How to start a business
Starting a business can be one of the most rewarding, yet challenging experiences someone can undertake.
But there are some key steps you can take when starting out that will make the process infinitely easier and give your business a greater chance of success from the outset.
- Define the scope of your business
- Do your research
- Get financially savvy
- Write a business plan
- Know your outgoings
- Break it down
1. Where to start
It might seem somewhat obvious, but it’s important to ask yourself one key question as you embark on your business journey: are you going to be a big business or a small business.
Around 96% of Australian businesses are small businesses, and the implications and requirements on small businesses versus large ones can be very different, so start by working out where your business will sit.
The Australian Taxation Office classifies small businesses as those with an annual turnover (excluding GST) of less than $2 million, so that’s a good place to start.
2. Are you ready?
Before you make the jump into starting your own business, you should stop and reflect on whether you’re actually ready.
- Have you researched your industry and the market you’re entering? Are you sure there’s a demand for the product or service you’re offering?
- Do you have the experience – both in your industry and in the business world – to make it work?
- Are you prepared to ride out the challenges that running your own business inevitably presents?
- Do you have the money to get the business off the ground?
- Where should you run your business from?
3. Get savvy with your finances
You’ve probably heard the statistics: for about 80% of businesses that fail, cashflow issues are the cause.
So if you’re not adept at managing finances, it’s time to get savvy in a hurry.
Firstly, calculate how much money you’ll need in order to get the business going, as well as keep it ticking over in the short to medium term. You’ll have poured thousands of dollars down the drain if you start the business, only to discover two months in that you don’t have the financial strength to maintain it.
Then it’s time to put some financial measures in place, beginning with:
- Investigating and selecting some good accounting software
- Opening business bank accounts
- Engaging a good accountant and/or bookkeeper
With those tools and people in place, you’ll be in a much better position to create a business budget to help make smart financial and business decisions moving forward.
4. Write a business plan
Ask any business coach or successful businessperson what one of your first steps should be when launching a business, and they’ll almost always suggest writing a business plan.
Your business plan is essentially your roadmap for your business’s future, detailing the short, medium and long-term plans and goals, as well as the steps you’ll put in place in order to achieve them.
At a minimum, your business plan should include your expected cashflow, your projected costs, your growth expectations and a detailed marketing plan for how you’re going to reach your potential customers during the first 12 months.
Business plans should also be updated regularly as you reach or reassess your goals, to ensure you stay on track.
5. Common costs when starting a business
Your business plan should give you a helping hand here, as it will already have identified some of the major expenses that your business will be faced with in its initial stages.
Some of the common costs when starting business are one-off or annual costs, such as equipment, relocation costs, fit-out costs and insurance, as well as licence fees, such as registering the business, attaining permits, securing an ABN and registering for GST.
Write down every possible fee or cost and calculate an annual estimate of what you’ll need to turnover in order to break even and turn a profit, in the short-term and medium to long-term.
6. Start a business checklist
If that all seems difficult and confusing, try simplifying the process by condensing it into a basic checklist, beginning with:
- Researching your industry, potential customers and competitors
- Choosing the best business structure for your business
- Calculating the expected initial and ongoing costs
- Writing your business plan, including your marketing and advertising plan
- Set up your finances and financial processes
- Register your business name and arrange any other registrations/licences you need.
- Find the right space to run your business from
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