Categorized | finance, news

Sage advice for start-ups and entrepreneurs

Back in March, Sage surveyed over 500+ start-up business in the US in their attempt to see what made SMEs works. The research wasn’t about finance, per se, although that did surface as an indirect effect.

No, this research would look at what made a small business a success beyond the initial capital. And, of course, its continued profit and growth.

Why a predominantly accounts-based company is interested in SMEs

Sage, as most will know, supplies some of the world’s most used accounting software. On top of their business management programs, they’re an actual service provider, too.

The thing is, bespoke sage packages don’t come cheap. Knowing the sage software inside out is a desired skill in its own right.

In that sense, there are the barriers to entry for freelancers or limited company contractors. The learning curve itself and the cost for a one-man business are prohibitive. With so many people across the globe now looking to set up shop on their own, Sage can see their market potentially shrinking.

The State of Startup: what makes a successful business model

A couple of the more interesting facts to surface from the study are:

  • women are more likely to start up their own business than men;
    • (57% v 43%)
  • 30-50 year olds are the most likely age bracket to start their own business, having:
    • earned their stripes as an employee, and
    • still being young enough to do benefit from their industry acumen
  • those approaching middle-age/retirement found it easier to start a business than millennials.

There are other striking, but expected, differences and similarities across the age ranges.

Those who’ve been brought up with social media are more likely to use it as a marketing channel. Those in their twilight are almost 2½ times less likely to use Twitter, Facebook, et al.

But there are commonalities, too, with the following elements reported as issues across the board:

  • increasing revenue beyond the startup capital (46%);
  • new customer acquisition (42%);
  • securing startup capital in the first instance (41%).

What actually works, then?

In order to segment the study group, sage grouped the startups into tiers.

In the top tier, they found that 9 out of 10 had achieved their initial goals. The key to their success, compared to only 12% of the bottom tier attaining similar results, can be found in the following common traits:

  1. Partnerships:
    • For contractors offering a bespoke service, the concept of starting a business can be narrow. 59% of successful business ventures were found to have more than one founder in the sage survey;
  2. Business Plan:
    • That old adage, “fail to plan, plan to fail” was never truer than for the startup business. Those who’d launched successfully in the top tier were 78% more likely to have planned a business map than those in the bottom tier;
  3. Use your Yoda:
    • It might be a very British thing to do to have a mentor, but most limited company contractors know the benefit of having an accountant who knows how their payment structure works.In the sage survey, the best-performing businesses leveraged the knowledge of mentors and accountants to fill in the blanks.
  4. Marketing: it’s not a dirty tactic:
    • Marketing is no longer about cold-calling, pinning leaflets to windscreen wipers or leaving a tear-off flyer in the bus stop. Invest in a blog, engage on social media and leverage the relationships in forums.Using a branded website as the hub of your online marketing strategy is crucial to success in 2015.
  5. It’s not all work, work, work:
    • At first glance, you may think this list all sounds like too much. You’ve got to find the time to sell your service or product, too. So this will surprise you.Those in the top tier of the sage study were more than half as likely to achieve a great work/life balance than those in the bottom tier. Yes, they were the most successful. But they also enjoyed the best work/life balance. If you enjoy your business and find the time to recharge your batteries, you’ll be invigorated when new opportunities present themselves.

What do the experts make of the findings?

According to those who nurture startups, 40% of new businesses fail. They either don’t:

  • consider the demand for their service with a critical enough eye;
  • borrow so much capital that they ever make enough to clear the debt;
  • have no conception of controlling the costs associated with running a business.

It’s the latter that we can identify with. In the survey, more than a third of advisors don’t trust the figures that entrepreneurs present to them.

It’s no wonder that almost 8 in 10 of those advisors suggest either buying bespoke accounting software to handle your business or appoint an accountant.

Knowing a trade is one thing. Being able to run a business another entirely.

For contractors, it’s taken you time to get to a stage where you can make good profits from your expertise. You don’t want to dilute your earning power by labouring over company accounts. Leave that to the experts in finance, while you focus on earning. It is that simple.

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