The Basics
I’m going to start with some very basic basics, just to give you a little more awareness of how things work in a general sense.
In relation to small business, the news isn’t amazing. Most small businesses fail within the first one to two years and most take around five years before they become properly profitable. This is a financial reality we really need to be prepared for.
Being part of a membership like this means you get to leverage experience—mine, the clients I’ve worked with, and the information I’ve gathered over time—to push against this reality. But that doesn’t mean you’re impervious to it. Small business is precarious, the success rate is low, and it’s a slow process.We need to be prepared for that. How much money do you have saved? And what is your realistic expectation for your business’s profitability? You can get lucky, but most people don’t. This is statistical, and while I’m here in Australia, it’s something that’s globally recognised.
Another factor to consider is that the economy tends to go through cycles, tracked now for close to 150 years. These patterns could change, and in a rapidly evolving world, that’s always possible, but at this point, they tend to move in roughly seven-year cycles. Things start getting better, then go really well, then a bit less well, then we hit a recession. It’s like a wave. We can also experience economic crises caused by unexpected events like COVID, stock market crashes, or terrorist attacks—things we can’t predict. These events affect the size of both down cycles and up cycles.
If you’re starting or growing your business during a down cycle, it’s useful to keep that in mind—it will affect both your spending and your customers’ spending. It’s also important to remember that many businesses have come through slow periods successfully. Some started in tough times and built steadily. Success at the top of the market doesn’t guarantee long-term, sustainable success. Some businesses thrive when the market is booming, but fail to withstand the tightening that follows.
Our goal is to create a business that can ride these waves over decades. If you’re going to be in this business for 10, 20, 30 years, you’ll see ups and downs and we need to be prepared for them. Expect them, plan for them and keep this in mind as you build your business. This will help you understand your own situation, risk-proof your business, and serve your customers more effectively depending on the part of the cycle you’re in.
Your money muscle can be built over time. Podcasts and books are a great place to start. For 2 simple books I recommend –
- The Barefoot Investor (Australian focussed with general strategies that work no matter where you are)
- I Will Teach You To Be Rich — Ramit Sethi (Quite US focussed in relation to superannuation but otherwise has fundamentals that will work anywhere)
