“Execution is everything”: Here’s the number one reason Australian SMEs are going broke

Two years ago, Kris Cochrane was the owner of a fast-growing personal training business with locations in Sydney and Western Australia.

As a first-time founder, Cochrane oversaw three full-time staff and 17 contractors, featuring in SmartCompany’s Hot 30 Under 30 list in 2016.

But that all ended in February last year when he was forced to liquidate Rapid Personal Training after experiencing issues managing cashflow.

“It was all about fast growth and having really ambitious growth plans, with a lot of ideas and big thinking without the operational execution,” he tells SmartCompany.

“My motto was ‘bite off more than you can chew and then chew harder’. That fucked me.”

Now a business coach, Cochrane says the potential pitfalls of running a small business are often overlooked by eager entrepreneurs.

“We take risks and think big and that’s an actual skill set most people don’t have, but there’s also that element where you’ll sometimes get too far ahead of yourself.”

A broad study released today by the Australian Centre for Business Growth (ACBG) has revealed the struggles many SME owners experience with their businesses.

Surveying 650 chief executives of small and medium companies over four years, the centre asked the 22% who admitted to experiencing business failure where things went wrong.

A quarter (25%) said lack of leadership, poor management and a lack of planning was the primary reason they went out of business.

In a similar vein, 6% said poor management of people was to blame, 4% cited chief executive inexperience and 4% said they implemented the wrong strategy.

“Execution is everything”

Cochrane isn’t surprised by the findings.

“Leading a business and a team of people without having experience means you have to learn as you go.

“You’ll make some errors,  and sometimes the consequences will be quite minor, but other times they can be fatal,” he says.

Jana Matthews, director of ACBG, says too many SMEs are failing because leaders lack an understanding of the nature of their jobs, what they need to do and why.

“Too many of Australia’s companies are failing because CEOs or founders simply do not understand their job and don’t know what to do, when, or why,” she said on Monday.

Data released by corporate regulator ASIC last week found cashflow issues were the primary reason SMEs go broke, but the ACBG study released today dives deeper into the reasons behind those financial issues.

Behind leadership, management and planning, 17% of respondents said they didn’t do enough market research, marketing or sales for their business, or didn’t know how.

A further 14% said they didn’t understand finance or didn’t have the necessary financial skills to manage their business, lacking knowledge of how to properly fund company growth.

Broader issues, such as drought, interest rates, regulation and global trends tripped up 13% of respondents, who said they had no risk mitigation plan.

Cochrane now works with businesses to help them avoid common small business pitfalls and says understanding risk and the financial implications of decisions is a big problem area.

“Speak to a good accountant or CFO and get someone to balance your big thinking — that’s what we need as entrepreneurs,” he says.

“Execution is everything, every idea means nothing until you execute it.”

He says there are plenty of resources available to help business owners with becoming better and more informed leaders, but that programs and advice are fragmented, making it difficult for time-poor founders to access tailor-made advice.

“Execution comes down to daily planning and staying aligned. Time management and focus management during the day are important, there are so many distractions.

“If you’re a small business owner and working from home, it’s just you and there’s no one to be accountable to,” he says.

What do you think? Let us know at news@smartcompany.com.au.

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