Lasting success comes from a series of well-planned steps, not a flash of inspiration – Judy Hartcher examines the necessary building blocks for creating solid business foundations.
Many people dream of starting their own business but they don’t always plan ahead before taking the plunge. Planning is a key element in establishing a successful business and it pays to research the desired market.
Market research will provide information on your product, pricing, costs, competition and suppliers, and it will also help to determine the feasibility of your business idea. This information is crucial to preparing a business plan. Going though the planning process will clarify your business goals and lead you through SWOT (strengths, weaknesses, opportunities, threats) analysis of your product or service, customers, the industry, the competition and business environment. Your business plan should set down the strategy for achieving the goals and the finance for operating the business. It is the document requested by prospective lenders if they are approached for business loans.
Once satisfied that your business idea is viable, you should then consider the most appropriate operating structure. Factors such as taxation, asset protection, flexibility in the distribution of income and capital to family members and estate planning, should be taken into account when deciding whether you should operate as a sole trader, partnership, company, or trust. At this stage, you should consult an accountant with experience in business advice and taxation. If legal contracts such as partnership agreement, trademark registration, or franchise agreements are required, you should seek counsel from a legal adviser.
The next step, deciding on the location of the business premises, will depend on your target market, product or service, space requirements, and budget. For example, a bakery, confectionery manufacturer, and food writer, have different requirements. The bakery needs to be located in a shopping precinct frequented by shoppers, the confectionery manufacturer requires larger premises to house bigger equipment and stock, whereas the food writer can work from a home office.
Cash & Flow
A business can’t operate without funds, so it is important to prepare a budget to start or purchase the business, to buy assets, and to operate the business. It is also important to forecast your cash flow to ensure that you have sufficient cash coming in to cover expected outgoings. Always consider unexpected events and build in a margin for contingencies. Remember, cash and profit are not the same-—a profitable business can still run out of cash. Take the time to review your resources and if you find you don’t have enough financial resources to cover your business operation in the first year, consider other sources of finance such as sale of personal assets, family contributions, investors or banks.
Appropriate records should be kept to check on performance. Record-keeping is essential for managing your business so you know what is happening and can react to emerging situations quickly. These records are also essential for tax compliance.
Give thought to staffing, marketing, insurance, local and state government requirements such as zoning requirements and health regulations, and business registrations such as business names and the Prescribed Payments System.
When employing staff, you should look into award requirements and legislation such as the Superannuation Guarantee Charge Act, Occupational Health and Safety Act, Payroll Tax Act and Workmen’s Compensation Act.
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Research government assistance that might help you; visit www.business.gov.au and www.smallbusiness.gov.au and the Business Enterprise Centres of Australia (www.beca.org.au) for information and advice for small business and those intending to start a business. Another good source of information is your accountant who can advise on your business start-up and compliance matters.
Judy Hartcher is business policy adviser for CPA Australia. This is general advice only and does not take into account your business objectives, financial situation or needs.
Case Study
With a niche product and plenty of confidence, one young entrepreneur is making all the right moves in the start-up phase.
While most teenagers are doing maths homework or trying to make a meagre pay cheque stretch beyond mere survival, Aaron O’Brien, the 16-year-old owner of Outtaline, has his head down balancing budgets, buying stock supplies, planning sales meetings, and designing his next season’s collection of jewellery to be ranged in retail outlets around Australia.
Like the back stories of most thriving businesses, Outtaline had humble beginnings born from a desire to tap into a niche market. Now in its fifth year, this funky brand of silver and nickel-plated pendants was the result of O’Brien’s frustration about the lack of unisex jewellery available in surf and urban stores.
At the age of 11, O’Brien put $500 of his own savings into an operation that was “pretty basic to start with”. Initial momentum and popularity grew in the trendy youth market through word of mouth. Within a year, Outtaline made its first sizeable profit and, ever since, O’Brien has been putting most of the yearly takings back into production, promotion, and marketing.
His age has been a barrier in terms of finance and bank loans, and so being realistic with profit spending has allowed him to start growing the business. With the initial designs finalised, all jewellery manufacturing is now completed off-site by casters and platers.
“It’s been a big help,” says O’Brien of the off-site manufacturing, “because time is money. I can focus more closely on other areas, like marketing and developing new designs.”
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With his jewellery now selling in 200 surf, urban and gift stores around Australia, Outtaline is on the cusp of exponential growth. To bolster this process, O’Brien is working on a business plan to see him into the future. Although it’s only in draft form, this business plan is already being implemented through marketing channels.
His line of surfboards, emblazoned with the Outtaline logo, is a cost-effective way of gaining brand awareness. “People see the labels on the surfboards, and again on the jewellery swing tags, and think ‘this is a familiar logo’.”
He has also secured support from an Australian publishing company to distribute his catalogue for display in suppliers’ retail outlets nationwide. Similarly, an Outtaline website is in development—a move he hopes will further strengthen the brand through potential online shopping capabilities.
O’Brien recognises the value of mentoring and advice from other successful business owners and is in the process of securing a mentorship with Dan Single, one of the three founding designers behind booming Australian denim label, Tsubi. “I wrote to them asking for a mentorship, and within about three days I got a call saying they’d like to meet me.”
O’Brien says some suppliers are surprised by his youth: “Before they meet me, they’re often thinking, ‘backyard beads-on-a-string type jewellery’, but if you’re dressed well and make a good impression they’ll generally turn the other way and support you.”
And with that same attitude mirrored in taking all the right steps through all the right channels to grow his business, there’ll be more than a bit of pocket money in store.
—Monica Higgins
