Let’s look at 7 finance tips for starting a successful business. Avoid the common mistakes that new business owners make. In our 20+ years of experience giving advice to local entrepreneurs, we’ve seen a few things that work and a few things that don’t.
Whether your business is online or not, this advice should help anyone in Australia who’s considering starting their own business.
1. Provide a solution.
Research from CBInsights reveals that 42% of startup businesses fail because there’s no market need for their services or products. Whatever business you’re thinking of getting into, make sure that you’re actually providing a solution to a real problem. That way people will be interested in what you’re offering. Unlike The Pizza FannyPack which nobody wanted.
2. Keep it simple.
Once you’ve decided what your product or service is and who you’re trying to sell it to, don’t over complicate things, especially in the beginning. In desperation to get clients new business owners sometimes create complicated pricing structures to cover all bases. It gets confusing and becomes difficult for you to manage.
You don’t need to keep adding things to your offering to desperately try to get clients. If you have a good product/service and know who you’re targeting, keep it simple and focused.
3. Keep track of your costs.
From day 1, before you even start trying to sell, begin recording all the expenses involved in running your business. Without this you have no idea of what the real costs of operating are and without that you don’t know how much turnover you need in order to make a profit.
Without an idea of how much turnover you need you’re going to be guessing when it comes to deciding how much to charge or what volumes of sales or number of clients you need.
Banking: We recommend you keep a separate bank account for your business so that it is easier to manage and not mix up with your personal expenses. This also helps reduce bookkeeping time and costs.
4. Plan before you act.
You don’t book a trip somewhere without doing some planning. With a new business you’re investing money (potentially someone else’s too) and your time, energy and mental space. Operating a business becomes part of you and can affect every area of your life.
Take the time to do a business plan. Know what your offering is, how to communicate it, to which audience, how you’ll distribute it and what costs are involved (amongst other things you should cover in a business plan).
Test your offering, your communication, your pricing and be open to feedback before launching.
From a financial point of view you should plan the following:
- An annual budget
- Return on investment: The time it will take you to repay the initial and ongoing investment to operate your business.
- Your breakeven point: What value of sales is required to cover all your operating expenses.
- Tax. When will you pay and how will you pay tax? Who will be responsible for this?
- Cash flow. How will you manage your daily, weekly and monthly cash movements?
- Statutory and legal requirements – Registrations you have to apply for such as ABN, GST, Workcover, PAYG etc.
5. Build with the right structure.
In the past we’ve had new clients come to us at Teamwork Accounting and we’ve discovered that they were trading under the ‘wrong’ legal business structure for their type of business.
Operating under the right business structure can protect you from risk and litigation and also save you a lot of money in taxes. You can read more about the different types of business structures here on your site.
“Fantastic service. Within minutes Matthew had discovered we were being over taxed and saved us thousands. If only we had made the change sooner.”Damien Welch
Business Development Manager at Little Real Estate
6. Don’t run out of cash.
According to that CBInsights Survey, 29% of startups fail because they run out of cash.
We have seen profitable businesses struggle to survive because of cash flow issues. This particularly happens when a business needs a lot of working capital for stock and to finance debtors.
Without a good bookkeeping system and good planning, it’s difficult to know for sure how much cash you have in your business and when you can expect cash to come in or when you’ll need it to cover expenses.
Without good cash flow management new business owners can find themselves unprepared for certain expenses (like BAS payments, tax, unforeseen operating costs) and not be able to pay those bills. This can create big interest expense payments, put you into debt or force you to sell assets, or worse, close your doors.
Poor cash flow management also costs you opportunities that may pop up as you lack the resources required to act quickly when they do arise.
7. Find affordable ways to grow
It’s important to keep costs low in the early days of a new business venture, so before you go all out with your marketing, think of affordable ways to grow.
In our experience, things that we’ve seen work include:
- Business network groups (like BNI)
- Word of mouth / referrals from satisfied clients
- Affordable digital marketing
At the end of the day, the businesses that we’ve seen do best are those that provide real value. They provide a solution that’s actually needed, at a fair price, they’re professional and are people you enjoy working with.
Our last piece of advice to anyone thinking of starting a new business is to get good, reliable advice from the start, especially in key areas of your business that you’re weak in. The right advice can save you a ton of time, money and potentially your business.
At Teamwork Accounting, we don’t only handle the bookkeeping and financial accounting of our clients. We also help you to really understand the financial health and performance of your business and offer advice based on our many years of experience. Book a free consultation with us to discuss your business needs.