Starting a new business is extremely exciting. However, it can easily turn into a nerve-wracking task which is both challenging and complicated. In order to minimise your risks and optimise your profitability potential, it is therefore important to carefully plan and consider each aspect of your business prior to its launch.
- Getting started
- Doing your research
- Writing a business plan
- Raising money
- Presenting to the investor
- Formal Legalities
- Setting up shop
- ‘Insuring’ your bright future
- Managing your money
- Growing your business
You’re probably starting a new business because you have a great idea for a product or service which you feel has the potential to appeal to a large enough audience to make a profit. In short, you believe in your idea enough to invest your time and money into it.
Before you start, ask yourself some questions:
- What are my objectives and goals?
- What is my target market?
- How much money do I need to start-up?
- When do I want/need my business to be up and running?
- How much time do I have to dedicate to this business?
- Am I able to make these kinds of financial and time commitments?
Doing your research
It is essential that before you even start thinking about your own business, you conduct extensive research into the marketplace. This means understanding your target audience and knowing who your potential customers are, where they are and what they are looking for. It also means you identify your competition: what other companies are offering similar products or services, what makes them successful and what is their point of difference? Think about your product or service, compare it to those your competition is currently offering and find out what’s missing – identify areas of opportunity or an unmet demand in the marketplace.
Conducting this research will allow you to determine your Unique Selling Proposition (USP). Your USP is what makes you stand out from the competition – the differentiating factor between your product and the one next to it on the shelf. This is the reason a customer should choose you. Make sure you’ve identified your USP or niche before you start planning your business as it will give you a clearer sense of direction.
One of the most effective methods of research is by conducting market research questionnaires. Although this is a fairly expensive resource, it can give you a detailed insight into customer behaviour and opinions. It will allow you to learn more about your potential target market and will help you customise your products or services to attract these customers more effectively.
Writing a business plan
Perhaps the most important aspect of starting up a new business is to write a detailed, accurate and effective business plan. A water-tight business plan will give you the direction and focus you need to channel your energies more effectively toward the fulfillment of your business goals. Writing a business plan requires both extensive financial knowledge and strategic planning skills – you may wish to seek the assistance of an accountant to help you at this stage of developing your business.
A good business plan can be used throughout the career of your business. It should be consulted and reviewed at any important turning points of your business to ensure you are still meeting your goals and objectives.
Your business plan might follow this sample business plan outline.
Now that you have a business plan on paper, it’s time to think about how you’ll get the money to invest in your business. There are a variety of options to choose from, but you need to ensure you plan your budget carefully and get expert financial advice to minimize any risks. Financial sources might include equity investors, loans or venture capital schemes/government assistance.
There is no one right or wrong method to obtain finances for your company – it all depends upon the size, scale and nature of your business. You may wish to enlist the help of a professional expert such as an accountant to help you make the right decision.
Remember that anyone who gives you money, be it a bank of individual lender, will need security to ensure that you are capable of returning the money. Security may be in the form of collateral, equity or various income projection statements. You will need to submit a detailed business plan highlighting the profitability potential. Sometimes investors/banks may wish to check your personal financial statements to help them identify any hidden liability or pending financial commitments before they decide to give you a loan.
Presenting to the investor
Your business will need financing, and a lot of the time, this means finding an outside investor who beliefs in your ideas and is willing to provide you with the money to make them a reality. You will need to present your business plan and investment proposal to a potential investor so you need to ensure you have all the necessary information, including:
- A clear outline of what you do and what your mission statement is.
- An outline of the organizational structure and profiles of senior management. It is important to elaborate on how you plan to structure the organization of your business so as to maximize output and maintain efficiency.
- Details about the financial aspects involved. Accurate projections which measure up against industry standards are necessary to convince the investor that they will get the maximum return on investment if they choose to work with you.
- A sales strategy and marketing plan. You need to explain how you are going bring your products or services to the customers, and what marketing and promotional strategies you wish to deploy in order to attract these potential clients.
- Summary. Often, investors and lenders have no time to go over detailed business plans (link). They go through the summary or overview and if they see potential in what’s in front of them, only then will they bother to get into the details. Ensure your business plan summary is concise, crisp, relevant, and bursting with practical ideas and potential.
Remember: it’s important to have conviction about why you think your business will do well and to get that conviction across to the investor. Make sure you’ve backed up all your statements with research that proves what you’re saying. This way, the investor has more faith in your words and your proposal has more credibility.
In order to set up your business, you will have to go through some legal formalities.
Firstly, you will need a business name. Choose something that is relevant, memorable and reflects the image you want to project. It’s important to conduct some research to ensure the name is available and is not patented or copyright to avoid any legal problems later on. Company names need to end with ‘Limited’ or ‘Private Limited’, depending on the type of business. You need to ensure that you meet the necessary legal compliance.
Secondly, you may need a trademark. A trademark is a symbol that reflects your brand value and may be a symbol or word. Remember that business names and trademarks need to be registered to prevent anyone else from using them. They usually require a registration fee to be sent along with an application to the registration office.
You may also wish to obtain a patent or legal protection for exclusive use of a technology or invention which has been created by you, to prevent anyone else from using it.
Setting up shop
There are different options for setting up shop, depending on the nature and size of your business. You may initially wish to work from home, you might consider leasing or you might even wish to buy your own premises to conduct your business operations. In order to determine the best option for you and your business, ask yourself:
- Do you need customers to swing buy your business or are you providing all products and services online such that you don’t need to setup a formal office space?
- If you need to setup an office, is there any specific area or locality which will be best suited for your and your future employees?
- Does it have good transport and is it close to the utilities you’ll need most often?
It’s important to keep in mind the future of your business and invest in premises accordingly. If you are planning massive expansion in the future it may be a good idea to bear that in mind when deciding upon the size of your office.
‘Insuring’ your bright future
The purpose of insurance is to give you security and peace of mind in case of any unforeseen disasters or emergencies. There are different kinds of insurance applicable to businesses, including:
- Personnel insurance – cover losses arising from the death of any staff member.
- Product and public liability insurance – the former covers damage by failure of your product, while the latter protects you in case of damage done by third parties
- Employers’ liability – necessary for any business that employs people
- Operational disruption insurance – covers losses from interruptions to your business.
- Personal accident and health insurance
It’s a good idea to get advice from a financial expert about the various insurance policies and the benefits of each in order to determine which one would be most suitable for your business needs.
Managing your money
As a business owner, it is important to ensure complete financial control if you wish to maintain and improve the health of your business. It is a good idea to enlist the help of an accountant in order to get expert financial advice, especially when making important financial decisions. The following are some of the key areas you might want to discuss with your accountant:
- Managing cash flow – Making timely cash flow projections or estimates can help you prepare for the future, maintain cash reserves for paying debts or investing into the business, save money by transferring excess funds into interest-generating ventures, and manage borrowing and relationships with banks and lenders. Once you have tabs on your cash flow, you can make better informed decisions about your budget.
- Loans – There are various loan schemes available to small and medium businesses so it is a good idea to undertake extensive research and measure the advantages and disadvantages of every scheme to choose the loan that best serves your needs.
- High-risk debtors – Clients who owe you money can be a nightmare. Obtaining credit references for companies you wish to deal with is a good way to learn more about their background. Make sure the payment terms are clearly outlined and leave no scope for ambiguity.
- Book-keeping – In order to make the right financial decisions at the right time, it is essential to maintain accurate and up-to-date records of all your financial transactions. Also note that it’s mandatory to submit all necessary financial documents to the ATO for tax purposes
Growing your business
Taking your business to new heights is not just about selling more products. There are a lot of resource management and business strategies that are involved when you decide to expand your size and scope. Some things to think about include:
- Hiring new employees
- It takes the right people to run successful businesses. Hiring is therefore an extremely crucial part of operations. Here are some things to keep in mind:
- Outline the key qualifications and skills you are looking for.
- Have an efficient and organized hiring process.
- Pay special attention to formulating the right interview questions that will help you gauge the strengths and weaknesses of the candidates. Make sure the questions are easy to understand and open-ended.
- Be objective and don’t make hasty judgments when interviewing.
- Make sure you discuss all the aspects related to the job
- Building a relationship with suppliers and handling purchasing
It is important to build healthy and long-term relationships with your supplier. Ensure all business contracts are clear, unambiguous and are mutually agreeable by both parties.
- Marketing and promotional work
In today’s world of rapidly growing media, it is important to advertise your products and services. Having something unique to offer is not enough – you have to ensure your message gets across to the right target audience. Implement a marketing plan or strategy which is based on extensive research into your segment and target audience.