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Business Basics
- starting your business
13 12 49
smallbusiness.wa.gov.au
The small business specialists
Business Basics - Starting your business
Small Business Development Corporation
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© Small Business Development Corporation 2017
ISBN: 978 0 9874484 3 9
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This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced
by any process without written permission from the Small Business Development Corporation. Requests and
enquiries concerning reproduction and rights should be addressed to the Small Business Commissioner, Small
Business Development Corporation, GPO Box C111, Perth, Western Australia.
The quotations included in this workbook are drawn from clients’ case studies and success stories.
Disclaimer
Published by:
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This information or advice is provided as a service to the citizens of Western Australia and it is made available
in good faith and is derived from sources believed to be accurate and reliable. Nevertheless, the reliability and
accuracy of the information or advice provided cannot be guaranteed and the Small Business Development
Corporation, its officers, employees and agents expressly disclaim any liability for loss or damage suffered by
any person caused by the negligence of the Small Business Development Corporation, its officers, employees
and agents as a result of any person relying upon the information or advice, whether the loss or damage is
direct or indirect.
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Small Business Development Corporation
Level 2, 140 William Street
Perth WA 6000
T: 13 12 49
F: (08) 6552 3399
E: [email protected]
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Contents
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About the Small Business Development Corporation
Introduction
Common business myths
Top 10 business tips
8 steps to launch your small business
1. Are you ready?
2. Assess your business idea
3. Build your business plan
4. Choose your business structure
5. Legal obligations
6. Build your support team
7. Figure out your finances
8. Market your business
Final step - complete the ‘Are you ready?’ checklist
Notes
1
2
3
4
5
7
10
10
12
17
18
22
23
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Useful contacts
Contact
Phone
Website
smallbusiness.wa.gov.au
Business Local
13 12 49
smallbusiness.wa.gov.au/businesslocal
Australian Securities Investment
Commission (ASIC)
1300 300 630
asic.gov.au
Australian Taxation Office (ATO)
13 28 66
ato.gov.au
Department of Commerce (Wageline)
1300 655 266
commerce.wa.gov.au/labour-relations
Department of Commerce (WorkSafe)
1300 30 78 77
commerce.wa.gov.au/worksafe
Fair Work Australia
13 13 94
fairwork.gov.au
.au Domain Administration
CPA Australia
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IP Australia
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Small Business Development Corporation
13 12 49
(SBDC)
ipaustralia.gov.au
1300 732 929
auda.org.au
1300 73 73 73
cpaaustralia.com.au
1300 137 322
charteredaccountants.com.au
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Institute of Chartered Accountants
1300 65 1010
(02) 9964 9400
niba.com.au
Australian Bureau of Statistics
1300 135 070
abs.gov.au
Law Society of WA
(08) 9324 8600
lawsocietywa.asn.au
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National Insurance Brokers Association
About the Small Business Development
Corporation
The Small Business Development Corporation (SBDC) is
the only agency in the Western Australian Government
dedicated to helping small business start and prosper.
It has been providing practical support to small
business owners since 1984. We can offer you the
following.
Business Local service
Across the State, you can also access business advice
through Business Local – our outreach advisory service.
Business Local advisers understand how to do business
in your area, and can provide
guidance on a wide range of issues relating to solving
problems, and growing and developing your
business. Visit smallbusiness.wa.gov.au/
businesslocal to find the provider for your region.
Workshops
One-on-one advice
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Tailored low cost business skills workshops are
delivered across a range of subjects, including business
planning, online opportunities, marketing and financial
understanding.
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You can access our free confidential advice and
guidance services online, by phone, email or via
face-to-face meetings. Our business information centre
in the Perth CBD provides a walk-in service for clients
seeking general information or help with business
licensing and regulatory requirements.
Commercial tenancy advisory service
We provide free information and guidance on the
Commercial Tenancy (Retail Shops) Agreements Act 1985,
and other aspects of commercial lease negotiations
and operation, with specialist commercial tenancy
advisers assisting in face-to-face meetings or by phone.
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The advice is supported by free publications providing
detailed information, available to download from our
website.
Alternative dispute resolution
(ADR) service
The ADR service is a low-cost, non-litigious means
of resolving business-to-business and business-togovernment disputes involving small businesses. The
service is particularly useful in resolving retail tenancy
disputes.
Stay in touch
W: smallbusiness.wa.gov.au (where you
can also sign up to receive our monthly
e-newsletter)
E: [email protected]
T: 13 12 49
F: facebook.com/smallbusinesswa or search
for our Facebook group ‘I’m a small business
owner in Western Australia’
Introduction
Experience shows several key decisions need to
be made before starting a business. It is important
that they are based on sound financial and market
information. This workbook leads you through the
steps to make the right decisions. You may decide:
Starting a business can be confusing; trying to assess
the risks and benefits of something which will become
a major part of your life for a number of years is not
easy.
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To start a business when you have saved more
money, or gained additional knowledge or skills.
•
That the right time is now – the opportunities are
there and the risks for you are at their lowest.
•
Not to proceed with this particular business idea,
but to keep looking for further inspiration.
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Before you start your business you will need to
talk to many people, conduct research and gather
information.
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This workbook will help you get your business idea off
the ground. It provides a place to record information
about your business idea, to help decide if it’s worth
pursuing.
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If you decide to go ahead, the material in this
workbook will provide the basis to develop a
comprehensive business plan.
Common business myths
Not everything you hear about starting a small business is true.
Myth 1 - The government will give me money to start my business
Fact: Usually there is no funding to assist your business. While there may occasionally be financial support for
particular industries or projects, the competition is fierce and all money must be accounted for – you don’t
get anything for nothing. Search for ‘Grants and Assistance’ at business.gov.au for more information.
Myth 2 - I need to register my business
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Fact: While there is no generic ‘business registration’, as a minimum you will need to register for an ABN
(Australian Business Number) and, if you intend to operate under any name other than your own, you will
need to register your business name. There may also be individual industry registrations applicable to your
business.
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Myth 3 - My business will be really small and based at home, so I don’t need
any licences
Fact: Regardless of where you operate your business, you will probably need some type of permit or licence.
Aside from industry or activity specific licences, most local councils will require you to get a home business
licence. Visit our Business Licence Finder at smallbusiness.wa.gov.au to search for licences and permits you
may need.
Myth 4 - I need to register for GST
Fact: You only need to register for GST if your business is likely to turnover $75,000 or more during a
12 month period. However, you can register for GST before reaching that threshold if you wish.
Myth 5 - Running your own business will be much easier than working for
someone else
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Fact: This is definitely a myth. Running your own business may be more rewarding, but the thousands of
small business owners will tell you it is definitely not easier.
Top 10 business tips from real
business owners
1. Start with a business plan from the very beginning, then use it - don’t put it in the bottom
drawer and forget about it.
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2. Focus on the ‘bread and butter’ of your business. It may not be the most romantic or
rewarding part of your business, but the thing that takes you the least time and makes the
most profit is the main area you should be developing initially.
3. I am hopeless at setting goals. However, I have learnt my lesson the hard way and now
realise how important goals are to developing a business.
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4. It took me three years to establish systems in my business – before that it was all in my
head. I couldn’t go on holidays or have much of a life outside my business because I was the
only one who knew what was going on. Now that everything is written down in the form of
operational manuals, it’s so much easier for everyone. Plus I can go on holiday!
5. My biggest tip is if you don’t like bookkeeping, don’t do it. My bookkeeper comes in for
two hours every week and is well worth the money.
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6. Every year my accountant would show me my profit/loss and balance sheet and I wouldn’t
have a clue what he was talking about. After feeling stupid for about two years I decided
to learn a bit more about finance. I’m definitely not an accountant, but at least now I
understand how my business is tracking.
7. Be creative with your marketing and have a plan. I used to blindly advertise in the
newspaper until I realised that I could reach a lot more people for free through other channels
such as social media.
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8. Don’t forget how important your staff are. I was so caught up in running my business
that I forgot to thank them. They were slaving away and I didn’t even stop to buy them lunch.
9. Understand your lease. My business was located in a small complex of four shops. I had
a furniture/gift shop and there was a hairdresser, beauty salon and a café. As part of our lease
agreement, we had to pay the outgoings of water. I had a huge shop so paid the highest water
bill each month, but actually consumed the lowest volume of water.
10. Never stop learning. There are so many great books, blogs, courses, webinars,
newsletters on business – soak up as much as you can.
To learn more tips from real business owners join our Facebook group
‘I’m a small business owner in Western Australia’.
Step 1 – Are you ready?
Going into business for yourself for the first time will
change your lifestyle, professionally and personally, and
can involve a significant financial commitment.
To give yourself every chance of success, first consider
your personal suitability for going into business.
There are no right or wrong answers to the questions
below – they are intended to make you stop and
consider your suitability and reasons for going
into business.
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There may be many reasons why you are thinking
about starting your own business; perhaps you have
a great business idea, an opportunity to take on a
franchise, or to purchase an existing business. For most
people it’s a combination of many factors including a
desire to make money, enjoy greater autonomy and
freedom, take an opportunity to work at something
they enjoy doing or the prospect of building an
enterprise to pass on to their children.
Whether your business succeeds or fails will depend
on many things including your abilities, initiative and
capacity to work, as well as the economic and business
environment.
Why do you want to start this business?
I’m not happy in my present situation
I’m unemployed and need a job
I want a better lifestyle
I want to spend more time with my family
I’m bored and want a challenge
I’m looking for more flexibility in my life
I want to take advantage of a great opportunity
I have great skills and experience and want to use them
I want to help others
I want to make lots of money
Other: ______________________________________________________________________
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What do you hope to gain?
In relation to money, time, family, career, professional challenges, values and lifestyle. Describe the top three
things you hope to gain by running your own business:
1.___________________________________________________________________________
2.___________________________________________________________________________
3.___________________________________________________________________________
How do you rate your experience and natural ability in the following areas?
For each item, tick the most appropriate answer.
Poor
Average
Good
Excellent
Planning and goal setting
Time management
Marketing
Industry knowledge
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Industry experience
Networking confidence
Communication skills
Decision making
Negotiating
Social media
Customer service
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Financial management
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Motivation
Staff management
Continually learning is one of the keys to business success. If you scored poorly in any of the areas above, maybe
you need to take action.
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There are many ways to further your knowledge and skills. Check out the resources and services available through:
•
Small Business Development Corporation (SBDC)
•
Business Local (an outreach service of the SBDC)
•
Australian Taxation Office
•
Department of Commerce
•
Chamber of Commerce and Industry
•
Universities and TAFEs
•
Financial institutions
•
Industry and business associations
•
Internet (webinars, business blogs etc.)
Step 2 – Assess your business idea
Be clear about what your business is
aiming do
Will it:
• Fill a gap in the market?
• Enter an existing market where demand is greater
than supply?
• Provide a real difference for customers?
Research your idea
To gain a better understanding of whether your
business idea has the potential to succeed it is also a
good idea to conduct your own research, for example:
Survey a range of people about your business idea,
such as potential customers, suppliers, competitors
and industry members. By asking potential
customers you may get fresh ideas about your
product or service offerings.
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Avoid conducting research just to prove your
preconceived ideas, keep an open mind. Also be
objective when analysing the results. Remember these
golden rules:
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Flawed survey questions produce flawed results.
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Be aware of your own biases.
•
Be honest with yourself.
•
The better the research, the more informed the
decisions.
Don’t ignore the results if they are different from what
you expected. If your research shows that a proposed
business venture has a high probability of failure, then
it would be unwise for you to proceed.
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Depending on your industry, a great deal of
information is probably already available in published
reports or studies from these sources.
• Australian Bureau of Statistics – abs.gov.au
• The State Library of WA – slwa.wa.gov.au
• IBIS World – visit the SBDC’s business information
centre
• FMRC Business Benchmarks – also available
through the SBDC
• Your industry or business association
• Local councils
Analysing your results
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The only way you can know if your idea is going to
work is by undertaking market research. Consider the
following:
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Conduct a focus group discussion.
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Monitor social media discussions and forums.
Remember to consider what’s happening within
your industry at a broader level (industry trends and
projections) and how this might impact on your
business, for example growth opportunities, or industry
decline.
Above all, remember that market research, like any tool,
must be used effectively to achieve useful results.
Tools to help you assess your business idea
SWOT Analysis
What are the main strengths, weaknesses, opportunities and threats your business may face now and in the
future? Analyse your business idea and the areas you may need to work on. When completing the SWOT
analysis below, choose up to five examples in each category that are likely to have the greatest impact on the
success of your business.
Weaknesses
Strengths are the internal resources or capabilities of
your business that are better than your competition
and positively contribute to your profitability.
Weaknesses are the internal resources or capabilities
of your business that are below your competition and
may damage your profitability. Weaknesses need to be
improved or you need to seek outside support.
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Strengths
Threats
Opportunities are external factors or conditions
that the business can exploit to build success. Take
advantage of opportunities by using your strengths,
supported by the most appropriate marketing
strategies to enhance your competitive edge.
Threats are external factors that could adversely affect
the success of your business. You usually have little or
no control over them, but you need to be prepared for
their impact.
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Opportunities
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Town
Beach
River
Beach
Lovely looking, very well maintained and
in an excellent coastal location. Lots of
features for their target market, including
playgrounds, pool and well equipped
games room.
Very run down, not geared towards
tourism.
Quiet park in a good location. Sites are
very small, chalets are run down. Needs
money spent on it to be competitive.
Caravan park A
Caravan park B
Caravan park C
Location
Your business
General notes
Neat looking, ideally positioned close
to the town centre. Ideal for visiting
shoppers or to attend sporting events.
Competitor
Families
Permanent
residents
Families
Local
Core target
markets
$40 - $60
$35 - $50
$55 - $70
$40 - $55
Caravan
site price
range
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$175 - $235
$90 - $150
$250 - $370
$110 - $140
Chalet price
range

×


Pool
Use the caravan park example below to create your own competitor analysis based on your specific business type and industry.
×
×

×
Free WiFi
×



Pets
allowed
Very few businesses operate without competition. It is really important to understand your competitors and how your business rates against them. Your competition
may include businesses in other industries, however they still need to be considered if they are chasing the same customer dollars as you.
Competitor analysis
Step 3 - Build your
business plan
Step 4 – Choose your
business structure
The information you compile during this workshop can
be used to help prepare a business plan. A business
plan should describe your business, its objectives,
strategies, target market and financial forecasts. It’s a
blueprint for the future of your business.
Once you have established the viability of your
business idea, you will need to decide on the
structure that best suits your business and its
particular circumstances. Some things to consider:
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asset protection
•
control and succession
•
flexibility to adjust as circumstances change
•
exit strategy
•
set-up and maintenance costs
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There are no rules about what the plan should cover
or the level of detail. It depends on what you want to
use it for – to obtain finance, or as an operational and
management tool for yourself.
how the entity will be managed with regards to
income taxes, capital gains and land tax
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Although it initially may seem like a lot of work, a well
prepared business plan can save time and money
in the long run and help you secure major contracts
or funding.
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There are some very practical resources on putting
together a business plan on the our website.
Your aim should be to minimise taxation, protect
your assets, and retain control. The four most
common structures in Australia are:
Sole trader
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A sole trader is the simplest of business
arrangements giving you, the sole owner, all the
decision making power. You are also able to hire staff.
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Partnership
A partnership is formed when two or more people
(up to 20) go into business together, partnerships
can be general or limited. We strongly recommend
that you create a formal partnership agreement’,
which outlines how the partnership will operate,
including the sharing of any profits and losses, and
the responsibilities of each partner.
Company
A company is a separate legal entity that is capable
of holding assets in its own name and conducting
business in its own right. A company is owned
by members (shareholders) and run by directors.
Independent contractors can also set up a ‘one
person company’ listing themselves as sole director
and member.
Trust
Unlike a company, a trust is not a legal entity. They
are often used in connection with running a business
for the benefit of others.
For detailed information on business structures
and their implications visit ato.gov.au
Comparison of business structures
Issues to consider
Sole trader Partnership
Company
Trust
No
No
Yes
Yes
Is it expensive to register?
No
No
Yes
Yes
Do I retain complete control?
Yes
No
No
No
Are there complex reporting
requirements?
No
No
Yes
Yes
Will my assets (house etc.) be under
threat if my business goes into debt?
Yes
Do I receive full profits made from the
business?
Yes
Can I employ staff?
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Is the structure difficult to set up?
Not as likely
Not as likely
No
No
No
Yes
Yes
Yes
Yes
Do I have to pay my own workers’
compensation, superannuation, etc.?
No
No
Can I change the legal structure easily?
Yes
No
No
No
Do I have the ability to plan tax
through avenues like income splitting?
No
Yes
Yes
Yes
Is it easier to raise capital?
No
Yes
Yes
Yes
Is it easy to dissolve or exit?
Yes
Yes
Yes
No
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Yes
Yes
Yes
(if employed by (if employed by
the company)
the trust)
Step 5 - Legal obligations
Registrations and licences
The name of your business is a major element of its
identity and image. Choose one that reflects what
your business is about, and will continue to be relevant
as the business grows and evolves. If you decide to
use your personal name for your business e.g. John
Smith, there is no need to register it. However, if you
want to call your business ‘John Smith & Co’, this would
need to be registered as ‘& Co’ is not part of your
personal name.
The business name registration service operates
through the Australian Securities and Investments
Commission (ASIC). To register a new business name
you will need an Australian Business Number (ABN).
Applications cost $34 for one year or $80 for
three years.
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Licences
Registering a business name
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Starting a new business is an exciting time, but there
are a few things you must do before you can begin
trading. This section covers how to comply with
mandatory regulations, protecting your intellectual
property and registering your business and domain
names. While there is no single place to ‘register’ your
business, by following these directions you will be
able to quickly and easily get your new business up
and running.
Your industry and geographical location will determine
which licences you need before you can start trading.
Visit our website and follow the link to Business Licence
Finder. Once you have entered your details, you will
receive a personalised report showing which licences,
registrations and codes of conduct you need to
address before you start your business.
W: asic.gov.au
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Registering a domain name
W: smallbusiness.wa.gov.au
Obtaining an Australian Business Number
(ABN)
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Businesses use an ABN when dealing with other
businesses and the government. While an ABN is
not mandatory, if you are unable to quote an ABN in
your invoice, businesses dealing with you are legally
required to withhold tax (at a rate of 49%) from any
payments they make to you. You can obtain an ABN
online for free from the Australian Business Register.
W: abr.gov.au
Your domain name is your website’s address on the
internet (eg. yourbusiness.com.au). It’s a valuable part
of your business identity and an important marketing
tool to help customers find and identify with
your business.
It is important to check the availability of your
preferred domain name. Go to ausregistry.com.au
to check availability and to choose an authorised
registrar to take you through the process. Registrars
are the retail channel for domain name registrations;
they can also assist with other online needs. Prices,
products and services will vary depending on which
registrar you use.
W: auda.org.au
W: ausregistry.com.au
Register for tax
How to apply for registration
The most common initial tax registrations required by
small businesses are:
There is no cost to apply for any ATO registration.
However, your accountant or tax agent may charge a
fee to assist you with registering. You can register your
business for tax purposes:
Tax file number (TFN)
All businesses need a tax file number (TFN). Sole
traders use their individual TFN, while partnerships,
trusts and companies need a separate TFN for
the business.
Goods and services tax (GST)
You need to register for GST if you are a business and
your current /expected turnover is $75,000 or
more; and/or
•
you are a taxi operator (regardless of turnover).
•
Through your accountant or tax agent.
Protecting your intellectual property
When starting a new business, registering a new
business name or developing a new product, you
should consider protecting your original business idea
– your intellectual property (IP). Registering a business
name or domain name doesn’t automatically give you
exclusive rights to that name. There are a number of
options for protecting aspects of your business. The
three most common forms of IP protection are:
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Online at the Australian Business Register
(abr.gov.au) where you can apply for an ABN, GST,
PAYG, and FBT in a single application.
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W: ato.gov.au
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Once you reach the threshold, you are required to
register for GST within 21 days. You may choose to
register for GST even if your turnover has not reached
the $75,000 threshold as you can then claim credits for
any GST you have paid on goods and services used in
your business.
W: ato.gov.au
Pay as you go (PAYG) withholding
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This is the system for withholding amounts from
payments you make to employees and businesses so
they can meet their end of year tax liabilities, including:
•
Payments you make as an employer to employees,
company directors and office holders. Personal
drawings are not considered a wage and sole
traders and partnerships are not required to
withhold amounts from these drawings. It’s a good
idea to set money aside to cover any personal
income tax payments you may need to make.
•
Payments under labour hire arrangements.
•
Payments under voluntary agreements.
•
Payments to businesses that do not quote
their ABN.
You must apply to register for PAYG withholding by
the day on which you are first required to withhold an
amount from a payment.
•
copyright
•
trademark
•
patent
IP Australia can provides practical information and
ongoing support.
W: ipaustralia.gov.au
The only compulsory insurance you need as a small
business owner in WA is workers’ compensation (if you
have employees). It’s up to you to decide, based on
your business type, activities, and industry, what other
insurance you may need.
Keep in mind that many insurance companies will
require you to have business registrations and licences
in place before they agree to provide insurance.
•
liability
•
employees
•
assets and revenue
It is important for small businesses to legally protect
themselves. While obtaining professionally drafted
contracts and/or terms and conditions can be costly,
in the long run it could save you thousands of dollars
in litigation fees and unknown hours of stress. It is very
important not to sign any contract or document you
don’t understand.
Contracts
A business contract is a legally binding agreement
between two or more parties to do, or not to do,
certain things. For example, a business contract
could be for the sale of goods or supply of services
at a certain price. There are many different types of
contracts including:
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There are various types of insurance available to
protect your business, which can be divided into three
main categories:
Legal documents
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Insurance
Insurance is a complex area, so make sure you
understand all the terms and conditions of the
insurance contract and obtain independent advice
from a broker before you sign.
the sale and purchase of a business agreement
•
partnership agreements
•
leases of business premises
•
leases of plant and equipment
•
employment agreements
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Insurance cover may be arranged through an
insurance company, agent or broker. Insurance brokers
are required by law to act as your representatives and
work in your interest, whereas insurance agents are
acting in the interests of the insurance companies.
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The process for creating a contract generally includes
information exchange, discussion, negotiation and
employment agreements.
Terms and conditions
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You can contact a broker through the National
Insurance Brokers Association (niba.com.au) or the
Insurance Brokers Network of Australia (ibna.com.au)
If you want to liaise directly with an insurance
company, the Insurance Council of Australia
(insurancecouncil.com.au) provides information and
contact details of its members.
W: niba.com.au
W: ibna.com.au
W: insurancecouncil.com.au
Drafting terms and conditions may not be the most
enjoyable part of starting a business, however it is
important. Neglecting this part of your business
could impact your daily operations and finances, for
example a weak credit management policy could delay
payments and impact on your cash flow. If you don’t
specify terms and conditions you put yourself at risk of
uncertainty and misunderstandings.
Policies and procedures
Documented policies and procedures are important so
that everyone is aligned with the business operations.
Written systems also help to minimise risk. Some
common policies and procedures relate to:
• customer privacy
• equal opportunities
• employee conduct
• complaints management
Drafting legal documents
Start drafting your own documents by drawing on what your competitors are using and information you can find
online through sites like docracy.com. Then take your draft documents to a contract lawyer for review. The Law
Society of WA has a ‘find a lawyer’ section on its website.
W: lawsocietywa.asn.au
Employing staff
Which labour relations system applies?
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Your staff are one of your greatest business assets, so it’s vital that you hire the right people for the job. Once
you’ve found good staff it’s important to look after them and to address a number of legal obligations A basic
overview is provided below.
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In general, your business structure will determine which system you are covered by.
Business
structure
State system
Federal system
Work safety
Wageline
Fair Work
WorkSafe
commerce.wa.gov.au commerce.wa.gov.au commerce.wa.gov.au
Taxation
ATO
ato.gov.au
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Sole trader
Partnership
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Insurance for employees
Taxation and superannuation for employees
As an employer you are required to hold workers’
compensation insurance to protect your employees.
You might also have to extend your cover to include
sub-contractors.
Having employees brings taxation and superannuation
obligations. The first thing is to clarify the status of
your workers; your obligations will differ if they are
employees or contractors and will differ depending
on your business structure. In general, obligations
relate to:
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If you are working for yourself as a sole trader or in a
partnership it is not compulsory to take out workers’
compensation insurance. As an alternative, many small
business owners protect themselves with income
protection insurance.
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pay as you go (PAYG) withholding
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superannuation guarantee
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fringe benefits tax (FBT)
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payroll tax
the lease in case disputes arise and who to contact for
help. Seek legal and commercial advice before:
Your business can operate from home, a business
incubator, commercial premises or through a shared
working space. Each location has advantages and
disadvantages; there are many factors to consider,
such as your type of business and your customers’
buying habits.
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making any commitments to buy, lease, take on an
assignment or incur any other obligations
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signing any lease related documents
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payment a deposit or other monies
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occupying leased premises
Operating from home
You should also seek business and property advice to
ensure the lease is based on sound business
and property principles. Read the overview of leasing
commercial premises at our website and then make
an appointment with one of our specialist leasing
advisers.
This may seem appealing due to the cost savings
and convenience; however you need to consider the
following:
Will working from home fit in with your current
and future family situation?
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Will your local council allow you to operate from
home?
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Be aware that capital gains tax may apply if you sell
your home.
A business incubator
Co-working spaces/virtual office
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Location and leasing
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A business incubator provides a physical location in
which a new business can start, supported by business
advice and shared services.
Co-working spaces allow you to rent desk space and
benefit from shared facilities. There is also often a focus
on encouraging members to create a collaborative
community. This differs from a virtual office which
usually provides communication and address services
but not dedicated office space. Both options allow you
to present a professional image for your business and
access to meeting rooms.
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While there are many types of incubator, typically it
would have space to accommodate around 15-50
small businesses, all working towards ‘graduating’ from
the facility within two to three years. During this time,
business owners generally have access to advice and
support services.
Leasing commercial premises
A lease is a legally binding contract, so it is essential
you fully understand the terms and also conditions
before making a commitment. It’s important to
understand your rights and obligations in relation to
Step 6 – Build your support team
It is advisable to surround yourself with trusted and reliable advisers who can help you with start-up issues and
then assist you as your business develops.
Professionals and organisations that can help with your business development include:
Accountant
Visit cpaaustralia.com.au or charteredaccountants.com.au
Lawyer
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Visit lawsocietywa.asn.au
Small Business Development Corporation
Visit smallbusiness.wa.gov.au or call 13 12 49
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Business Local service providers
To find the provider in your area visit smallbusiness.wa.gov.au/businesslocal
Industry association
The easiest way to find your industry association is to search online.
Business mentor
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Ask a business person you admire to provide advice and support while you set up your business.
Part of being a small business owner is knowing how
to set up and manage your business finances. Finance
is the foundation of your business. Understanding your
finances will help generate income, plan future growth,
meet legal obligations and maximise your profits.
Can you afford to start this business?
Business benchmarks provide industry averages for
business expenses that can be used to help your
financial forecasting. Ask one of our staff for help
with this.
Where to obtain finance
If you have insufficient personal savings, you may need
to source finance from elsewhere.
Keep in mind, if you plan to borrow finance through
an investor or bank they will require a detailed
business plan outlining your operations and financial
strategy. They will want to know where their money
is going and often want collateral, in the form of
equity in property, as a guarantee. Possible sources of
finance include:
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Carefully consider how much it will cost to get your
business idea up and running. If you are in doubt, seek
professional advice. It is always better to overestimate
your anticipated expenses.
Business benchmarks
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Step 7 – Figure out your
finances
How much money will you need?
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banks and financial institutions
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family and friends
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government grants
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crowd funding
W: business.gov.au/grantfinder
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It’s not just understanding your start-up costs, you also
need to assess how you will access the money to fund
your plans. You need to consider the health of your
financial position and if you have significant assets,
do you want them to be considered (and therefore
possibly at risk) as part of this business venture. List
your financial assets including:
annual income (if you plan to continue working
while starting your business)
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assets (equity in your home or other investments)
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shares
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cash
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Will your business support you?
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Will you have sufficient income to live on during
the early stages of starting your business?
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Could you work part-time while establishing
your business or do you have sufficient savings to
live on?
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Once your business is established, will it provide
you with enough income for your desired lifestyle?
Financial forecasting
A lack of planning and control of cash is often the
reason small businesses fail. Good forecasting can help
reduce your business risk. Much like a map helps you
plan a road trip, a financial forecast helps you achieve
your business goals.
A financial forecast is a plan or budget for your
business. It is the best guess of financial outcomes for
your business over a period of time. Usually, financial
forecasts are an estimate of income and expenses over
the period of a year.
accounting and legal fees
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advertising and promotion
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employees’ salaries
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insurance
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interest and bank charges
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printing, stationery and postage
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rent of premises
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telephone and Internet
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training
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business travel
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vehicle operating expenses
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Establishment costs
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You can develop your own financial forecast by listing
establishment costs and planned income over a period
of 12 months to generate an annual cash flow forecast.
An expenses forecast estimates your ongoing
operating expenses (overheads, outgoings, fixed costs)
for the year. This is how much it will cost to run your
business. The selling price of your products or services
must include an amount to recover these expenses.
This forecast will include the list of expenses developed
for your profit and loss statement. Base your forecast
on research and benchmarks of similar businesses.
You can also call suppliers and ask for quotes. For
other costs, you will have to make a best guess about
how much you are likely to spend. Typical business
expenses include:
You need to work out how much money is required
to start the business and whether you have sufficient
savings or need to obtain finance. Costs will vary
depending on whether you start a new business, buy
an existing business, or buy a franchise. Just opening
the doors to start operating will incur some expenses,
even if you are operating from home. For example, you
may have to:
pay legal, accounting and consulting fees
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pay for licences, permits and the connection
of utilities
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arrange insurance
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buy furniture, equipment, office supplies and retail
shop fit-out
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pay for advertising, printing and starting inventory
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include an amount for working capital - cash
to fund your business until you actually receive
payments from customers
Expenses forecast
Cost of goods sold forecast
If you are selling a physical product, forecasting the
cost of goods sold (also called COGS, cost of sales,
direct cost of sales) forecast answers the question
of how much it will cost to produce or stock
your product.
COGS vary directly with sales or production; the more
items you sell or make, the more stock or components
you need to buy. The COGS forecast therefore relates
directly to the sales forecast. To calculate the COGS
forecast, include all the direct costs of getting your
products into inventory and ready for sale.
For example:
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the wholesale cost of buying completed goods,
raw materials or parts
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freight and insurance costs
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direct labour costs involved in manufacturing
the product
Sales forecast
Cash flow forecast
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To get started, consider how much you can realistically
sell in the next 12 months, and how much revenue this
will generate. If you are starting a new business and
don’t have a trading history, base your sales estimates
on market research, industry information, and business
strategies.
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Sales forecasts are estimates of your sales for the
forecast period. The sales forecast establishes the level
of activity used in all other forecasting and budgeting
for the business. If your sales forecast varies significantly
from your actual results, your cash flow and profitability
forecasts will similarly be inaccurate. Regularly update
your forecasts taking market intelligence, buying
signals from customers and results from marketing
activities into account.
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A cash flow forecast indicates the likely future
movement of cash in and out of the business. It’s
an estimate of the amount of money you expect to
flow in (receipts or revenue) and out (payments) and
includes all your projected income and expenses.
forecast usually covers the next 12 months; however it
Record keeping
Creating an efficient system for collecting income and
paying employees, suppliers and taxes is an essential
part of operating a small business. Whether you choose
to operate a manual or electronic financial record
keeping system, it should be easy to use, reliable,
accurate, and provide information when you need it
and in an accessible format.
Manual record keeping systems
Credit management is the process of controlling and
collecting payments from your customers. A good
credit management system will help you reduce the
amount of capital tied up with debtors (people who
owe you money) and minimise your exposure to bad
debts. Good credit management is vital to your cash
flow. It is possible to be profitable on paper but lack
the cash to continue operating your business.
Tax invoice vs invoice
If your business is registered for GST then you should
issue tax invoices, however, if you are not registered
for GST you will just issue invoices. For more detailed
information, including invoice examples download the
ATO guide ‘How to set out tax invoices and invoices’
from ato.gov.au.
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Manual record keeping systems consist of paper based
journals for each financial year. They are a good way to
learn about bookkeeping and accounting, and keep
control of your financial records when you are starting
out. A range of commercial manual record keeping
systems are available, alternatively you could use an
Excel spreadsheet.
Credit management
Electronic record keeping systems
Electronic record keeping systems are efficient and
generally provide complete accounting functionality.
The majority are cloud-based which means you can
access them anywhere, through any mobile device
or your desktop computer. Some of the most popular
include:
Xero
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Cashflow Manager
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MYOB
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Quick Books
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Waveapps
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Before choosing a system, consider the particular
needs of your business and make sure it is compatible
with the system your bookkeeper or accountant uses.
Do some training to gain confidence and to make sure
you get the most out of your accounting system.
Step 8 - Market your
business
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Many small businesses come up with a great business
idea but then fail to market it successfully. You need
to get out and spread the word about your product or
service to the right people in the right way. Advertising
and selling are part of the process, but there is much
more involved.
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By the time you start promoting your business you
should have already determined if your idea is likely to
succeed and have completed a developed business
plan. Marketing is the final step and many consider it to
be the most enjoyable.
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Your business plan should include a marketing
overview, which covers what you are selling, to whom
and how it meets their need. Use your overview to
develop your ‘elevator pitch’. It is so called because it
is based on being in an elevator (lift) with a potential
major customer, and before reaching their floor you
have 30 seconds to tell them about your company.
Make sure to include:
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what your main product or service is
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what is special about your business
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why customers need your product or service
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Spend time developing and practising your elevator
speech so you can fluently tell everyone about your
business.
Your next step is to develop a marketing strategy. This
will help you focus on increasing sales volume and
guide your business to achieving its goals.
Final step - complete the ‘Are you ready?’ checklist
Congratulations, you’ve successfully completed our Business Basics workshop. The questionnaire below will help
you to determine how close you are in turning your business dream into a reality. Use the traffic light colours to
tick the most appropriate response to each question.
Started
Haven’t
Completed working on this considered it
Are you ready?
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Have you assessed your personal readiness for this type of business?
2
Have you rated your business and personal skills?
Assess your business idea
Have you determined if there is a market for your product or service?
4
Have you conducted industry research?
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Have you surveyed potential customers about your business concept?
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Have you completed a SWOT analysis?
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Have you analysed and compared your competitors?
Build your business plan
9
Have you completed your business plan?
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Choose your business structure
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Have you sought advice from your accountant regarding business structures?
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Have you determined which business structure you will operate under?
Legal obligations
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Have you used the SBDC’s Business Licence FInder?
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Have you registered for an ABN?
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Have you registered a business name?
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Have you registered a domain name?
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Have you registered for all relevant taxes?
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If applicable, have you protected your IP?
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Have you researched your insurance needs?
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Have you drafted legal documents for your business?
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If you are employing staff, have you determined your legal obligations?
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Have you determined where your business will be located?
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If leasing commercial premises, have you sought advice from the SBDC?
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Build your support team
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Have you gathered a good support team (e.g. accountant, lawyer)?
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Have you made an appointment to meet with one of the SBDC’s specialist advisers?
Figure out your finances
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Have you determined if you can afford to start this business?
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If necessary, have you secured a reliable funding source?
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Have you drafted financial forecasts (e.g. expenses, sales, cash flow )
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Have you determined which record keeping system you will use?
29
Have you developed a credit management policy?
30
Have you completed SBDC’s Understanding your Business Financials workshop?
Market your business
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Have you undertaken research on your target market?
32
Do you understand who your competitors are?
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Have you completed your marketing strategy?
Have you attended the SBDC’s workshops?
Other SBDC workshops
Mostly GREEN
Congratulations! You are well on the way to turning
your business dream into a reality. Book into our range
of business start-up workshops to ensure you have
all the information needed to make your business a
success.
SBDC offer a range of other low cost workshops that
are perfect for businesses starting out or in their first
few years of operation. All of our workshops can be
booked online at smallbusiness.wa.gov.au at a
minimal cost.
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Mostly ORANGE
You’re making great progress, just a little bit more work
and you will have completed most of the necessary
steps to get your business started. If you need help
to complete your business start-up preparation then
contact us to arrange an appointment with one of our
specialist advisers.
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Your results
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Mostly RED
You’ve still got some way to go until your business idea
starts to take shape, but don’t give up! Go back through
the checklist and work your way through each of the
steps. Remember, we are here to help through our
range of workshops and one-to-one advice.
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Notes
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Notes
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13 12 49
Small Business Development Corporation
smallbusiness.wa.gov.au
DEC16/006
Level 2
140 William Street PERTH WA 6000
[email protected]