So you want to start a business; well done you have taken your first step, starting a business and then running a business is a life commitment and should not be taken lightly.
Commitment is the key; remember 90% of business fail in the first three months and 55% in the first year. Don’t be frightened by that; fear is the biggest cause of failure. The ABS Australian Bureau of Statistics found that, 316,850 new startup business in 2007-08; 71.5 percent were still operating in June 2009. They also found 56.8 percent were still operating in June 2010 and 48.6 percent were still operating in June 2011. About 60 per cent of established businesses running in 2007 were still in business four years later. ABS data suggests just over half of new companies in Australia fail within four years. To be fair, the research’s sample period (2007 to 2011) was mostly during the global financial crisis.
Statistics from other nations are similar; I suggest you research this for your home country.
For a business to survive the business leader has commitment and a plan to follow, business fail because of lack of commitment and solid planning.
Let us now look at the 10 Steps to Starting your Business, pen & paper ready?
Great let’s begin.
1. Self Assessment
• Why do you want a business
• List your strengths
• List your weaknesses
• List your experience
• Where do you want to be in 5 years, i.e. solo operator, expansion with a multi layered management structure, or sell and retire.
• Start up your own business
• Buy and established business
• Buy a franchise business
Buying an established business is often more expensive, but it can provide established premises, equipment and clientele. Franchising is often an excellent alternative, where a company will sell you a proven business structure, established brand name, products, operating process. Most of the establishment groundwork is done, and you can start almost immediately.
3. Market Research
Is there a demand for my product or service, study the industry, collect as much information as possible about your customers, products, pricing, industry trends, and production/ delivery processes.
Who are your competitors – you will need to thoroughly examine who your competition is. Talk to your competitors, you will be surprised at how helpful they will be, competition is good, and they likewise want to know their competitor.
The market is there room for your business
Collect accurate information, conduct surveys, not just feedback from family and friends.
4. Business Structure
These are all something you will need to discuss with your financial advisor/accountant.
Solo Trader, most suited for the service type operations, i.e. trade type work, (a Solo Trader has all the rights and “Liabilities”)
Partnerships can be a rocky road, fraught with danger; having said that there are many very successful partnerships still going strong. Deciding to create a partnership needs careful consideration and documented clearly, don’t fail to “Get Legal Advice”!
Having your own corporation/company has many advantages such as, limitation of liability and tax efficiencies again discuss with your financial advisor/accountant.
5. Statutory Requirements
Every Country has laws that cover small business, and it is your responsibility to ensure that you comply with them.
• Contact your local Business Development Centre or Chamber of Commerce Business to see what licences/regulations apply to you.
• Insurance, in most countries Insurance, is compulsory, especially if you will be an employer then some form of worker protection insurance is required.
• Check with your local city government on requirements for your location, i.e., regulations of a home business or other premises. See step 7.
6. Business Name
Choosing a name for your business can be fun, get your family and friends involved.
Choose at least five or more names in order of preference, you will be surprised how many names are already registered, often using your chosen favorite.
You may decide to use your own name, often your name doesn’t require registration, again check the legal requirements for your local
7. Locate Suitable Premises
You will need to have a business address.
If this is at your home, is it suitable, for example, do you have enough room for your business purpose. Will the local statutory authority allow you to operate at your home.
If you want to rent/or lease a premises, investigate carefully. Is the premises in a good location, is it suitable to your needs, do you understand the contract thoroughly before you sign it. I have personally been caught out here and I have a lot of experience with contracts. Most, lease contracts are in a standard format, taken from a statutory authority. Some are modified, written in a way that can be difficult to interpret often with hidden clauses. “Get Legal Advice” before you sign any contract a few dollars now will save you thousands in the long run.
• How do you plan to advertise your business
• Who is your target audience
• What is your planned budget (customers/clientele)
As an exercise do a thorough search on Google, contact your local newspaper, sign-writer and printer to get ideas and costs. Often your local shopping mall has free post boards these can help, post a brief survey, or a summary of your business don’t forget to include your contact details to get feedback.
Now look at how much you are willing to spend on advertising, make a cost sheet listing the different advertising scenarios you have and the cost for each.
9. The Cost
The difficult bit none of us like; you will need to know and understand business costs and how to do basic financial projections before you start. If you intend to borrow finances to start, this part is critical as your financier wants to see how they will get their money back.
• How much money is required to start i.e. equipment, stock, advertising, wages,
insurance, leases, and running overheads, power & phone, etc.
• Do you need finance, and how much, can you self-fund if so how much can you afford. If you intend to borrow can you obtain that amount of funding. If you can’t, then you need to reconsider your plans.
• What your projected cash flow is for the following year?
You need a projected profit & loss for a full financial year; this will help you determine if the business is viable.
Bank accounts are a necessity, make an appointment with your bank’s business banking manager and discuss with them your requirements they will assist in tailoring your banking needs.
You will also require a bookkeeping system consult with your account what is best for your business and will cover taxation and financial management budgets and forecasts.
10. Prepare Your Business Plan
Your business plan is a formal statement of your business goals; the plan ties in all of the steps above and the reasons you believe will make your business a success. It may also contain background information and experience about you and why you are capable of running a successful business.
This document lays out your plans for the future and act as a blueprint for the future. A good business plan will show whether your idea is viable or not. It will also enable other people to give you useful feedback on the viability (or otherwise) of your business, and help financiers work out whether or not they will loan you any needed money.
Before you start, get advice, most business councils/chambers, governments and even your accountant are places you can go for business advice.
It is essential that you employ competent professionals who have specialist advice in key areas. These should include a lawyer, (for any lease arrangements, contracts of sale, or other legally- binding arrangements), accountant (for financial projections, record keeping, compliance with tax laws).
Well done, you have read the above steps, written down your objectives, asked yourself some difficult questions and answered these honestly.
Now the work begins, contact your local business advisory group and start building your business.
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