Starting a new business is as exciting as it is uncertain. Each business is different and so too is the reason each person goes into business in the first place. Whether you’re turning your passion into a profit, selling online, opening a bricks and mortar store or setting up your own professional practice, each have their own strategies and keys to success.
Starting a new business is simple. Keeping it running isn’t. Only 40% of businesses in Australia survive past their third year1. If this is your first leap of faith into a business of your own, you should be able to answer the following questions with confidence.
1. Is this your side hustle or your main source of income?
Many businesses start as a hobby or a side business to regular full time employment. If you are running a side hustle, be honest about the time commitments of both your new enterprise and your current job. It can be difficult to do both well. If you are quitting your job to start your business calculate how or when you will be able to pay yourself and business expenses until you start receiving revenue? Lastly, a ‘hobby’ is not a business in the eyes of the ATO, you might want to check the tax status of your undertaking up front so you know where you stand.,
2. How do you obtain your first customer?
A great question to challenge your business model, marketing methods and cash flow projections. A business plan is what commonly is produced to identify how your business makes money and what sets you apart from your competitors. It should also also show what growth looks like and how it will be managed.
3. Why now?
Sometimes, in business, timing is everything. What is the reason for launching your business now? Is it a personal reason or one that’s relevant to your intended market? Personal reasons could be that you have raised enough money, secured your ideal premises or simply if you don’t do it now, you never will. Market reasons may be a lack of competition in the market, a unique offering or the right time in a seasonal business. Starting your business at the right time can have a significant impact on its success.
4. How are you funding your business startup?
Is your small businesses being funded with personal savings or a personal loan? Most banks won’t provide a business loan to a new business without some sort of security. Many businesses run out of money before they’ve had a chance to prove success. Knowing how much you need and when you will begin earning revenue (cash flow) is vital so you do not run out of cash before you can prove your business idea has legs.
5. How are you tracking your income and expenditure?
Keeping on top of receipts, invoices and paying staff, among other things, is essential. Setting up a simple system of accounts and accounting software that can track and record transactions as they happen will remove administrative headaches and costly errors down the track.
6. What is your business structure?
Sole-proprietor, partnership, company or trust? The right business structure of your new business has repercussions in terms of taxation, legal liability and protection of your assets. When you decide on what structure you’ll use, keep in mind how you may eventually exit the business, because this may impact your decision on structure.
7. Have you registered your business name and applied for an ABN?
Registering your business name can be an exciting moment to see your idea become an officially recognised entity. Checking that your business name is not in use can also be an anxious time. A simple check at any time on the ABN Lookup tool can ensure your intended business name is available.
8. Have you secured your website domain and social media profiles?
These days, registering a relevant domain name and associated online profiles is essential. While there is no regulatory, tax or legal requirement, in order to effectively communicate your business to customers, suppliers or investors almost always requires an online presence. This can often be done well in advance of being open for business to begin testing the market.
9. Do you need a tax file number or register for GST?
Registering a business name and applying for an ABN does not mean you are automatically registered from a taxation perspective. Depending on the purpose of your business, applying for a Business Tax File Number may be necessary. And, if you wish to charge GST, claim GST credits or if you’re likely to earn over $76,000 per year in revenue, you will need to register your business for GST.
10. What are your BAS Lodgement & Tax Return obligations?
If you are registered for GST, you will need to submit a Business Activity Statement (BAS). This could be monthly, quarterly or annually depending on a number of factors. Also, you will need to submit an annual business tax return ensuring you complete this relevant to your business type and structure.
Do you have the right advice?
Starting a business means you are responsible for everything. It can take time to navigate a lot of new territory. Finding reliable advice from trusted people can make the difference between success and failure. They can also ask the tough questions you may be afraid to ask yourself. This may come in the form of professional advice or from friends or family who have had prior experience in a particular aspect you need help with.
Saige Accountants and Financial Planners can assist you in setting your business up for success. We can advise on business structures, accounting software and help with all your taxation and accounting needs. We work with businesses every day and help people see their business by the numbers so they can see the signs of when business is going well and when it isn’t. Talk to us if you are looking to start a business so we can help you succeed.
- Australian Bureau of Statistics