The 10 biggest issues facing start-ups in 2013: #7 political uncertainty

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.

Today, we look at how political uncertainty is spooking small firms.

Several interviews with DFK accountants and their clients indicate that the more mature a business is, the more affected the business owner is by external circumstances such as political situations, legislation and new suggestions of different taxes.

It is usually said that uncertainty leads to a lack of confidence; both for businesses and consumers.

Uncertainty impacts decision-making, with many SMEs unsure whether to invest for growth, consolidate or shrink their business.

“It appears to me that start-ups seem to be less affected by political climate and international economy, simply for the reason that they are still full of ideas and inspiration and don’t let these factors get in their way of their upcoming success,” says Michael Gray, partner and small business specialist of DFK Australia New Zealand.

Start-up business owner Jarrad Morgan is perfect evidence of that.

A finalist in the category of Fast Growing Business in the StartupSmart Awards, Morgan owns SA Construct, which supplies and installs commercial cladding systems.

“I’m working from early morning to late night and I’m busy keeping all my customers happy. I don’t have time to worry about potential threats that may come or may not. I’m just out there chasing business opportunities,” he says.

That is the typical entrepreneurial spirit which works around any hindrance such as red tape and restrictive banks. That spirit often is accompanied by young age.

Morgan is turning 26 and he started his business in April 2012. Today the business is turning over $3.64 million and employs 21 people, many of them older than Morgan.

“Jarrad is showing an extraordinary growth in a very short time. When growing this fast, it is crucial to have the cashflow under control,” says Gray, who is advising Morgan in his business.

What can the government do to help business owners?

“The government seems to put up as many barriers and stop signs as possible for SMEs. Instead, they should get out of the way and let businesses march from A to B without any detour,” suggests Gray.

In talks with accountants and clients, we found that mature businesses tend to worry more about external factors.

With business conditions being uncertain, Gray advises that SME owners need a greater focus on improving the performance of their existing resources, in particular their staff.

Improving productivity also involves reviewing and improving processes and investing in assets that improve performance, such as suitable IT.

“Planning is essential and strategic planning actually increases during times like this,” continues Gray.

Poor business management skills also come to light when business conditions are tough.

“In good times, a business can get away with a semi-skilled owner, but in tough times it is not possible and they have to exit.

“I suggest business owners put more time into their own development as managers and surround themselves with appropriately skilled staff and board members,” says Gray.

What drives a young business owner to perform?

“I want SA Construct to become one of the most recognised and respected names in the building industry in South Australia,” says Morgan.

At the moment, he is focused on improving the procedures and creating safe and effective policies: “Simply to iron out any defects in our workmanship – to give the business a rock solid platform to expand further from.”

SMEs often do not get the best out of their staff and sometimes do not even have the right staff. SMEs should put more time into motivating and rewarding good performance, getting employees engaged with the business, investing in appropriate staff development.

“There are many demands on a business owner these days, so it certainly helps with an entrepreneurial spirit and a good team in terms of staff, business adviser and an active board,” concludes Gray.

Five ways to survive in an uncertain world

1. Develop your management skills

2. Improve business planning with a focus on cashflow

3. Improve productivity of staff, IT, etc.

4. Manage risk: look for cost-effective ways to manage risk and have a good succession plan

5. Improve governance structures and processes together with new technology