operations that you lose track of your finances. To keep on top of finances as things become more complex, business owners should be mindful of:
- What monthly costs are required to keep the business running (electricity, insurance, wages, rent, website costs, equipment, etc.).
- What number of products/services a business needs to sell each month to cover these costs.
- What level of profit on each sale is sufficient to make the business sustainable.
Selling a lot of products or services but not making any money is a recipe for failure. Purchases must be carefully managed and financial records monitored and maintained, especially before making any major purchases or financial commitments.
3. Set a standard for quality and stick to it
When you’re busy meeting customer demand, especially if your business grows quickly, it’s easy for quality and customer service to slip. With social media and online endorsements being highly influential, bad reviews can be devastating. Rushing products to market without proper testing, or allowing a reduction in quality, can also result in lost customers.
To combat this, business owners can:
- Regularly ask yourself if you’d be happy with your product/service/value if you were the customer.
- Compare your product and service with competitors, especially those at a similar price point.
- Review negative feedback to identify and address issues.
- Conduct regular customer surveys.
4. Understand legal and regulatory requirements
Many new business owners overlook the importance of getting their legal and regulatory foundations in place. However, failing to meet legal requirements in Queensland can result in fines, disputes, or even the closure of your business. Depending on your industry and structure, you may need to register your business name, obtain specific licenses or permits, meet tax and superannuation obligations, and comply with workplace laws, privacy regulations, and consumer protections. It’s essential to research what’s required for your type of business and seek professional legal or accounting advice where necessary. Getting it right from the start not only keeps you compliant but also builds trust with customers, suppliers, and potential investors.
Minimising risk when starting a business doesn’t guarantee success, but it significantly improves your chances. By conducting thorough market research, staying on top of your finances, and committing to consistent quality, you lay a strong foundation for long-term sustainability. Every business will face challenges, but with the right preparation and mindset, you can navigate the risks more confidently and build a business that thrives.
We are also here to help.
Business Chamber Queensland offers a range of support, services and membership options to help your business grow sustainably. Get in touch with us today to find out more.
