Excited by the prospect of making money by doing something that you love? Perhaps you’ve been feeling frustrated in your current job, and are convinced that running your own business will provide you with the satisfaction you seek? Or maybe the entrepreneur in you can see an opportunity, a problem that no-one else is offering a solution for?
Well here’s a few of the most essential things you need to know about starting your own business ....
- Consider both the upside and the downside
Yes, running your own business can be very rewarding. It offers you the freedom to be your own boss, the autonomy to make your own decisions and the satisfaction of building something that you are proud of. There are many people who make a lot of money successfully running their own business – they end up making more money than if they were working for someone else. Not only are they doing what they love, but they are able to eventually enjoy a lifestyle that would otherwise not have been possible.
But you can't close your eyes to the potential downside. There are just as many people in small business who do not succeed and end up walking away disillusioned, disheartened and having lost money. Sometimes it’s because they’ve gone into business with strong technical skills (ie. they’re a great plumber, a great chef, or a great mechanic) but completely inadequate commercial skills necessary for running a profitable business.
- Common pitfalls
One of the most common reasons for small business failure is a lack of preparation ….. people suffering from a romanticised view that it will be an easy path to riches. They neglect to undertake proper market research, ignore the risks, over-estimate demand and jump too quickly into over-capitalising their business. They get excited by their idea and can become impetuous in their actions. They spend too much money too quickly – for example over-committing to leasing premises or purchasing equipment, instead of trialling their idea and putting their toe in the water first.
- Be prepared for hard work
Talk to anyone who has been running their own small business for a while, and they will all say that the first 18 months is hard slog. There are long hours and more than a few sleepless nights. It will draw upon all your reserves of stamina, self-belief and determination to succeed in building a customer base and proving that you can consistently deliver on your promises.
If you find after 18 months that your business is providing you with a reasonable standard of living and that your revenue is comfortably exceeding your costs – then chances are that you have indeed found the ingredients for achieving sustainable business success and business growth
The point here is to make sure that you are seeing the thorns as well as the roses when thinking about going into business for the first time. Recognise that it will take hard work, but if you’re doing what you’re really passionate about then you won’t begrudge it.
- Assess the viability of your idea
Invest some time and thought in preliminary market research. This is a crucial step in helping you determine the viability of your idea. Finding answers to questions such as
- How do I know there is sufficient demand for my product or service?
- What is the level of competition ….. is demand greater than existing supply, or is it a crowded market and there are more suppliers than demand?
- How would I be able to differentiate my business from competitors – by doing it better, doing it cheaper or doing it differently in some way?
- What would be all of the costs associated with developing and delivering the service / product – and what would I be charging? ….. How many sales would be necessary to cover costs? ….. How long would it likely take before the business was generating that volume of sales? …. Do I have a sufficient reserve of funds to cover any shortfall – or would I need a bank loan?
- What are the risks? ….. what would be the impact and the likelihood of things going wrong? …… is there anything I can do that would mitigate these risks
- Are there any government grants for which my business could be eligible?
Nothing is ever risk-free. What’s important however is that you’re aware of the risks and that you judge you can comfortably live with them if you can’t find a way to manage them.
- You’ve got to feel ready for running your own business
There’s no point taking on a level of stress that will end up damaging your health or undermining your ability to apply yourself positively to building a solid business.
Maybe the time is not yet right for you to go down this path …….. Not for now doesn’t mean never. Timing is crucial and you’ve got to feel ready for the challenge within yourself.
You’ll probably never be completely free of doubts, but you’ve got to have a level of confidence, self-belief and drive that will outweigh the doubts.
- Can you test the water first?
Before you leave the security of your current job, you might just want to see if you can first test the water with your idea and try it out on a low-risk, part-time basis.
Maybe your idea is writing e-books, or selling perfume online, or setting up your own handyman business. See if you can trial it in the evenings or on the weekends, so you can confirm there will be sufficient demand for your service or product, to make it financially viable for you to embark on doing it full-time (However, even if you are trading only on a part time basis you will still need to register a business name and obtain an ABN)
Maybe your idea is writing e-books, or selling perfume online, or setting up your own handyman business. See if you can trial it in the evenings or on the weekends, so you can confirm there will be sufficient demand for your service or product, to make it financially viable for you to embark on doing it full-time (However, even if you are trading only on a part time basis you will still need to register a business name and obtain an ABN)But once you’ve carefully completed your research and assessed the relative risk versus reward, and if you remain confident in the viability of your idea, then now becomes the time for bold action and taking the steps necessary to start your business.
- Choosing a business structure
You may benefit from gaining expert professional advice in selecting the business structure that is best suited to your situation. The options that are most common for a small business structure are as follows, but each structure carries with it potential advantages and disadvantages
i) Sole trader: an individual trading on their own
ii) Partnership: an association of people or entities running a business together, but not as a company
iii) Trust: an entity that holds property or income for the benefit of others
iv) Company: a legal entity separate from its shareholders
- Choosing a business name
The choice of a name for your business is one that you may be stuck with for a long time, so again it’s worth investing some thought to get it right. Although admittedly you can always later change your business name, this can have quite a disruptive impact on your brand. A name change can also end up incurring significant costs, through things like needing to have stationary reprinted and registrations updated……. So what do you need to consider?
Many business owners will advise you to look for a name that is easy to spell, easy to remember and gives potential customers an indication of what you do. Some small businesses will combine their family name in their business name – for example Thompsons Plumbing, Ashman Accounting, or Taylors Gardening Services ….. Others combine the area or region they service, such as Bayside Motors, Sydney Renovations or Eastside Landscaping
And then you have other businesses that go for short, quirky original names like Apple, Google, Innovate
You’ll probably have a few different ideas for names, so get some feedback from other people and test their reaction to each of the names as part of your decision making process. Your choice of business name will also be connected to how you want to position yourself in the market you are targeting and the type of image you want to project to your target market. For example, do you want to be seen as steady, reliable and safe – or is it more fresh, innovative and vibrant? What will hold appeal for your target audience?
Once you have selected a preferred business name, it can be wise to also check on the availability of the name to register as a domain name for your website. Although your domain name does not have to be the same as your business name, I believe this helps to strengthen your brand in the marketplace.
- Registering your business name in Australia
In Australia, you can check availability and register your business name online with Australian Securities & Investment Commission (ASIC). You will also need to apply for an ABN with the Australian Taxation Office. You will require an ABN if your business will be charging Goods & Services Tax (GST) and the ABN should appear on all of your invoices. An ABN is required before you can complete registration of your business name.
If this all seems a little complicated, get a couple of quotes from local Tax Agents as to what they would charge to complete it for you online. It's a fairly quick process to obtain an ABN for people familiar with navigating their way around the ATO procedures
Note that registering a business name is not the same as registering a company name. If you decide to set up your business as a company structure, the current ASIC fee for registering your company name at time of writing is $433. A company name has Pty. Ltd. at the end of it.
To register as a company, you can either attempt to do it yourself through the ASIC online portal (but it is somewhat complicated) or there are other commercial online services that help to simplify the process and charge less than $100 in addition to the ASIC fee. This compares to some accountants who will charge up to $1,800 to handle your company registration process.
If you do not decide to set up as a company structure, then the initial cost of registering a business name with ASIC at time of writing is $30.
There are subsequent annual renewal fees to maintain registration of your name as well.
If this all seems a little complicated, get a couple of quotes from local Tax Agents as to what they would charge to complete it for you online. It's a fairly quick process to obtain an ABN for people familiar with navigating their way around the ATO procedures
Note that registering a business name is not the same as registering a company name. If you decide to set up your business as a company structure, the current ASIC fee for registering your company name at time of writing is $433. A company name has Pty. Ltd. at the end of it.
To register as a company, you can either attempt to do it yourself through the ASIC online portal (but it is somewhat complicated) or there are other commercial online services that help to simplify the process and charge less than $100 in addition to the ASIC fee. This compares to some accountants who will charge up to $1,800 to handle your company registration process.
If you do not decide to set up as a company structure, then the initial cost of registering a business name with ASIC at time of writing is $30.
There are subsequent annual renewal fees to maintain registration of your name as well.
And you may want to consider seeking to register the name as a trade mark to protect your business name. However there are strict eligibility requirements for gaining a trade mark and you might want to consult with an IP (intellectual property) lawyer. It is a common misconception that registration of a business name or domain name gives you exclusive use of the name. It doesn’t – only a trade mark registration can offer you protection of your name and logo.
This is where you establish written goals for each of the major components of your business, and set out some actions, time-lines and strategies for achieving your goals. The level of detail in your plan will be determined by whether you are writing it for yourself, or in support of an application for a government grant or bank loan (these will typically require a greater level of detail).
At its simplest level, your business plan defines the objectives of your business, the target market, your sales and revenue goals and projected major operating costs for the year (this becomes your budget). It incorporates how you will market your business and differentiate yourself from your competition, including any major advertising and promotional strategies. Your business plan answers the basic questions of who will buy from you, why they should buy from you (and not your competitors) and how you will efficiently deliver to your customers what they have bought from you.
Your business plan is something that you should continue to keep in your line of sight, because it will provide you with focus and help you to judge priorities during the year
- Your business plan
This is where you establish written goals for each of the major components of your business, and set out some actions, time-lines and strategies for achieving your goals. The level of detail in your plan will be determined by whether you are writing it for yourself, or in support of an application for a government grant or bank loan (these will typically require a greater level of detail).
At its simplest level, your business plan defines the objectives of your business, the target market, your sales and revenue goals and projected major operating costs for the year (this becomes your budget). It incorporates how you will market your business and differentiate yourself from your competition, including any major advertising and promotional strategies. Your business plan answers the basic questions of who will buy from you, why they should buy from you (and not your competitors) and how you will efficiently deliver to your customers what they have bought from you.
Your business plan is something that you should continue to keep in your line of sight, because it will provide you with focus and help you to judge priorities during the year
- In closing
I started my own small business more than twenty years ago. Although there have been many challenges along the way and with the benefit of hindsight, many things that I would have handled differently, let me say that I have no regrets about going into business.
I’ve found running my own business provided me with a level of satisfaction, freedom and independence that working in the corporate world never equalled. It’s not suited to everyone, and only you can judge whether it will be right for you. Anyhow, hope you've found some useful tips here on how to start your own small business
Video : Registering your business name
In the following short video clip, the speaker explains some of the early steps in selecting and registering your business name. By the way, there are many different suppliers for seeking to register a business domain name - as well as the company that they are promoting in the video
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