Despite the impact of COVID, the number of people starting up small businesses is still very strong. In fact, the number of micro-businesses in Australia grew 10% from 1.41 million in June 2021 to 1.55 million in June 2022. Many people will take the leap in early 2023 to start up their own business. While there are many aspects to consider, there are seven key things people should do when they start up a new business in order to achieve profitability sooner.
What must new business owners do to achieve success?
Starting up a business is one of the most exciting things to do as part of your career journey, however it can also be one of the most stressful and expensive. There are lots of costs associated with setting up a new business so it is important that you manage costs or you will put yourself in a precarious position from day one. The key is to minimise spending while maximising revenue generation. Sadly many people are not good at minimising spending.
While purchasing equipment for your business may be tax deductable, you need to outlay the funds upfront to buy things. From day one you need to be thinking about moving into the black. This is an accounting term that relates to profitability. In simple terms, you need to be bringing in more income than you are sending out the door through spending.
If you are still in the red, then your business is not sustaining itself financially. Where possible set up your business with secondhand items. Secondhand marketplaces are full of desks, chairs, cupboards, fridges, shelving and other items that are ideal for offices and warehouses. This will save you considerable money and also help you to get up and running quickly.
Use free software and apps
Running a business can be very expensive so you need to look for ways to keep your costs down. Utilise free apps and software available online to support and run your business. These include apps for collaboration, communication, creative design, account management, etc.
When choosing which apps, consider integration and scalability. As your business grows and your needs increase, you may need to advance to paid versions to access different services.
Engage a good bookkeeper and accountant
There are some things that you must have from day one and having a good accountant and bookkeeper is critical. A good accountant will ensure that your structure and business have been set up correctly from day one to meet your needs from a risk and tax compliance and minimisation point of view. They will also work with you to put in place systems to help you manage your cashflow, invoices and expenses in a central and manageable manner.
Your accountant will also be able to recommend bookkeepers who are skilled and trustworthy at taking care of your day-to-day accounts. When you start your business, every cent matters so you need to keep track of your expenses and receipts and ensure invoices are being generated quickly and efficiently and payments are being followed up.
It can be difficult to think of everything when you set up a business but digital assets are very important. Websites, social media and customer databases are critical in business and form a key part of your overall operations and digital assets. Ensure you have registered all available and relevant domain names, social media pages and your branding with IP Australia.
In addition, these assets will grow in value over time and ultimately become integral to your brand and business value. If you don’t secure domain names and social media handles early on it may cost you more once your business is established to purchase these assets.
When starting up a new business the key is to sell hard and bring as much revenue in the door as possible while scaling up in a measured way. You also need to keep fixed costs and expenses as low as possible to bring the business into the black.
If you find you are growing fast and need help to deliver the work to clients, opt for platforms like Airtasker and Upwork to get tasks done quickly on an ‘as needs’ basis. Outsourcing the work in this manner is more cost-effective in the early days than bringing in employees.
Security is an important issue regardless of your size of operations or stage of growth. Ensure your computers, website and other assets or systems that sit in the cloud or are connected to the internet are secure. A lot of businesses are being hacked and blackmailed. Websites are being hijacked and social media accounts are being hacked into and stolen.
Ensure you have good security in place from day one and maintain high levels of vigilance. Being hacked can be devastating and bring your business to its knees.
Build your business fast and find other businesses that offer services that could benefit from your products or services. Value exchanges are important strategies while you are growing. If you need an IT person to set up your computers, then offer products and services in return to reduce the cost of the services. Many business owners are happy to swap services in order to gain access to expertise they need while using their own services as currency.
This is referred to as bootstrapping and it is an extremely valuable tactic to use while you are growing and moving into the black – and also a good strategy to use to stay in the black.
Coco Hou is the managing director of Platinum Professional Training, a national training provider for the accounting and bookkeeping industry, and Platinum Accounting Australia, a national network of accounting and bookkeeping businesses that specialise in providing strategic and practical taxation, business and accounting advisory services.