Get Networking Events Right from the Start
When you are starting a small business (that will hopefully grow into a much larger business) there is a lot to think about. Not only do you need to think about how you are going to do the specific thing that your small business does but you also need to think about structuring, financing, employees, what sort of space you need, how you are going to get your new customers in and how you are going to bill them.
Below are 5 tips that we at Virtual Reception have for budding entrepreneurs. These are things that we have learned along the way and that we think will make a difference in the development of your small business.
Tip 1 – Company Structure
When you start your new venture the tendency for a lot of people is to start as a sole trader or as a partnership. Unfortunately, if your small business is successful then starting as a sole trader or partnership may create issues for you as you grow.
When you start as a sole trader you are saying that the income from the small business is simply another personal income stream. From a legal point of view, there is no separation between the business and yourself. Because of this, if the business were to be sued or if someone had a claim against the business then they would also be able to claim against you.
If you choose to start your business as a partnership then you still don’t have the benefit of the business being a separate entity (people can claim against you or your partner/s) but you also have the issue that you can be liable for the actions of your partner/s. This creates an added risk.
Our advice would be to incorporate a Pty Ltd company for your business. If you have some people going into the business with you then work out shareholdings amongst the stakeholders.
With a Pty Ltd company, the company is seen as a separate legal entity and as long as you do not trade whilst insolvent any individual with a claim against the company will be limited in terms of what they can claim against you.
It is also a really good idea to consult an Accountant before setting your company up. Whilst it is relatively easy to set up a company with ASIC there are a few important things that you have to get right if you want to ensure that you get the benefit of any small business rollover provisions in the future.
Tip 2 – Funding Your Business
When you start up a new business you generally think about the funds that you will need in the next 3 months to get things moving. You generally don’t consider what your funding requirements are going to be in 12 months.
Our advice in terms of funding would be to put together a comprehensive cash flow forecast that looks at some different operating scenarios. You should then take your worst-case scenario and use this as your base for determining how much cash it will take to keep your business in the black.
When it comes to actual funding for your business you have some options.
Firstly, if you have the funds available you could bankroll the whole venture yourself. Unfortunately, in the majority of cases, the person with the brilliant idea is not necessarily the one with the money.
If you don’t have the cash yourself then you could potentially talk to friends and family to see if they are willing to loan funds into the new business or whether they would be interested in taking a stake in your new venture.
Sometimes it is preferable to borrow money and pay an interest charge rather than giving away equity in your new business. Once you have issued that equity it is very hard to get it back and if your business is extremely successful then that equity could be worth a fortune in years to come.
The final option when organising funding is to borrow money from an external financier like a bank or a private equity firm etc.
If you have equity in your house or other assets that you can use as security then getting a loan from your bank should not be overly difficult. The bank will assess how much equity they believe that you have and how much of a loan they are willing to risk against that equity. They will then either require a mortgage on your property or they will require you to sign a guarantee and an indemnity.
Tip 3 – Accounting Systems
Most small businesses start up without considering their accounting system. They then operate off spreadsheets and out of shoe boxes until they get to a size where it all becomes too difficult.
Our advice is to think about your accounting structure from the start.
You should start by building a chart of accounts for your business. Map out the revenue and cost accounts that your business will have and work with your accountant or bookkeeper to structure your chart of accounts.
Once you have built your chart of accounts you should think about what accounting package you want to use. There are some packages available on the market these days however we would highly recommend going with a cloud-based service like the ones offered by Xero and MYOB.
The beauty of cloud-based services is that you can operate them from anywhere that has an internet connection and also operate them from almost any device.
Another great thing about modern cloud-based services is that most of them will link seamlessly to your bank or financial institution and many of them will allow you to lodge your BAS online and send emails and statements electronically to your customers.
Tip 4 – Your Online Presence
A huge number of small businesses spend a fortune setting up their business and getting their physical presence right and then end up scrimping on their online presence.
These days, your online presence is almost as important as your physical one.
Unless you are a graphic designer with a great feel for online design do not build your website yourself. Find yourself a good web designer and build a website that is better than the websites of your competitors.
Once you have a decent website under your belt you should seriously consider promoting your business with online marketing. Online marketing comes in many forms with the most popular option by far being Google Adwords. Google Adwords is relatively cheap to try out and is a fast way to test out different concepts in the market.
Other options in terms of online marketing include banner advertising, sponsored email marketing and search engine optimisation.
Tip 5 – Outsource Where Possible
The cost of employing a staff member for your new business can be quite excessive. Firstly you have to advertise your role, you then need to read through all of the CVs and pick out the ones that you want to interview. Next, you need to physically (or telephone) interview the candidates and select the one that you want to make an offer to and then you need to make an offer.
Once you have your employee selected you then need to pay them a competitive salary, pay them superannuation, provide them with holiday leave and sick leave and ensure that all of your health and safety ducks are lined up in the right row.
An easier and quicker option rather than employing your person is to outsource your roles to other organisations.
Tasks that work well with outsourcing include bookkeeping, cleaning, delivery, accounting, telephone answering etc.
General clerical work, spreadsheeting, admin and sales admin roles can also be outsourced to a virtual assistant. Virtual assistants can carry out work that is quite similar to the work that would be carried out by a physical office assistant except they are located remotely in their own home office. They complete their work via the Internet rather than sitting at one of your desks using your Internet service.
One of the great things about outsourcing your tasks to external companies is that you only need to pay for what you use. If you don’t have any work on then you don’t need to pay to have a person sitting at their desk playing with their smartphone.
Our advice in terms of outsourcing is that you should only outsource non-strategic labour-intensive tasks. The strategic aspects of your business are critical to the growth of your company and should be completed by you and your key staff. The great thing about outsourcing though is that it gives you back the time that you need to focus on those key tasks and the growth of your company.
Growing your small business into a global giant will be a lot of work however if you take on board the issues that we have raised with these 5 tips it should be easier to get that small business through those first critical months and years.
