Ask Us How: Business Start Up
Published on October 16, 2013 under NSW Business Chamber Partnership
Unemployment is currently 5.8% and likely to rise up to 8%, with this comes exceptional talent now available on the market. Many of those individuals have taken this opportunity to set up themselves with record new businesses starting up in Australia.
Start up is a risky business; Here is some insight into the critical elements of what’s needed to make your venture succeed.
ECONOMIC CONDITIONS AND INDIVIDUAL START UPS
Australia has a wealth of talent in many industry sectors. Many of these experienced individuals are now using the economic conditions to take the leap into business. It represents a new breed of innovation and competition that is good for Australian business.
There are many factors that contribute towards individuals going it alone and normally it’s because they:
- Feel it is a good time to go into business, individuals working in growth sectors want to take advantage of this and go it alone
- Can’t find a job
- Are Disenchanted with the big end of town and want to explore their own business ideas
- Have numerous contacts they can utilise in establishing a successful business
- Want to control their own destiny
- Are buying themselves a job
- Need to generate income quickly to cover their personal liabilities
- Opportunity for experienced people to come together to create a company
CRITICAL INGREDIENTS IN MAKING YOUR VENTURE SUCCEED
At the outset it’s important you have considered whether you really understand what's involved in running your own business and whether you're suited to business.
You need to examine the reasons for getting into business, your goals and skills, the income your business will need to generate for it to be successful quickly and the advantages and disadvantages of establishing your own business.
If you have determined above and are positive about business then the starting point for any business to be successful is in their sales and the generating of revenue. This is the lifeblood of any business.
Once you feel comfortable about generating sales from your products or services then it is about how you manage the business to efficiently service those sales.
Once you have sales then you need to drive the profits!
There are two critical areas in making your venture succeed:
1. Operations (this is most critical)
You need to understand what it takes to produce or service your product, efficiently, effectively so the quality ensures people come back to continue to buy or use your product or service.
2. The internal management of your business
This is where you need to put structures in place that look at:
- What marketing methodologies you are putting in place
- If you have the right people in the right jobs who will concentrate on helping build or maintain your business
- If you have the right IT infrastructure to service your business
- Your Financials – are they set up properly, running properly, are you getting accurate reports on a monthly basis?
- How are you managing the administration & office premises
For you to be able to continually produce your product or sell your service the backbones of your business need to be operating efficiently as well otherwise the quality will be sacrificed
Other points to consider are:
- You need a Targeted strategy
- You need key contacts u can leverage and / or help grow your business
- Focus, determination and drive
HOW TO STRUCTURE YOUR NEW BUSINESS
When structuring a business you need to consider:
- Directorship agreements if going into partnership
- Other people or investors from a share holding point of view
- Restraints of trade, ie any non compete clauses or non poach periods
Structure wise, a corporate structure is typical for most serious business owners. This allows for limited liability up to the value of the share capital against directors or owners.
If you want a smaller operation then you may want to consider setting up as a sole trader or family trust type arrangement which would be easier to manage.
Beyond above you need to ensure your business is structured in a way that will minimise tax.
WHAT PITFALLS SHOULD TO AVOID TO ENSURE YOUR VENTURE SUCCEEDS
Many businesses fail due to:
- Not having the sales to cover the costs of the business
- Very poor financial management such that the business is not profitable and they build liabilities they can’t pay
- Don’t plan well in setting up the business – such as injecting limited capital into the business
- Pay too much for an established business and do poor due diligence
As always if you are going to set up any business you need to acknowledge the importance of these areas.
Other businesses fail because the initial due diligence was not completed before commencement and you haven’t researched if:
- There was a real market for your product or service
- That you can you get to that market
- Or that market will buy from you?
ADVICE FOR STARTING UP
Make sure you have done some research into your business idea before you just jump in. It is important to identify the need for your offering and assess the risks and benefits.
Any decision you make in business needs to be done with a commercially minded focus not based on emotional decisions.
If all the ingredients are right, I say go for it. Owning your own business can be an extremely exhilarating experience especially when start to see it work and your business ideas come to fruition.
On the other side, if your business isn’t working be prepared to get out early or commit the time and capital to get it up and running.
Most businesses take 5 years to gain any real momentum and become established businesses.