Small Business

                             Introduction

 

                                               

 
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    So you want to start a small business...                 
    http://www.ausindustry.gov.au/SmallBusiness/Pages/home.aspx            
    Anyone can start a business, but running one successfully – and keeping it running – takes something special. It does not happen without planning and hard work.    
                           
    There are many reasons why you might want to start a small business           
                           
    You may want to share ideas, products or resources    
    You may want to be your own boss, or    
    You may want to supplement your regular income.    
                           
    Beware                      
                           
    Starting and running a business is hard work. Owners need to be flexible and enthusiastic. And they need to have good judgement.    
                           
    Be prepared                      
                           
    For your business to succeed, it is important to fully understand what it takes to start, run and grow a business. The more preparation you do before start up, the better your chance of avoiding financial and personal heartache.    
                           
    Here are the things to consider:                  
                           
    why do you really want to go into business?    
    what are your goals for the business?    
    what skills are needed start, run and grow the business?    
    how much income will the business need to generate to survive?    
    how much time, effort and resources are you prepared to invest in the business?    
                           
    Be realistic                      
                           
    Don’t underestimate how much time and emotional energy it takes to run a business. No one will be as excited about your business as you.    
                           
    Consider the finance and resources needed to back your ideas.    
                           
    Is business right for you?                    
                           
    Welcome to the "Is business right for you?" test.    
                           
    This test will help you evaluate your suitability to run your own business. At the end, a detailed report will automatically generate feedback based on the responses you provide.  
                           
    The more honest you are in your answers, the more useful and relevant the feedback will be.    
                           
    Use the feedback report to:    
                           
    judge if you are suitable for business    
    identify strengths and weaknesses.    
                           
    1 Why are you thinking of going into business?               
    2 Have you discussed starting a business with your family?               
    3 How would you describe your industry experience?               
    4 What business management skills and experiences do you have?               
    5 What does your past training include?               
    6 Why have you chosen this business and this industry?               
    7 Have you prepared a business plan?               
    8 What do you see as the biggest obstacles in your business?               
    9 Can you accurately describe your targeted customers in terms of age, demographics, behaviours, etc?               
    10 How are you going to promote your product or service?               
    11 Why will customers buy from you rather than the competition?               
    12 How would you describe the competition?               
    13 How do you expect the competition to react once you start business?               
    14 Do you have the right licences and permits to operate your business?               
    15 Who have you contacted to prepare for your business?               
    16 Have you estimated your monthly expenses?               
    17 Have you estimated your start up costs?               
    18 Where are you going to get your finance?               
    19 Have you ever borrowed money before?               
    20 What have you done to prepare for business?              
                           
                           
                           
    Will the business satisfy your needs?    
                           
    1 Why are you thinking of going into business?            
      There are many reasons that people decide to go into business. Unfortunately, many businesses are not successful and this can often be put down to people going into business for the wrong reasons.            
                           
       I need a job.                
   

I don't like my current job.

                
    To be my own boss.                
    I've always dreamt of working for myself.              
   
 
Lifestyle.                  
      I want to be rich.                  
      Family reasons.                  
      Not sure.                  
                           
   

2

 Have you discussed starting a business with your family?          
                           
      Many small business owners rely heavily on family support because of the time, money and commitment demands. Working long hours with few, if any, holidays can strain the family relationships. Whilst not essential, family support may help you during difficult times and when you are heavily involved with the business.            
                           
       I have not discussed going into business with my family.          
       My family has no interest in the business.          
    My family could be described as lukewarm on the idea.          
     
 
My family is very supportive.          
                           
    Do you have enough skills to run your business?              
                           
    3 How would you describe your industry experience?          
                           
      Relevant industry experience provides you with an understanding of the requirements of the particular nuances of industry suppliers, customers, competition, key challenges and potential pitfalls. Some say it is easier to get experience whilst working for someone else compared to \"paying for your own mistakes\" when you work for yourself. Talk to as many people as possible in the industry to realistically and objectively assess the viability of your proposed business.            
 
 
                       
       I have never worked in the industry.            
    I have recently started in the industry.              
      

I have worked in a similar industry.

              
       I have been working in the industry and consider myself as an expert in the this field.              
       Its all new to me, but I am keen to give it a go.              
                           
                           
                           
    4 What business management skills and experiences do you have?            
                           
      Business management skills and experiences provide a good background for operating a small business. If you lack skills in any areas of management, you may struggle to maintain the business at a high standard. It may be necessary for you to develop your business skills prior to starting your own business. Consider how you could either develop or gain access to the skills you may lack through further training, contracting or forming a partnership with someone who has the skills you require.            
                           
       People                    
    Finance                  
    Marketing                  
       Administration                  
    Customer service                  
       Production                  
    Distribution                  
    Planning                  
    Research                  
       Selling                  
    None of the above                  
                           
                           
                           
    5 What does your past training include?              
                           
      Training provides many benefits to small business owners. It can provide you with the confidence, knowledge and ability to effectively plan and manage day-to-day business             
                           
       I have no formal training.              
       I have done a few short courses.              
       I have undergone extensive managerial training.              
                           
                     
      Do you have a sound business proposition?                
    6 Why have you chosen this business and this industry?            
                           
      Starting your own business involves a significant investment of time and resources. Therefore, it is important to make sure that the business you choose is a viable and profitable option in an appropriate industry.            
                           
     
 
I have a great idea that will make me rich.            
      I have identified an opportunity in the market.            
      I can afford to start up the business.            
      It looks easy to operate.            
      Unsure.            
                           
    7 Have you prepared a business plan?            
                           
      Preparing a business plan allows you to develop your understanding of your business by working through a number of important issues including marketing, finances, management and legal requirements.            
                           
     
 
Yes.            
      Yes, but it's incomplete.            
      No, but considering doing one.            
      No.            
      What is a business plan?            
                           
                           
    8 What do you see as the biggest obstacles in your business?            
                           
      As a business owner, you will encounter any number of obstacles that you will need to work through and solve in order to be successful. The better your understanding of the potential problems, the more equipped you will be to be able to deal with them as they arise.            
                           
     
 
Setting up the business.            
      Developing a business plan.            
      Lack of management skills.            
      Finding customers.            
      Selling.            
      Finding suppliers.            
      Operational issues.            
      Finding help from accountants and business advisors.            
      Finance.            
      Time.            
      Personal issues.            
      Employees.            
      None.            
      Can not think of any at this stage.            
                           
    9 Can you accurately describe your targeted customers in terms of age, demographics, behaviours, etc?            
                           
      A business needs to have some understanding of its customer base. A thorough understanding of the type and behaviour of the customers you plan to target will give you an advantage when it comes to utilising your marketing strategies.            
                           
     
 
Yes, in great detail.            
      Somewhat.            
      No.            
      Everyone is my customer.            
      I don't know how to identify my customers.            
                           
    10 How are you going to promote your product or service?          
                           
      Promotion involves making people aware of your product or service and then in some way encouraging them to buy it. There are many ways to promote your products using methods such as advertising, giveaways, packaging, event sponsorship, discounts and coupons, or on a website.            
                           
       Unsure of what to do.            
       Still considering the options.            
    I have defined a strategy to target potential customers.            
     
 
I don't know anything about promotion.            
                           
    11 Why will customers buy from you rather than the competition?          
                           
      For your business to become profitable, you will need to convince customers that you have something to offer that is better than what they can get elsewhere. There needs to be a sufficient reason for them to purchase from your business rather than your competition.             
                           
     
 
Price.            
      Service.            
      Quality.            
      Reputation.            
      Improved product.            
      Uniqueness.            
      Not sure.            
                           
    12

How would you describe the competition?

            
                           
      Understanding your competition will be important if you are to effectively compete with them in the market. You should be able to describe their strengths and weaknesses and develop strategies to compete and capitalise on these points            
                           
       Very competitive market with many suppliers and pressure on price.            
     
 
Competitive market, a few competitors but still some opportunities available.            
      Few, if any direct competitors.            
      None, my product/service is unique.            
      I have not assessed the competition.            
                           
    13 How do you expect the competition to react once you start business?            
                           
      Prior to going into business, you should form a projection of what your competitors are likely to do when you enter the market. Your competitors will utilise strategies to protect their market share, therefore making it difficult for you to establish your business.            
                           
     
 
They will do nothing.            
      Observe, monitor and see.            
      Advertise more aggressively.            
      Improve their service.            
      Start a price war.            
      Unsure.            
                           
    14 Do you have the right licences and permits to operate your business?            
                           
      To operate a business, you are required by law to have a number of licences and permits. Your requirements will depend on what type of business you plan to operate, its size and location and the industry you belong to.            
                           
     
 
Yes.            
      No.            
      Unsure of the requirements.            
                           
    15 Who have you contacted to prepare for your business?            
      There are many factors that need to be considered before opening your own business. Nobody can consider themselves an expert on all of them, so you should think about seeking some external and independent advice during the planning stages. Some extra time and resources spent seeking advice could save you a lot of trouble later on.            
                           
     
 
Accountant            
      Solicitor            
      Financial Institution            
      Insurance Company            
      Department of State and Regional Development            
      Business Enterprise Centre            
      Australian Securities and Investments Commission            
      Australian Tax Office            
      Office of Fair Trading            
      Australian Chamber of Commerce and Industry            
      Business Association            
      Industry Association            
      Intellectual Property Australia            
      None            
                           
    16

Have you estimated your monthly expenses?

            
                           
      You should be aware of all of the possible expenses your business may encounter during each month of operation. Before you can begin business operations, you will need to ensure that you are able to meet these expenses, whilst still making a profit in the long term.            
                           
     
 
Yes, I have developed a cash flow budget.            
      Yes.            
      Yes, but not completely.            
      No.            
                           
    17

Have you estimated your start up costs?

            
                           
      Start up costs can become substantial very quickly and are often more than business owners anticipate. Having a thorough and realistic estimation of your start up costs and following a budget will help you to avoid this situation.            
                           
     
 
Yes, I have a budget.            
      Yes, in progress.            
      No            
                           
    18 Where are you going to get your finance?            
                           
      Depending on your business proposition, you may need a very little or a very substantial amount of finance to get yourself into a profit earning position. Therefore, you need to consider how much finance you need, within what time frame and where you will access it from.            
                           
     
 
Own money.            
      Credit cards.            
      Personal loan or house mortgage.            
      Friends and family.            
      Work part or full time.            
      I haven't thought about it yet.            
      Don't know/can't get finance.            
                           
    19

Have you ever borrowed money before?

            
                           
      You may or may not need to borrow money to start up your business. Either way, your options should be considered now as you can\'t be certain that you won\'t be required to in the future. The ability to borrow money provides extra security for any cash flow or unexpected expenses you may encounter in the future.            
                           
     
 
Yes.            
      No.            
      Don't need to borrow money.            
                           
    20 What have you done to prepare for business?            
                           
      Being well prepared for business will give you the best opportunity for success. While having a good business and product idea is vital, it is unlikely to fare very well in a competitive market if you are unprepared            
                           
     
 
Talked to friends and family.            
      Attended training seminars.            
      Visited business centre.            
      Researched on the internet.            
      Talked to people in business.            
      I have previously worked for myself.            
      Nothing.            
                           
                           
    Red tape checklist                    
                           
    When you start hiring staff, there’s no shortage of red tape. P.A.Y.G., F.B.T, O.H.&S. — the list goes on. To help, we’ve prepared a checklist with some further information on the various requirements you will need to consider, including the various taxes and insurances you’re required to provide fort hem.    
                           
                           
    1.     Have all of your employees completed a tax file number declaration?   Yes   No            
    2.     Have you offered your employees superannuation choice?   Yes   No            
    3.     Do you make super guarantee payments four times a year?   Yes   No            
    4.     Do you understand the difference between a contractor and an employee for tax purposes?   Yes   No            
    5.     Do you know when a contractor is entitled to super guarantee payments?   Yes   No            
    6.     Do you have copies of relevant awards for your employees?   Yes   No            
    7.     Are you withholding income tax?   Yes   No            
    8.     Do you have a current workers' compensation policy?   Yes   No            
    9.     Do you have a written occupational health and safety policy?   Yes   No            
    10.  Do you maintain accurate wage records for payroll tax purposes?   Yes   No            
    11.  Do you provide pay slips with each employee's pay?   Yes   No            
    12.  Do your payslips fulfil the requirements in your state?   Yes   No            
    13.  Do you know whether you provide taxable fringe benefits to employees?   Yes   No            
    14.  If you bought the business, do you have a statement of existing employee liabilities?   Yes   No            
                           
    If you answered "no" to any of these questions or you want to be sure that you're sticking to the letter of the law, then read on …    
                           
                           
    1. Super                      
    Most of your employees, whether full-time, part-time or casual, will be covered by the superannuation guarantee legislation. Generally, you have to pay super for your employees if they are:    
                           
    between 18 and 69 years of age.    
    paid $450 or more before tax in a calendar month; and    
    work full-time, part-time or on a casual basis.    
                           
    Eligible contractors are also entitled to super guarantee payments, even if they have their own Australian Business Number (ABN).
                           
    As an employer, you are required to make superannuation guarantee contributions on behalf of your eligible employees at least four times a year, totalling 9% of each worker’s wage over the year. If you don't make contributions by the cut-off dates for each quarter, you'll face hefty penalties. You also need to offer your employees a choice of superannuation fund using a standard super choice form (unless they fall into one of a limited number of exceptions)    
                           
    If you are self-employed, you don't have to make super contributions to a super fund for yourself. However, you may wish to consider super as a way of saving for your retirement. Most self-employed people can claim a full deduction for contributions they make to their super until age 75.    
                           
                           
    2. Fringe Benefits Tax                    
    Fringe benefits tax (FBT) is a tax paid by employers on certain benefits provided to their employees. FBT is separate from income tax and is based on the taxable value of the fringe benefits you provide.    
                           
    If your business provides fringe benefits to employees then you need to:    
                           
    Register for FBT.    
    Understand which benefits are subject to FBT and which are exempt.    
    Keep the necessary FBT records.    
    Calculate how much FBT you have to pay.    
    Lodge a return and pay FBT to the Tax Office.    
    Report fringe benefits on your employees' payment summaries.    
                           
                           
    3. Withholding Income Tax                    
    Under the Pay As You Go (PAYG) system, you're legally required to withhold income tax from your employees’ salaries.    
                           
    If you have employees, you generally have to withhold an amount from their wages and send the withheld amount to the Tax Office.  As a new employer, you must register with the Tax Office before you withhold tax from payments to your employees.    
                           
    You do not need to withhold tax from payments to contractors. But again, just because a worker quotes an ABN, it doesn't mean that they're a contractor. Whether a worker is an employee or a contractor depends on all the facts and circumstances of how you engage them, and how the work is performed. The ATO has a useful checklist to help you decide if someone is an employee or contractor.      
                           
                           
    4. Workers' compensation insurance                
    Workers' compensation insures employees against injury or death caused in the workplace. Through workers' compensation, injured workers can receive weekly payments to cover loss of earning capacity, payment of medical expenses and vocational rehabilitation, and assistance in returning to work.    
                           
    It is your responsibility as an employer to:    
                           
    Maintain a safe workplace.    
    Maintain workers' compensation insurance.    
    Protect yourself and your workers from financial hardship in the event of a workplace injury.    
                           
    An employer who does not have a current policy may be prosecuted and be liable for steep fines, if found guilty of an offence. If a worker is injured, uninsured employers may be held responsible to pay the full cost of compensation — so make sure you have insurance!    
                           
    You should also have an occupational health and safety policy in place, and all employees should read it before they start working for you. Employers and staff alike have obligations to ensure a workplace is safe, so it's important to make sure your employees are informed.    
                           
                           
    5. Payroll tax                      
    Payroll tax is a state tax on the wages paid by employers. It is calculated as a percentage of the wages you pay each month.    
                           
    You must pay payroll tax if your total Australian wages bill exceeds the exemption threshold that applies in your state or territory. Your local revenue office can give you more information about the payroll tax rate and threshold that applies to you.    
                           
                           
    6. Payslips                      
    Your payslips must specify each worker's gross pay, the tax withheld and compulsory superannuation contributions. The requirements for payslips vary depending on state or territory legislation or the award you pay your employees under, so you'll need to check with the relevant government authority in your state or territory.    
                           
                           
    7. Buying a business                    
    Where you buy a business and you keep the existing employees, you may become responsible for any employee liabilities which have accrued up until the date of the sale. Your responsibilities regarding the reemployment of staff should be outlined in the sale contract. It's a good idea to obtain a list of employees from the seller, including their salary and entitlements and copies of job descriptions, employment contracts, and other paperwork.    
                           
    You may need to consult any relevant awards, agreements and legislation in order to gain a full picture of accrued entitlements, such as annual leave, sick leave and long service leave. You will also need to check whether compulsory superannuation payments and workers' compensation premiums have been paid.    
                           
                           
    8. Don't go it alone                    
    If in doubt about your obligations, don't try to go it alone. Start by talking to the relevant state or commonwealth authority, then get advice from an industrial relations lawyer if you need more information. The penalties for making a mistake can be significant, so it pays to be prepared.