Ready for business?
A robust business plan and sufficient funding help to form a solid foundation when starting a business.
How often have you heard it said that “Australians are an entrepreneurial lot!”? What does that mean? Is it that we love to get in and have-a-go? And that we’re prepared to put ourselves on the line and take a risk for the potential rewards of operating our own business? Given that more than 300,000 new businesses are established in Australia each year, it’s likely that these statements are accurate.
Whether we “want to be our own boss”, “have the best idea ever!”, or are “following in the footsteps of our forebears” Australians are leaders in starting their own business. However, our entrepreneurial-ism does not always translate into a successful business and statistics point to business failures being on the increase.
Why? Perhaps due to a lack of planning in the lead-up to ’taking the plunge’. So, here are some hints and tips to take into account throughout the various stages of the journey to starting your business.
In most cases, it starts with a dream. But at this point we really should be asking ourselves “is this dream a possibility?” and most importantly “have I got what it takes to turn this into a reality?” Having a passion for what you do is absolutely essential, but you also need to be self-motivated. In your own business, essentially it’s all up to you – in many instances, you’re the boss (think, chief decision-maker), the worker (think, chief do-er), the mentor (think chief encourager), and the investor (think 'it’s my money on the line!'). Without having the courage to take on all these roles, your dream has less likelihood of becoming a reality.
Even then, if you’ve decided you have the passion and skills to go ahead, the next prudent step to take is to work out whether your dream has any ‘legs’. No matter whether you think you have a great product or service, your business will only be successful if there are customers out there prepared to buy your product or service at a price that is going to make you a profit. It’s essential therefore that you do your research.
Some questions to answer might be:
• What need or want does the product or service satisfy?
• What raw materials are required?
• What is the process to turn them into the end product or service?
• How will the product or service then get to the purchaser?
• How do you package/present it?
• Will potential customers pay the price you need to charge to make a profit?
Your market research will help identify who your target customers are and by getting to know them well you will be able to develop a clear marketing strategy to communicate with them and entice them to buy from you.
Having established that there is a market for your product or service, the next step is to put together a detailed plan on how you’re going to bring it to your market. The planning process is one which is often brushed over but when done well can provide clear benefits. It can be approached in a number of ways, one of which is the 7P’s.
The 7P’s are as follows:
Purpose – Clearly defining the purpose of the business will provide a foundation for many of the upcoming business decisions. Identifying the values that the business will stand for and articulating those in a Mission Statement provides a valuable tool to maintain focus in a busy environment.
Product – Information on your Product should include not only what it is (and isn’t) but also spell out what customer need or want it satisfies and how. Details of the technical specifications, production and distribution processes also form a valuable part of the business plan.
People – Said to be the greatest asset of any business, your People requirements need to be carefully managed and clearly articulated in your business plan. Recording the various roles required, and the skills and behaviours necessary to successfully undertake those roles, a detailed plan helps to successfully recruit, develop, and retain your workforce.
Place- Choosing the right location can be the difference between success and failure. When selecting your place and describing it in your business plan consider:
1. access to customers,
2. access to labour, and
3. access to suppliers.
It is also becoming more imperative to have an online place as well as a physical place as customers do more and more of their research on the internet.
Promotion – It’s not just advertising. Promotion is about how you connect with your customers and potential customers and create a desire within them to purchase from your business. The plan should clearly define who the target customers are, how you are going to communicate with them, and what your call to action is.
Price – The price of your product or service is influenced by a number of factors. The quality of the product; the speed with which it can be produced and provided to the customer; the cost to purchase or produce the product; and finally, the value placed on that product by the customer.
Performance – Effective performance measurements encompass whether the business is achieving what it set out to achieve in all the above areas from a qualitative, quantitative, and financial perspective. By detailing in the business plan what performance measures are most important to a business you’re better able to maintain focus on ensuring you’re achieving what you set out to.
Having completed the plan, now it’s time to actually ’put some rubber on the road’. One of the first decisions you’ll need to make is how you’re going to structure the business. In deciding whether to be a sole trader, a company etc you need to take into account your (and the business’s) tax position, the cost of establishing and maintaining the structure, how easy it is to transition to another structure as the business grows, and the ease with which changes to management and ownership can be implemented.
The paperwork to get yourself legally registered to operate a business may seem cumbersome, however there is plenty of help available online.
• connectonline.asic.gov.au to check if anyone else has registered the name you would like to use,
• business.gov.au to register your business and obtain an ABN,
• ato.gov.au to register for GST and for information on tax obligations, employing staff, and keeping financial records,
• ablis.business.gov.au for information on licences, or
• ipaustralia.gov.au if you need to protect your product or service, your name, or your logo.
As valuable as planning is in helping you to mitigate risks, it’s still prudent to insure against accidents or unexpected events. Determining what assets or processes could be impacted or damaged in various scenarios will help to develop a suite of insurances to obtain that commonly cover assets, income, key people, and third-party liabilities.
The final piece of getting started is to get your financial records sorted out. Even if you’re a sole trader, business finances should be kept separate from your personal finances so it’s advisable to have a separate bank account for the business. It’s also necessary to keep records of all income and expenses, not only for tax purposes but to ensure that the business is making you a profit. By implementing and consistently using the right accounting software package this process can be much simpler than at first thought. It will also make life easier for your accountant come tax- time.
Then finally comes opening day! How are you going to launch the business to let your customers know you’re open for business? Whether it’s a party, a grand gesture, or a simple bargain, whatever you decide to do should:
• showcase your product or service
• highlight your point of difference
• ensure people can find you, and
• convince them to buy from you.
Making the dream a reality can be a lot of hard work but by planning well you’re much more likely to reap the rewards and enjoy the experience of ‘being your own boss’.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. ©Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.