Get it right with your start-up business
Federal and state governments may well have high hopes that in the next few years new, innovative businesses will provide the economy with the diversification desperately needed for growth, but much will depend on entrepreneurs getting it right with their start-ups.
When businesses fail in their first five years, and most do, owners have accelerated their way to disaster by making one or more of the following fundamental errors. They’ve not sought professional advice from the beginning. If they have they’ve ignored it. Planning before start-up and thereafter has been poor or non-existent, and the business’s structure has always been highly suspect.
Failing to plan is in effect planing to fail – as countless business owners know only too well, but seem quick to forget. Failure to seek or to heed expert advice only exposes their businesses to a plethora of risks, from escalating tax liabilities to the multitude of problems that can trigger and perpetuate terminal cash flow problems.
So here are things to avoid when you’re going into business, whether taking on a previously established one or launching your own start-up.
A catalogue of dos and don’ts
Let the winds of change be breezes not gales. There’s more to successfully taking over an established business than erecting a sign that says “under new management”, and demonstrating this by making a whole lot of hurried changes. Avoid change for the sake of change. Get a feel for the business. Each potential change should be considered individually in the context of a strategic plan. Sniff the breeze for a whiff of customer reaction to a change you might have in mind. Remember: more haste, less speed.
Avoid sloppy cash flow forecasting. A new business is very unlikely to establish an instant cash flow that’ll accommodate both mounting set-up costs and a realistic provision for wages. Building sales and an appropriate revenue stream to cover these as well as costs of other essential expenditures – including, for example loan repayments -- could take time. Vital therefore in pre-launch planning, are recognition of, and provision for, ALL outgoings.
Fail to seek professional advice at your peril. You may well be an expert in a particular field of endeavour, but it’s highly unlikely your knowledge of the business compliance minefields of GST, PAYG, WorkCover, Fair Work awards, employment contracts, trademarks, business names, licences, permits, and business insurance, will be of professional standard. Failure to get professionally qualified advice on these matters could doom your business to failure in its infancy.
Run a tight ship. All the work you’re doing to ensure your business delivers market-leading products and/or services will count for nothing if tight systems and processes for controlling bookkeeping, for reporting on accounts receivable and payable, are not in place and maintained.
The right business structure is essential for long-term success, and should be suited to long-term goals for a business. A sole trader set-up may be considered the cheapest and simplest option. However this structure allows the least effective options for asset protection and tax management flexibility. Decide the business structure you want before you start the business, bearing in mind that subsequent structural changes can be complicated, and could be accompanied by a range of burdensome income tax, capital gains tax and stamp duty impositions.
If it’s workable seek all business advice from a single source. The word “Advisory” in a business name (as in Macks Advisory, for example) is a useful indicator of a one-stop-shop. A range of advisers is expensive, and in any case having all required experts under the one roof aids effective time management, and generally makes life for a business owner a whole lot easier.
Keep this catalogue handy to prompt memory of things perhaps known, but all too easily overlooked……….or simply forgotten.
For more information, contact Macks Advisory on 08 8231 3323 or visit our office at Level 8 West Wing, 50 Grenfell Street, Adelaide SA 5000.
