Starting a small business can be an exciting endeavour, especially if it’s your first time venturing into entrepreneurship. While there are many advantages to being your own boss, it’s important to be aware of the challenges that come with it. This article aims to guide you through the initial stages of starting a small business, helping you plan for profitability, maintain a healthy cash flow, build a loyal customer base, find reliable staff or suppliers, and establish a strong online and offline presence.
Before spending any significant amount of money, consider the following steps:
Start with a solid business plan
Even if you’ve had prior business success, it’s crucial to engage in some level of business planning. Your small business plan should include an environmental analysis of your target market, including local demographics or online search trends. Assess your strengths and weaknesses in relation to your competitors, and identify external opportunities and threats. Develop comprehensive marketing and operational plans and set clear objectives to guide your progress. While a mission and vision may not be necessary at this stage, they can provide direction and motivation.
Get your legal structure in order
While it’s easy to get caught up in product development or service planning, don’t overlook the importance of establishing your legal structure. If your business faces financial difficulties or unforeseen circumstances, choosing the right legal structure can protect your personal assets. Decide whether you’ll operate as a sole trader or register a company, considering the tax implications and other complexities. Seek professional advice to ensure you make the right choice for your business.
Consider the marketing strategies you’ll use to get yourself out there:
Build your brand presence
Create a brand identity that accurately reflects your unique features and benefits for your target market. Avoid designing a logo before understanding your consumers’ preferences and competitors’ branding strategies. Conduct thorough market research to align your logo, messaging, imagery, colours, and fonts with the desires of your target audience. Consult a professional graphic designer to ensure your branding is contemporary and visually appealing.
Develop a marketing plan
Within your small business plan, dedicate a section to your marketing strategy. Define your target market, analyse your competitors, set measurable goals, and outline strategies to achieve them. Regularly evaluate your progress and adapt your marketing efforts accordingly. Consider utilising various online platforms like YouTube, Facebook, Instagram, Google My Business, Pinterest, LinkedIn, and Twitter to engage with your customers and differentiate yourself from your competitors.
Leverage online marketing
Establishing a strong online presence is crucial in today’s digital landscape. Create a website for your small business and optimise it for search engines. Utilise content marketing to showcase your expertise and attract customers. Understand the role of different online platforms in your customers’ decision-making process, and tailor your content to suit their preferences. Implement search engine optimisation techniques to increase visibility and consider utilising electronic direct mail as an effective communication tool.
Getting your operations and services in order:
Hiring the right employees
When hiring employees, create clear job descriptions and person profiles to ensure you attract suitable candidates who align with your company’s values, approach, and style. While exceptional individuals do exist, it’s important not to leave it to chance. Clearly define the requirements of the role and ensure a good fit between both the job description and the person description.
Fulfilling your obligations as an employer
As an employer, you have certain obligations to your employees, such as paying fair wages, providing superannuation, ensuring workplace safety, and offering appropriate employment agreements. Treat your employees well, as they directly impact the quality of your product or service and contribute to customer loyalty.
Don’t forget to think about money and your finances:
Set up a cloud accounting system
Transition from Excel spreadsheets to a cloud accounting software like Xero, MYOB, or Quicken. These programs offer preloaded formulas, up-to-date tax rates, and charting capabilities, making financial management more efficient. Establish a system to organise bills, receipts, invoices, and petty cash. Additionally, consider obtaining a separate business credit or debit card to avoid mixing personal and business finances.
Start managing your books immediately
Begin organising your finances from the early stages of your small business. By doing so, you can ensure that all expenses are accounted for and potentially claim tax deductions. Even if your small business is not yet generating revenue, expenses can be carried forward and deducted from future earnings. Starting early also allows you to establish systems while the transaction volume is low, making it easier to manage.
Plan for start-up costs and expenses
Create a start-up budget that includes all necessary expenses, ensuring you have enough funds to cover both business and personal needs. Consider all the items you’ll require before opening your doors, such as equipment, supplies, and inventory. Explore different financing options like business loans, credit cards, equipment leasing, or equity investment. Choose the right lender based on terms and interest rates, and ensure you submit a successful loan application.
Understand profit and loss, balance sheet, and cash flow
Familiarise yourself with financial statements, such as profit and loss reports, balance sheets, and cash flow statements. Learn how to analyse sales forecasts, costs, and expenses. Distinguish between costs (dependent on sales volume) and expenses (fixed regardless of sales). For example, transaction fees in an online business are considered costs, while wages and utilities fall under expenses. Use these statements to assess your small business’s financial health and make informed decisions.
Calculate margins and break-even point
Understand the concept of gross profit, which is the amount left after deducting the cost of goods sold. Subtracting further expenses yields net profit or earnings before interest and taxes (EBIT). Calculate your margin by dividing gross profit by sales revenue. To determine your break-even point, use the formula: Fixed Costs / (Average Sales Price – Variable Costs). This calculation helps you understand how many units or products you need to sell to cover all costs.
Comply with tax obligations
Register for Goods and Services Tax (GST) if your turnover is expected to exceed $75,000. Avoid postponing tax-related matters, as it’s essential to meet your obligations promptly. Maintain accurate records and work closely with your bookkeeping system and accountant to maximise tax deductions while adhering to relevant regulations. Separate personal and business expenses to ensure compliance and make timely payments for quarterly or monthly activity statements.
Monitor and track business performance
Continuously evaluate your small business’s efficiency, effectiveness, and profitability. Track key performance indicators (KPIs) related to production, customer satisfaction, and financial metrics. Regularly review and analyse the balance sheet, cash flow, and other financial reports to identify areas for improvement. Consider investing in tools or software that can streamline tracking processes and provide valuable insights into your small business’s health.
Important watchouts for small business owners:
Prioritise and delegate tasks
Identify all the necessary tasks in your small business and create a comprehensive list. Prioritise the areas where you may need additional support or expertise. While it’s common for small business owners to handle multiple responsibilities, spreading yourself too thin can negatively impact the quality of work. Consider hiring employees or outsourcing tasks to ensure all aspects of your business receive proper attention.
Track business performance
Continually evaluate your small business’s efficiency, effectiveness, and profitability. Allocate time to assess whether your products or services are being produced in the most efficient manner, if customers recognise their value, and if the business is truly profitable. Regularly review financial statements, balance sheets, and cash flow reports to gain insights into your business’s financial health.
If you require assistance with your small business plan or need guidance in managing your business effectively, reach out to us at 1300 644853 or firstname.lastname@example.org (24/7 website chat and enquiry available).