This is the next post in my series on the “Five Keys To Starting Your Own Business”. So far, I’ve shared the first two keys:
Key #1 – Get Over Your Fears
Key #2 – Understand Your Business
Now it’s time to figure key #3. Why is it important to take time to plan.
Key # 3 – Take Time To Plan
OK this is the unsexy part and it’s quite a long post but hang in there.
Every business book, start-up website, guru, university lecturer and advisor will tell you that you need to do some planning and I agree with them but it needn’t be a huge time-consuming, expensive process.
Here are the main things to think about:
Legalities and Business Structure
Before you start trading and even before you decide on a name or purchase a website, there are a few basics you need to have in place.
The first thing is to decide on the structure of your business. Each country has a different framework so you need to check what applies in the country you’ll be trading.
Government agencies such as the ATO and Small Business websites also provide a lot of useful information.
A good Bookkeeper or Accountant will be able to help you work out the structure that’s best for your business and get you set up with things like ABNs, GST registration and good record-keeping processes.
Business Name and Licences
The name you are going to call your business is a big decision for many of us and as more and more small businesses are created, finding a name that is unique and helps you stand out is getting more difficult – particularly if you want to get the domain name as well.
There are three ways to name a business:
- Your Own Name or combination of names if a Partnership.
- Description of What You Do – e.g. Glossy Hair Salon, Elite Coaching Services, Transforme – The Kickstart Business
- Made Up Name – or just a word e.g Apple, Google
Once you’ve come up with a catchy name, you need to check that it’s available for use, i.e. not already registered. You can do this online using the Australian Business Register.
You may also want to check for any registered trademarks with IP Australia. Finally, if you want your domain name in the same name as your business name, then make sure that it’s available by searching for it on one of the many domain name registration sites.
Depending on the type of business, you’re in, you may need to obtain a Business Licence.
Did You Know? In Australia, if you are setting up an online business, trading only online, and earning <$75k p.a., then you don’t need to register a business name, register for GST or have an ABN? You must however, pay income tax.
You then need to think about which business model is best for your business? Let me explain the term business model. To make it simple, I think of it as how you make money – who is going to pay you, for what, why are how?
The key to starting your own business, is to think about the business model that is best for you. Here are some examples:
- Membership or subscription model where people pay you for a set amount each month for access to information/products / services
- Direct sales model where you sell products or services business to business (B2B) or business to consumer (B2C)
- Selling via a community – think Multi-Level Marketing (MLM) and party plans
- Paid advertising – offline such as in magazines or newspapers or online using Google AdSense for example
- Affiliate Marketing – earning a commission by selling other people’s products or services.
There are lots of options to explore and you may combine a few different ones – for example, direct sales via a website that also has a monthly membership program.
Recommended Reading: If you are interested in exploring different business models, I highly recommend “Business Model Generation” by Alexander Osterwalder & Yves Pigneur. Also available as an iPad App! You can download a template for capturing your business model on one page.
Now it’s time to start thinking about the money. How much will it cost you to set-up your business, produce your product, promote your services, pay staff (eventually), pay yourself (eventually, hopefully).
Once you’ve added up all the costs, you need to think about the funding. How will you pay for all of this? Do you have enough savings? Can you borrow from the bank? Do you need an investor? Will you get a business partner to contribute funds? How much will you charge for your product/services? How long will it take you to receive payment?
In the first key to starting your own business – getting over your fears – I talked about getting your finances sorted out. I want to make it clear that I was talking about your Personal Finances – what it takes to run your life. What I’m talking about here are your Business Finances – what it takes to run your business. That is a distinction worth making so that you don’t end up bankrupt.
I am not a numbers person, but I’ve learned the basics and when you’re starting out, it doesn’t need to be too sophisticated. You can get a clear picture with just a simple spreadsheet with a few linked worksheets. As you grow, you will probably want to work with a Bookkeeper, Accountant and probably invest in a system such as Xero, Saasu, Freshbooks or similar.
The final part to Key #3 is pulling it all together into a Business Plan which is a living document that sets out, in one place, your plan for making your business happen. This is not a tome that sits on a shelf but a document that excites you and helps bring you back on track. It is a business tool that helps you realise your goals.
Your Business Plan doesn’t have to follow a set format or template but you should make sure you cover the following:
- Background Information about the business and the owners
- Company Purpose sometimes called vision or mission
- Products / Services description and pricing
- Market Analysis including industry, competition, customers, positioning
- Operating Plan covering structure, goals & objectives, timing, management team, risk management
- Sales & Marketing Plan how products /services will be sold
- Financials including Budget, Profit & Loss Projection, Balance Sheet Projection
Live Example: If you’d like to see a real example of a Business Plan developed by a start-up business, have a look at this Slideshare presentation by Luk Beautifoods
Common Mistake #3 – Underestimating how long it takes
The common mistake that almost every business owner/entrepreneur will tell you, is that they underestimated how long it would take them to reach their goals and overestimated how much they would make. That ultimately leads to problems with cash-flow – not being able to pay the bills.
There’s a lot to do when you’re running a business and it’s easy to waste time on activities that don’t result in sales.
Taking the time to plan upfront, will help stop you from falling into the trap of wasting time and effort on things that just don’t matter instead of focusing on the things that will make you money.
In the next post in this series Five Keys to Starting Your Own Business, I’ll be sharing Key #4 – Selling & Marketing
Do you need help with starting your own business? Call me and we can discuss how you can effectively start planning.Book a Discovery Call
*Editor’s Note: This post has been updated on August 2020 for accuracy.