Are you considering throwing in your day job to start your own business? Got a great idea to supplement your regular income and fuel your passions?
Whether you’re going all in or thinking about a side hustle, if you’re toying with the idea of small business ownership, let’s talk basics: starting out is not as daunting as you think—especially if you’re aware of the steps to follow once you’ve resolved to do it.
Got a business idea you can’t stop thinking about?
Technically, to kickstart your business journey, all you need is an ABN or Australian Business Number. The first step is very basic and easily achieved by anyone: every Australian business is required by law to register for an ABN. But don’t worry if your business isn’t ready yet, even if you sit on this step for a while before you take the full plunge, you’ll be ready to roll once your plan is cemented.
Doting dad, Arnie, decided he wanted to launch a virtual assistant business just after the pandemic broke. Although he wasn’t sure he’d be able to fit it in with his rideshare driving and eBay selling commitments, he registered for an ABN while still mulling it over, so he could be ready as soon as he had a solid plan.
Registering for an ABN
To get yourself an ABN, simply register online to be processed and approved by the Australian Government, via the Australian Business Register. You can register for an ABN on the ABN registration page.
Before you click the registration link, make sure you know whether you’re looking to startup as a sole trader, a partnership, a company or a trust.
(Most people start business life as a sole trader, but check to make sure this is the correct option for you here to be certain.)
When registering for an ABN, you’ll also need the items in this checklist handy:
- your proof of identity
- tax file number (TFN)
- business advisor or tax agent number (if applicable)
- date your ABN is required
- legal entity name
- business and personal contact and address details
- intended business activity
- myGov account (recommended).
Getting your business plan together
Before you start trading or really decide to ditch your 9 to 5, you need a solid business plan. From mapping out your business intentions to detailing your proposed structure, writing a business plan will be essential in forecasting your expenses and profits when you first start out.
A basic business plan generally includes an executive summary succinctly describing your proposal; extensive market research and competitor analysis; your subsequent sales and marketing strategy; your operating costings and budget; and any information about potential investors or creditors.
Only once you’ve created a business plan can you assess the viability of your proposition, and what will be involved to ensure the success of your venture.
With a little help from his daughter, Lulu, Arnie created a plan for his new virtual assistant business over several breakfast sittings at home: he figured out where he’d operate from, how much he’d charge, who his competition would be, what his overheads would look like, and how he’d market himself. He also considered whether he’d need to borrow capital to get up and running.
Brainstorming a business plan like Arnie? To make things easy, we’ve created a basic business plan template you can download here.
Funding your brilliant small biz idea
If you wish to seek either investors or ask a financial institution for a business loan, showing a solid business plan will be essential. Indeed, by properly mapping out your forecast, you’ll come to know exactly how much capital you’ll need to start up. Be careful here, as gaining finance can be a serious undertaking and if you don’t plan properly, you may find yourself in debt.
Knowing he’d be operating remotely, Arnie calculated that he’ll need about $10,000 to get his virtual assistant business off the ground. This sum should afford him the essentials: new computer equipment and a fresh home office setup (which he banked on needing when forming his business plan.)
The three main types of business funding each have their own advantages and drawbacks.
Internal funding
Internal funding means that you’ll be financing your new business with your own personal savings and capital.
This is advantageous in that you’ll be free from debt and the influence of external investors. This also means it’ll be easier to access loans later on if required.
The disadvantage here is that you clearly must have enough personal funds to get off the ground. By tying up your savings, you may also have to forgo other expenses, such as purchasing a property or vehicle.
Debt financing
Debt finance is a popular choice for many people. It essentially refers to borrowing money from an entity, such as a business loan from a bank.
The advantage of debt finance is that you can start from scratch without the need for personal savings.
On the other hand, this means you’ll be saddled with debt plus interest, and will need to have a robust plan, with evidence, that you can pay it back to avoid financial strife.
Equity finance
Equity finance refers to gaining funds from external investors, in exchange for shares in the company. Often known simply as ‘investment’, equity funding means that you’ll give up a portion of control and financial ownership of your business in exchange for funding.
The advantages with this option are that you will not require a loan or large amounts of personal savings to get moving. You may also benefit form the experience and knowledge of your investors.
Conversely, you’ll have to give up a portion of business control and profits. It can also be rather difficult to secure third party investment.
Arnie has around $12,000 in personal savings and since he already has a mortgage it will be more difficult to secure a loan. Yet, because he has the $10,000 required to start his business, Arnie will officially take the internal funding route.
That’s it! These are the basic first steps to starting your own business. However, from here, you’ll also need to fully understand your legal responsibilities and get a handle on things like tax, super, GST, payroll, and BAS. Before you take the plunge, seek counsel from an accountant, and check out the ATO’s page here to read up on your formal responsibilities
