How can Australia's small businesses avoid failure?

Can small businesses buck the trend, secure long-term profitability and ultimately stimulate the economy?

The seismic fallout from the global financial crisis cannot be underestimated. The worldwide economy took a big hit over 2007 and 2008, and many sectors across Australia were little different. While the mining sector in particular helped prop up the economy to an extent, the risk of closure still loomed for smaller enterprises.

The small business conundrum

Those who are starting a business in Australia are imperative to the economy. After all, their ideas are typically more innovative and groundbreaking than many bigger peers. However, due to their relatively small financial footprint, they can be the first to suffer when wider business conditions falter.

Why? Well, it can actually be a case of an idea just not being up to scratch in terms of long-term sustainability and profitability.

Simply, too many small businesses start with an idea that isn't great to begin with, going blindly from failure to failure. However, the single biggest reason for closure is typically a lack of finances. Many people go into business – even those with the greatest ideas – under-capitalised and they end up running out of steam.

What's the secret to success?

While there's no guaranteed path to success in business, regardless of size or sector, there are a few common sense practices that small business owners should look to follow. For example, Forbes contributor Eric T. Wagner suggested that many startups fail to have a thorough business development strategy in place from the outset.

Planning effectively, and engaging in lean thinking when it comes to finances can help set the business on the right path. Ultimately, it's a matter of fact that many small businesses fail in the face of capital pressures.

However, if Australia's startups can be a touch more savvy, the country's wider economy will soon feel the positive effects.

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