From Concept to Cash
Important Considerations for Establishing a New Small Business
Congratulations! You are now on the cusp of establishing your very own business. Your product/service is probably very good and you will eventually find good demand……..but how to you convert your concept into cash?
As a Chartered Accountant I have been involved in setting up businesses both for myself and with others over the years. Here are some of my findings:
Business Plan
A solid well thought out business plan provides a great framework for your business. You will find yourself referring to it regularly. Make sure you consult with your Accountant or Business Advisor on what needs to be included and what does not.
Personal Finance Considerations
You may continue working whilst you establish your business or perhaps you will leave employment and make the leap of faith into the world of “Self Employed”. Each person’s personal circumstances will be different but you will need a clear understanding based on some conservative business modelling how much you will be able to draw from the business to assist you with your living costs and personal commitments.
The right structure
Sole Trader, Partnership, Trusts, Companies. What is the right structure for you? What structure provides your personal assets with protection from business failures/claims and risk? What are the compliance costs for the different structures? How flexible are the different structures? How will the structure impact your short term tax and long term taxes?
Funding the Startup
All new business requires some funding. Some will be started with minimal costs, others will be more capital intensive. Some will return a positive cashflow quickly others will take longer. Where will the funds for this business come from? Will you provide the capital? Will you approach the banks? Will you invite a business partner to contribute equity or will you go more broadly to the debt/equity markets? Funding your startup requires careful planning.
Registrations/Licences
All businesses will require registration with the tax office for an ABN, GST and a tax file number. Some businesses will need to register a business name. Some will require licences and permits to operate in their specialist field. Regardless of the business you are starting careful consideration will need to be given to ensure you are registered and licenced properly for your industry.
Staff/Premises/Business Systems
Depending on the scale of your startup you may or may not need Staff and premises at commencement, but eventually all successful startups will require staff/premises. Careful consideration needs to be given to ensure you are not making commitments now that may be overly costly at a later date.
Business Systems are widely available for different industries and in the age of digital disruption it is likely that there is a system that can be tailored specific for your business needs. Do not underestimate the efficiency a good business system will provide leaving you with more time to build the business.
Simon Liddicoat is a Chartered Accountant and Small Business Expert. If you are considering a new business speak with Simon and see how he can help your small business succeed.