By the Re: team
Are you a young person wanting to start a small business? Great news – you’re already ahead of the curve!
This article is part of our new series Finance Explained, sponsored by BNZ.
According to Charlie Mear, head of climate and cleantech business at BNZ, young entrepreneurs have a secret advantage when it comes to starting a small business.
“Young people are often more inquisitive, curious and willing to learn,” Mear says.
“This drive to ask questions and absorb knowledge is a huge advantage when building something new.”
Starting a small business is exciting, but it’s a big step that requires careful thought.
In this article, we’ll provide you with expert advice on what to consider before diving into a new business venture.
Before you start
Mear says it's important to think about what is going to make your business different and unique from others.
“It doesn't need to be something revolutionary, but you do need to have a point of difference.
“Some of the best technology businesses that we work with are those that can identify and clearly articulate how their value proposition is different from their competitors.”
It’s also worthwhile taking the time to go and work for another business in the same industry to get some relevant experience, Mear says.
"Meet some industry participants and get an idea of what it takes to run a business.”
Get advice from people
Whatever path you’re going down, someone has been there and done something similar before – so you may as well learn from their mistakes, rather than making them yourself, Mear says.
“Be a sponge and absorb as much information as you can from as many people as you can, including independent advice from lawyers and accountants.”
But it’s important to be mindful of who you take advice from.
“Make sure those people have the experience and knowledge to provide relevant and credible advice for your business,” Mear says.
You can look online for tools and advice from independent organisations, like from the government’s business advice website, or its newly-launched AI tool that summarises advice for small business owners from government websites.
Funding your business
To break it down simply, there are three common approaches (among various other options) that we see businesses taking when it comes to getting money to help start a business, Mear says.
- Bootstrapping: This is using your own money or resources to start your business.
- Raising Equity Funds: This involves selling an ownership percentage of your business in return for money (and potentially expertise and connections).
- Non-dilutive financing: If you want to grow your business without selling any of the ownership, you could consider “non-dilutive financing” by way of a loan or grant funding. While loans can be harder to secure in the early stages of a business, there are options. Grant and funding opportunities are also available specifically for young people starting a small business.
How to not run out of money
A common challenge small businesses face is running out of cash and not having enough money to pay the bills, Mear says.
“Do some financial forecasting to ensure the time horizon for when your business is likely to make money lines up with your expectations and is feasible for you. An accountant may be able to help if you don’t know where to start”.
Mear says the time horizon can vary, depending on the type of business.
“For example, a lawn mowing business might make money from pretty much day one.
“However, in contrast, a technology business may require years of research and product development before revenue generation.”
Mear also says it can be easy to fall into the trap of spending money on “nice to haves” in the early days, rather than essentials.
“Resources should be focused on delivering your core proposition and generating a return. Put simply, only spend on what directly drives value and growth.”
Advantages for young business owners
Having passion and a drive is the true key to success, and since young people are naturally more curious and willing to learn, this gives them a leg up, Mear says.
“Use those traits to your advantage!”
This article contains general information only, not professional advice. BNZ is not liable for any losses resulting from this article.
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