As some job opportunities, in particular industries not just in Australia but worldwide slowly diminish, more and more people are taking the plunge into starting a business, hopefully growing it into to a large one. Drones are affecting the courier industry, robots will affect many industries including security, technology will be replacing jobs in the future etc.
Starting a business is exciting, challenging, rewarding, stressful, full of anxiety, risky, financially scary and costly. Why “reinvent the wheel” when you start a new business? Just follow the steps that successful business people have implemented. Don’t make mistakes that 80% of people do! Don’t join about 50 small business owners that close their business every day in Australia!
Yes, you need a bank of money but you don’t need a fortune. One of Australia’s most successful online sellers obtained around the $100,000 mark from five different credit card companies using his friends but you don’t have to do that. You need to be smart, think outside the square and stay away from “negative knockers”.
There are essentials like computer equipment, licenses, a web site, promotional material etc. but you don’t have to lease an office or employ staff straight away (you can outsource so cheaply these days top notch staff). Below is a list of the main costs I feel are very important.
1. Legal/Accounting fees
You need to choose the type of entity to suit your business and family situation. Your Financial Advisor/Tax Accountant will ensure your business is set up perfectly and minimise your taxes. Now that is money well spent.
These days, there are lots of options if you don’t have lots of money in your bank or rich parents or relatives. Statistics reveal 75% of small business start-up financing comes from loans, line of credit, business credit cards etc. so explore all opportunities.
3. Business coach/mentor
Unless you have lots of experience in your industry, have a friend that can mentor you free of charge, I strongly suggest you use a coach that has run successful businesses, can give you case studies of their successes and their clients to call for references.
You don’t have to spend a fortune. I know of one person who had 3 days of intensive coaching at a reasonable fee that was the best money he ever spent. It is all relative. I know of one of Australia’s top business coaches who paid $80,000 to one of Australia’s best business coaches many years ago and now he is “killing them” and most likely very rich. It is not about cost, but investment and value for money.
One top Australian Business Coach attributes his success to three things: a top business coach that he still uses, continuing education and quality data base/connections. Whether your Business Coach or Finance Expert does it, you must, absolutely must have a business plan. If you don’t, it is like driving a car with a blindfold covering your eyes. It is a fact, most millionaires and billionaires look at the business plan daily or at worst weekly!
How many top sportsmen, businessmen and others have made it to the top without a coach or mentor? Hardly any!
4. Finance expert
Most business owners have little finance knowledge or experience so this is a very important appointment to ensure your business is successful. This expert will assist you put together a budget, cash flow, recommend the best cloud based software, educate you how to read financial reports and understand your statutory obligations and be your “finance gatekeeper” so your finances don’t “get off the rails”. You need a qualified accountant, with lots of experience, someone you can trust and is available to meet and talk to day and night!
5. Professional consultants
Surround yourself by these people. It is a must. Don’t be shy to ask lots of questions even if a few say no pay no advice. You cannot do it all by yourself and you will need a variety of people in industries such as insurance, IT, legal, etc.
Most of us protect our health (I hope you do), home, car etc. so don’t forget to insure your business. There are a variety of business insurances so find a good Insurance Agent and whatever you do don’t underinsure.
7. Protect Your IP
You may not think you need this but for under a $1,000 you can protect your business name, logo, trademark etc. Can you imagine not doing this and after a few years, someone “steals” your IP. I know of one naïve business owner who do did not do this and it cost him $10,000 to stop another person “stealing” all his IP in many court visits.
This is an absolutely must, your “Shopfront” and the first thing people look at when they become aware of your business. You don’t have to spend a fortune but make sure you spend sufficient funds so it ticks all the boxes of a very good web site.
You are kidding yourself if you rely on referrals to make your business successful. You must spend money on marketing and ensure you have a constant flow of leads to fill your sales funnel. You need to allocate a budget and choose what is best to spend this money whether it be Facebook Advertising, Adwords, networking, etc.
You can also take advantage of free advertising and offers via Linkedin, Facebook, Twitter etc. If you are not that knowledgeable about this, a bit of training will be worth every cent.
You must have certain items of equipment. If need be, you can lease equipment.
11. Office Rental
If you do have to rent office space in the early days, you have options of “coworking spaces”, office share etc.
If are in the retail, wholesale, manufacturing or distribution industries, you will need inventory. You MUST manage this really well finding the right balance between not running out of stock and not being overstocked.
All in all, a good rule of thumb is to be able to have enough money to survive for six months of business if things start very slowly. Don’t rely on making lots of sales in your first six months of operating.
I’m doing a survey on start-up businesses and would appreciate any feedback.
As a startup, what is the best decision you have made?
In hindsight, what different actions would you have taken?
What is the most important cost you invested in?
What top 5 tips would you give to start-up business owners?
Jeff Gordon, Principal of Prestige SME Business Solutions is a trusted qualified Accountant and Xero Certified Advisor with 25 years’ experience making a difference – including many achievements and innovations – in a variety of businesses and industries. Over the years, Jeff has seen the devastating problems business owners suffer through not understanding their numbers, lack of cash flow or not maximising their profitability. By working alongside business owners, he enables them to make good decisions that free up their time so they can focus on managing their business and spending more time with their family.