5 things to know before you start a small business

Are you looking to start your own business? It can be an exciting endeavour; but could mean some changes to your financial situation.

Is it a business or a hobby?

This is a critical question you should be asking yourself. As a business, you will ultimately function with a view to profit so you will need to consider a range is issues, including in tax, insurance and legal obligations. A hobby is what you enjoy doing in your leisure time. For example, mountain biking, surfing, painting, writing, reading and visiting art galleries.

When you start a business, you may be required to register and licence your new enterprise. This is where the Australian Government’s ‘Australian Business Licence and Information Service’ (ABLIS) can come in handy if you have any doubts or questions about setting up your own business.

The ABLIS can help you with:

  • A summary of state or territory, local and Australian government requirements relevant to your business
  • Information about licence fees, how to apply, periods of cover and renewals
  • How to access application and renewal forms
  • Where to go for more help and information.

Marketing your business

You will need to think about how your products or services are different from others in the market. Do you have a unique value proposition? For example, you may be the only candle shop in your local area that has contact with a supplier that sells orange scented statue candles.

You may want to consider whether or not you will need a website and what functionality would best help you to sell your products and services.

Managing your business finances

Managing your business finances can be critical to the success of your small business. For a small business, developing a cash flow forecast and managing cash flow can be more challenging compared to larger and more established businesses. Things to consider include:

  • raising start-up capital
  • record keeping
  • cash flow control
  • budgeting
  • credit management
  • insurance
  • future capital for expansion.

Managing taxation for your business

If you’re just starting out, more than likely, your small business will have an annual turnover of less than $2 million. If this is the case, you should investigate whether you qualify for any small business tax concessions from the Australian Tax Office (ATO). To find out more about these tax concessions for small businesses, visit the ATO website or contact the Australian Government’s ‘Small Business Assist’ service. They can provide you with easy access to information regarding taxation matters for small business.        

Recruiting employees

Before venturing down this path, you may wish to investigate such things as minimum rates of pay, payslips and even leave entitlements for your new employee/s. You will also need to consider payroll tax, superannuation and insurance. These requirements can be different across Australian states and territories so make sure you have a complete understanding of your obligations as an employer.

The recruitment process can take a large part of your time, however, you may find it as a good opportunity to identify skill gaps within your small business and factor this into your recruitment planning. The right candidate can really make a difference to the productivity of your small business.

Starting a small business isn’t always easy and there are many financial decisions you will need to make to get your business up and running. Hopefully, you now have a better understanding around what is involved when starting your own business.

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Important Information

This article has been prepared by IMB Bank and contains general information only. It is not intended to be relied on as advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal,  financial, taxation or other professional advice before you make any decisions about your business. Consider the relevant Terms and Conditions or Product Disclosure Statement and Target Market Determination available here before deciding whether to acquire any products or services offered by IMB Bank. Lending criteria, terms and conditions, fees and charges apply to IMB loan products.

IMB Bank does not recommend any third party products or services referred to in this article and we accept no liability in relation to them. Any links to third party websites are for your information only and we do not endorse any content on those sites.