January 18, 2021

I want to start a business; What do I do?

Getting off on the right foot

Many people manage to get their new business up and running through sheer hard work, determination and a driving passion for what they do.  Sadly, statistics show a significant number of small businesses fail within the first 18 months.  While enthusiasm and hard work will help your established business to succeed, expert advice and an evidenced-based business plan will set you up for success from day one.

What kind of business are you?

By necessity, most “start-up” businesses are initially operated using a sole trader or partnership model.  As the business evolves and grows, a company or trust structure could be a more tax-effective structure. Because there are positives and negatives to all options, having a conversation with your Accountant before you register the business name and open the bank account will save time and money in the long run. 

Form follows function principles help to develop a business plan

Once you have determined the structure of your new venture, it’s time to develop a Strategic Business Plan.   The best are evidence-based and incorporate the essential elements required to achieve your goals. 

Key points include:

  • Knowing your current and future customer base – allows you to refine goods or services and target your marketing dollar efficiently. 
  • Understanding (all) your overheads – helps to determine your revenue baseline, set sales expectations establish revenue targets.
  • Determining cash flow – lets you allocate revenue dollars in your budget effectively.

Strategic business plans are dynamic documents.  They must be revised and updated regularly to ensure they’re still fit for purpose. Review, check actual results, check assumptions, and of course, make adjustments.

Budget plus a cash flow plan equals efficiency

Your business may well turn a profit and still experience a cash crisis. Tracking current and anticipated cash flow helps to ensure you always have enough money on hand to cover your outgoings and allows you to plan for the future. 

A budget combined with a cash flow plan is a useful management tool because it:

  • forces you to identify your business milestones throughout the year;
  • tests your projections,  allowing you to track whether there is enough income to meet all your cash needs; and
  • projects how much operating credit you will need and when loans can be repaid. 

Compliance and reporting obligations

Quite often the last things on the minds of budding entrepreneurs wanting to establish a business, yet they are the building blocks of success.   We recommend accounting software package such as Xero. Be realistic, if you don’t have the time or skills to manage the system, engage the services of a competent Bookkeeper. Benefits far outweigh costs, both in terms of your time and the vast amount of intelligence a well set up system can tell you about your business.

Planning business growth

Growing your business takes an extraordinary amount of planning and creative thinking.  If you’re considering expanding your business, it’s important to strengthen everything you do now so your business is as lean and efficient as possible.  Then, work with your Business Advisor to determine where best to invest your resources for maximum effect.  Forging ahead without the proper planning and preparation is a guaranteed formula for failure.

There’s a lot to learn about running a small business, and little margin for error.  For “seriously good business advice” – talk to Robert Dalton from Seriously Good Accounting.

Filed Under: Business Advisory, Growth, Leadership, Management and Strategy, Structure

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