Building your business strategy for long-term success

Having a great idea is just the start for any successful small business. That great idea must be backed by a strategy for long-term success. Here’s our step-by-step guide to help you build a solid foundation from which your great idea can grow.

1. Start with the end in mind

First things first – you need to know, and be able to articulate, what you want your business to be. What’s the vision?

You may want to be the café of choice on Lambton Quay, or maybe you want to expand your design company into the South Island. Whatever it happens to be, your big idea will allow you to see what the finish line looks like – and then you can work out what you need to do to get there.

2. Know what makes you special

What truly sets your business apart from your competitors? What is your point of difference that makes what you do so much better – or be so different – than anyone else? If you’re unsure, your customers won’t know either.

It’s natural to find this difficult – often, small business owners are too close to their day-to-day operation to truly see what makes them unique. In that case, talk with your customers and your staff to get a sense of what they value about what you do. It could be your customer service or the quality of your products, or it could be something completely different.

3. Identify what your audience needs

While talking to your customers about what they value about you, take the opportunity to ask about their lives, and their needs too. Understanding how often they go on Facebook or Instagram, for example, may not seem immediately relevant, but it will help you define your marketing strategy. Talking about other products and services they use regularly will help identify product areas worth exploring, or new directions to take your business in.

The best way to conduct this research is by having one-to-one conversations, while you could also complement this with an online survey. Offering an incentive is a smart way to increase the number of people giving you feedback. Provide the option of anonymity too. While the feedback may be painful to read, it will enable people to be brutally honest. Ask the tough questions and be prepared to act on the results.

4. Be aware of your competition

While it would be lovely to have a monopoly on the market, very few companies do. So, you need to know who your competitors are and what they are doing. What products do they stock? What services do they offer? What’s their customer service like? Use this information to improve what you’re doing, and more deeply define your point of difference.

Just because someone else is doing something doesn’t mean you should copy. However, if someone is doing a smart promotion or adding a new service, take note of what works and then think about how you could improve on it.

5. Set SMART goals

Now you’ve gathered information about your business, your customers and your competition, it’s time to define some goals around what you want the business to achieve.

For example, one of your goals might be to increase sales. However, just saying ‘I want to increase sales,’ doesn’t give you much to go on.

A common approach to goal setting is to follow the SMART method. That means setting goals that are specific, measurable, achievable, relevant and timely.

  • Specific: Rather than ‘increase sales’, pick specific stock categories of which you want to increase sales in.
  • Measurable: How much more do you want to sell? Put a number on it.
  • Achievable: Be realistic. It must be achievable, otherwise it’s meaningless.
  • Relevant: Is this goal going to help you achieve your business vision?
  • Timely: The timeframe needs to work for you, your customers and your type of industry.

An example of a SMART goal would be: Increase sales of summer skirts by 20% between October and January.

From there, you need to work out what’s required to do it – do you need more staff, a wider range of stock or a different marketing campaign?

Having your goal is one thing – achieving it is another.

6. Investing in the future

With a clear business vision, understanding of your audience and clarity around how you’re going to achieve your goals, you can now make informed and educated decisions on business finance.

Can you achieve it all with your current finances, or do you need to seek additional investment, such as taking out a small business loan?

If you’re not sure you’re ready to invest, think about where you want to be in five years’ time or even in 12 months’ time, and work backwards to see precisely what needs to happen to get there.

7. Don’t set and forget

Business plans are great, but they should grow and change with you. It should be a living document that you review and evolve regularly.

Opportunities emerge and changes happen in industries, so your business plan should keep on top of that.

Schedule a recurring time to revise your business strategy. If you’re not on track or a new opportunity has come up, be flexible. An ever-evolving plan is the only one that will be able to keep up with your changing business.

And if you need a little help or advice, there are plenty of business coaches, planners, financial advisors and fellow business owners who can help you pull your plan together – and keep it on track.

8. Embrace the challenge!

Being a business owner is tough – that’s why not everyone does it. However, running your own business is also extremely rewarding. Hopefully, you’re excited at the prospect of having a road map for your business’s success. If you have the strategy – and the motivation – to succeed, then you’re giving your business the best possible chance.

Is investment part of your plan to succeed and grow? At Prospa, we provide small businesses across New Zealand with small business loans to suit a variety of growth needs. Call our team on 0800 005 797 or apply online.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

An accountant’s guide: Transitioning from a sole trader to a limited company

If you have big plans for your sole trading business, you may be thinking about how the structure of it might change in the coming years. For many sole traders, transitioning to a limited liability company is a logical next step.

Of course, it is a decision that should be made at the right time, and for the right reasons. We asked Jarrod Walton, a chartered accountant and director at Chapmans Chartered Accountants in West Auckland, to share the key things to consider when making the transition.

What is the difference between being a sole trader and a limited liability company?

As a limited liability company, all of a business’s assets, debts, profits and liabilities are listed under a registered company name.

“Anyone can be a sole trader,” says Walton. “All you have to do is declare your annual income to the Internal Revenue Department, and pay the required income tax on those earnings.”

When your income as a sole trader reaches NZ$60,000, you are also required to register for, collect and pay GST.

And, while this doesn’t require you to become a limited liability company, Walton says he believes reaching the GST threshold is often a good time to consider a switch.

What are the benefits of becoming a registered business?

“The first thing is that being a registered business legally provides additional protection from liabilities you could face as an individual,” says Walton.

Any risks when you’re a sole trader are in your name, he explains.

If you’re selling clothes or mowing lawns, these risks may be minimal. But if you’re offering services or providing products that expose you to any liability, it’s worth considering having that under a separate entity.

This is also particularly important if you have, or plan to have, employees.

Secondly, there are tax advantages.

“Being a limited liability company enables accountants to structure your business affairs to save on income tax, and other claimable expenses,” says Walton.

The third reason for moving on from your sole trader status is precisely that – status.

There is undoubtedly an element of professionalism that comes with doing business under a company name, rather than as an individual. Sometimes this perception is just what you need to amplify your offerings (and income)!

Walton also notes that, if you wish to introduce any additional shareholders, you’ll need to be trading as a limited liability company.

What are the downsides of becoming a registered business?

For someone who wants to run their sole trader business with a minimum of fuss, it may seem like becoming officially registered is more work than it is worth. There are added costs ($160 to register and $45 per annum), and you will need an accountant to take care of all the extra administration required each year to ensure everything is done correctly.

But, as Walton notes, any potential downsides are often mitigated with the added tax benefits of trading as a limited liability company.

So how do you become a limited company?

The best place to start is by talking to your accountant or contacting a trusted business advisor.

“Many accountancy firms offer obligation-free discussions on making this transition,” says Walton. “It’s what we do daily – we need to make sure you understand everything about your obligations before moving forward.”

The process itself isn’t too difficult (depending on your business structure) and the first step is to register your company with Companies Office – this is known as incorporating a company.

You’ll be able to check that the company name you want is available, reserve it and register it by paying a fee. You will then be given an NZBN (New Zealand Business Number) that you will use when dealing with the government, suppliers and customers. Every registered business also has to declare information about the company’s directors and shareholders – even if there is only one.

Following this initial stage, there are other processes to complete, including establishing a bank account for the company and transferring assets into the company’s name. It is best to do these tasks in consultation with your business accountant.

New Zealand is a country built on small enterprises. But Walton explains that knowing what it means to become a limited liability company is crucial for many New Zealand sole traders to ensure they are running their business efficiently and effectively.

“It’s important because people should have a structure and plan in place from the outset, as not doing it right can cause headaches down the track.”

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

Research reveals the realities of running a small business

Research: The realities of running a small business

Working for yourself, being your own boss, building a brand – that’s the dream imagined by small business owners everywhere. And while it undoubtedly has its benefits, the reality of running the show also has more than its fair share of challenges.

A recent study commissioned by Prospa has shone a spotlight on the daily battles faced by New Zealand’s small business owners – and the extent of the work they put into making the business a success.

While there’s certainly room for improvement when it comes to business management and work/life balance, it’s proven that small business owners certainly aren’t afraid to put in the hard yards to make their business a success.

Working 9 till 5… and beyond

The research, which was carried out for Prospa by YouGov Galaxy, found that nearly half (49%) of small business owners around the country are working between six to seven days a week on their business, with one in five (20%) working the full seven days.

But long hours aren’t the only challenge small business owners are facing, the research found that over three quarters (76%) of respondents are struggling with one or more areas of business management – namely finance and accounting (39%), IT/technology knowledge (31%) and digital marketing (30%).

Other common struggles were debt collection and managing overdue invoices (20%), sales techniques (20%) and people management (17%).

As a result, up to 43% of small business owners have found themselves putting in extra hours to learn new skills. While 38% of respondents say they’re missing out on opportunities to grow their business and one in five (20%) reported cash flow issues that brought them to the brink of going out of business.

Interestingly, millennials (90%) are more likely than baby boomers (69%) to say there are areas of business management that they struggle with, particularly finance and accounting (52% compared to 33%), and people management (35% compared to 8%).

The personal impact of running a small business

The study also reveals the emotional impact of such pressures, with 88% of small business owners reporting that they experience negative emotions, such as frustration (44%), stress (40%) and feeling overwhelmed or burnt out (38%).

What’s more, a massive 81% of respondents said they’ve had to make sacrifices in order to focus on their business, including cutting back on personal time (58%), hobbies (57%) and exercise (48%). Sadly, time spent with family wasn’t far behind (38%), as well as time spent with a significant other (33%).

Unsurprisingly, 30% even cut back on sleep to get back to the grindstone.

Small business wish list: Skills and investments

Still, small business owners know what’s needed to improve things, with key skills in digital marketing (31%), financial literacy (30%) and sales techniques (30%) listed as having the biggest impact on their ability to manage and grow their business.

And when it comes to investments, 25% of small business owners felt that a marketing campaign would have the biggest impact on helping them grow their business, while 17% said hiring staff and 13% said better, more professional equipment.

Finding the resources to fund equipment is something that Kurt Jacks and his wife Althea, owner/operators of The Rib House in the Auckland suburb of Pakuranga, know all about.

“We found that when you start a small business, it sucks a lot of money, more than we anticipated,” says Kurt. “We needed to do upgrades and renovations to the kitchen, and we also eventually want to upgrade the size of our restaurant, but we needed a bit of help.”

Read more about The Rib House’s small business story.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.