Business Mentor: Brave move but rewards great

Q: I am about to leave my comfortable role with a large firm to start a small business. Several colleagues have gone before me but have failed. Why is it so hard?


Roger Wigglesworth, director Small and Medium Enterprises at the Ministry of Economic Development, replies:

A: One of the immediate challenges in starting a business is understanding that running a small business is basically the same as running a larger one - it's just that you have fewer resources to help you with management tasks.

For me, one of the most interesting parts of the recently released report of the Small Business Advisory Group was their description of the typical small business. They said it might:

* Have started spontaneously from just one idea or new product, and might continue to be an incubator for innovative ideas and products.

* Have an owner/manager with little formal business experience or few generic business skills.

* Have begun because the founder had a particular technical expertise.

* Comprise the founder and up to four employees (often with an unpaid family member providing administrative support).

* Have the owner as the only person in a managerial position and no board or formal governance arrangements.

* Operate on trust rather than on systems and contracts.

* Have a tight family-like culture where the values of the owner are strongly shared by staff, and workplace practices are flexible and suited to individual employees' needs.

* Focus on a small range of products or services sold mainly on the local domestic market.

* Have all personal assets, including the owner's home, committed as security for the business.

* Acknowledge the owner's time as one of its scarcest and most valuable assets.

* Operate flexibly, on a "reasonable person" basis, rather than on an informed and strict observance of regulations.

* Have a vision and outlook that is bounded by the horizons, skills and experience of the owner, the pressures of day-to-day management and tight resource constraints (a tactical rather than a strategic approach).

* Endeavour to operate independently of other businesses and institutions and to favour self-help over seeking advice.

* No awareness of the regulations to which it is expected to adhere.

* In provincial areas, be a key part of the social fabric of the community.

* Close within three years of its inception, not infrequently in circumstances that could easily have been prevented.

Each of these bullet points contain huge challenges for the business owner and his or her employees.

That's why the advisory group also noted that managers in successful small firms were multi-skilled rather than specialists, with expertise in a range of areas.

You can, of course, contract-in specialist support such as accounting, logistics and marketing.

But, as the advisory group notes, small business owners are often loath to ask for help or to use the advice that is given.

Finally, starting a new business, as well as needing plenty of preparation, also requires an appetite for risk-taking as some of the best lessons come from experience of what doesn't work.

But don't be put off. If you go into your own business with the right attitude, the determination to succeed, and a mind that is open to new ideas and learning, it can be the greatest and richest experience of your life.

* Email us your small business question


* Small Business Advisory Group