Opening a small business is a bold move and often involves a lot of effort to successfully kick it off the ground.
Having worked with many small businesses over the years, we’ve seen many grow very well from the roots up. For businesses that are growing successfully, this is the typical life cycle we would expect for them.
First five years: survival
In the first five years of business, a lot of small businesses go down and are unsuccessful. It is very, very difficult to get things right in small business. Those initial five years, regardless of what sort of business you start, are by far the toughest.
You’re getting things up and started, and hopefully you’re growing a little bit. But, you’ve got a lot of obstacles to overcome, so essentially for the first five years, you’re just wanting to survive.
Five to fifteen years: growth & investing
Once you’re getting to the five to fifteen year period in your small business life, you should be growing and getting to be successful. Obviously the profits should be there as you’re starting to grow.
A lot of our successful clients start to invest privately during this time period. They’ve got their business growing, but they’re investing privately. A lot of our clients buy blue chip properties in the centre of the major cities and also buy blue chip shares and manage funds. Talk about successful and boring investing, but that’s what all of our super smart clients do.
It’s pretty simple. What they do is they put their geeky accountant hat on and they concentrate on blue chip investments while their business is growing.
We come across a lot of other business people, people who start to make a few bucks, and they try to put their money into dodgy high income investments. Steer clear of spruikers, seminars, and those sorts of things, folks.
If you’re going to be a successful small business person and the profit and cash starts to free up for you to make private investments… please, please, please stick to the blue chips and don’t get conned by silly seminars.
Fifteen years and onward: selling
Around this period, the majority of our clients have a transaction. One very popular option is to sell their business to someone else, 100%.
Alternatively they bring in other investors and equity holders into the business, or they start to pass it on to the next generation. Somewhere in this time period, they’re starting to look for a quieter lifestyle and to enjoy the next few years of their life.
That’s what we consider to be a typical life cycle of a successfully growing small business. Are you on the right track?