Bam. You have a great business idea. Maybe it came to you in the middle of the night, maybe it’s been permeating in your brain for many years. The important thing is, you have the idea. Now, how do we turn this idea into a business?
Here is a checklist of some important things to consider when getting started.
- Write a business plan!
It seems like a no brainer, but ensuring your business plan covers off all the vitals from the outset makes all the following steps so much easier. A business plan is a formal document that sets out goals and objectives for your business and how it intends to reach those goals. A business plan may cover the following:
- Background and mission
- Business management team and key personnel
- Analysis of competition and competitive advantage
- Analysis of the business’ Strengths, Weaknesses, Opportunities and Threats (“SWOT analysis”)
- Marketing/engagement/business development strategy
- Financial plan and forecasts
- Capital raising strategy
Banks or investors will often wish to see a business plan and may have particular criteria they would like to see before discussing involvement with your business. This can largely impact your success so it is worth researching thoroughly.
- Set up the right business structure
This is key. Getting the right structure from the start ensures your business is set up in a way that will protect you, your business and your family from the unexpected (asset protection). The right business structure will also allow for flexibility in your future (succession planning, purchasing/selling/merging) and tax effectiveness (maximising returns and minimising costs). You will also need to consider legal and regulatory matters specific to your industry or profession. For example, research and development (R&D) tax offsets will only be granted to those who operate under a company structure.
Typical structures for small businesses include:
- Sole trader – an individual trading on their own.
- Partnership – a number of people or entities running a business together, but not as a company.
- Trust – an entity that holds property or income for the benefit of others.
- Company – a legal entity separate from its owners.
- Get your registrations in order
Depending on the structure and nature of your business you may be required to register for some or all of the following:
- Tax File Number (TFN) – all entities that will be required to lodge an income tax return will be required to apply for a TFN.
- Australian Business Number (ABN) – an ABN is required for all entities (including sole traders) that intend to firmly establish and run a business
- Goods and Services Tax (GST) – an entity will need to be registered for GST if its annual turnover exceeds $75,000 ($150,000 for not for profit entities).
- Fringe Benefits Tax (FBT) – registration for FBT will be required if your entity provides certain types of benefits to employees. The types of benefits that can be subject to fringe benefits tax include cars, meal entertainment and expense payments (generally private expenses).
- Pay As You Go Withholding (PAYGW) – a PAYGW registration will be required for all entities that employ staff or have other PAYGW requirements. This basically ensures tax is paid (withheld) on behalf of employees for their salary and wages.
- Superannuation Guarantee (SG) – all employers are required to provide a minimum level of superannuation support for employees (currently 9.5% of the employee’s ordinary earnings). Although no registration is required for SG, superannuation payments must be made within specified timeframes.
- Workers compensation – subject to certain exemptions, a Workers Compensation policy will be required for all entities that employ staff. As Workers Compensation is state based, separate policies are required in each state that the entity has employees. In certain circumstances the policy must cover contractors.
- Business name – if your business is structured as a sole trader, partnership or trust then you are required to register your business name in the state or territory in which you will operate. A business name registration will not be required if you plan to conduct your business under a company name or you or your partner’s, first name and surname, or initials and surname. In Victoria business name registrations are handled by the Australian Securities and Investments Commission (ASIC).
- Record keeping process/software implementation
Sound record keeping is essential for the financial management of a business and to ensure that your legal requirements are met. Setting up a process now will set you in good stead for your ongoing business management and makes your business planning and decision making processes much easier. Regular reports provide vital insights into what your business is capable of and how it is tracking.
The best way to maintain the financial records of your business is through the implementation and use of online accounting packages such as MYOB or Xero. Once these are established, your financial obligations are made so much easier to manage.
- Chart your progress
During the early growth of your business it is vital to set a procedure in place to regularly produce financial statements. By preparing these reports throughout the year and having them reviewed, you will be able to better understand your financial position and consider strategies for tax and cash flow management and projection. As a sound business manager, maintaining these regular reports allows you to forecast for investments and plan for business expenditure.
by Justin O’Brien
Director – West Carr & Harvey