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I want to run my own business, so now what?
I want to run my own business, so now what?
I've heard this line on many occasions over the years. Bright eyed and highly energised potential business owners with a concept for a business that they want to run. Of course, as every experienced business owner will tell you, it's actually not that simple to run a business - successfully and profitable. There are many pitfalls and in most cases - you need to spend a few dollars before you can turn a dollar.
For those serious about setting up a business for long term success – this article is going to cover the very unexciting topic of where you need to spend your money.
This subject is considered to be so dull by many, that they will have not even read this far - but…..there is a lot of money to be lost if you get these things wrong.
When you set up a business - you need to do it with the view of where you are going to be in the future. The business structure must be able to adequately support the business of the future – and not just of today. To put it another way, if you were building a house, you would lay strong foundations which can carry the weight of the walls and the roof. If would seem silly to lay a foundation which could only carry the weight of the walls, yet in a business context, many business owners do exactly this. The “cheap” business foundations are used, primarily because they are cheap or quick, or both.
To lay some quality business foundations, consider the following;
In today’s world, not only do you need to secure your preferred business name, but you also need to secure the appropriate domain name and consider the trademark. When all three elements are considered, it is more difficult to secure the perfect name - but it is so much cheaper to get this right up front, than to have to rebrand and change later.
You'll hear terms such as Sole Trader, Company and Family Trust. So, which one? The reality is that all three have merit and are appropriate for a different set of circumstances. The costs for each vary significantly, but they provide different options for ownership, risk protection, taxation, asset ownership and capital gains (just to name a few), so it’s an important decision to get right. Too many times I have seen the cheap option taken up front, just to see many thousands of dollars in cost down the track to correct it. Get some quality accounting and legal advice up front.
Common issues to discuss with you solicitor include ownership structure, trademark protection, employee contracts, buy-sell/shareholder agreements, trading terms and conditions. An experienced lawyer will not be cheap, but a few dollars spent now could avoid significant cost and heart ache down the track.
I find that most business owners will have their vehicle insured - however when it comes to themselves, their tools, their management actions, public liability, premises, business interruption (cash flow) etc, the numbers drop away quickly. Insurances premiums can be expensive, but they tend to be insignificant compared to the potential cost of not having them. A good broker can provide a clear definition of the different types of insurance - aligned with the appropriate risk assessment of your business.
With the ever-growing level of technology in business, the electronic business card (website), is something that just about every real business will have. Not all websites were born equal – with different levels of security, functionality and reliability – not to mention design, available in the marketplace. Often the desire is to go for something quick and cheap, but I typically find that most business owners gravitate to a better-quality site over time. Hence, if you are serious about the long-term prospects of your business, then this is an area where I would go for a better site the first time around.
Computers, printers, VPNs, backups, printers, tablets, phones,..... businesses these days run on technology. Unless you are appropriately skilled in this area, do yourself a favour and employ someone to advise the right equipment and set it up for your use. When it comes to the discussion about security and backups – my guidance is that you should listen. I have seen too many businesses crippled because they skimped on a small monthly fee, yet they lose days of productivity whilst their system is rebuilt or recovered.
Design & Print
Generally, all businesses need some design work completed, albeit some will only ever use this in an digital environment. Designers I have used have the tools and creative flare to do amazing things - things I could never have done. Equally, a quality printer will recommend different products, cards, and finish’s which can give your material the extra pop to differentiate your collateral from the rest of the market. Many new businesses will do their own design and production via one of the online providers - so if you wish to do this, increase the quality of the product and reduce the volume. This will drive a better product and minimise wastage, as collateral items tend to be ever changing.
Prior articles have talked about the value of a quality Banker and the need for good cash controls and volumes in your business. At the start however, the business needs are simpler with transactional and merchant needs the most common. For transactional needs - look for good access and connectivity with modest fees. For merchant needs - seek something that is easy to use, has moderate fees with fast settlement times. Be careful about long term contracts as these can be restrictive and check for online merchant functionality (for down the track) if you need it.
If you have a strong understanding of accounting principles, then by all means do your own bookkeeping with one of the many online software packages. If you don’t, then engage a bookkeeper to assist. You need quality data to run your business and to meet your Tax/GST reporting obligations - so it’s more cost effective to get it right up front.
Now if you are a new business owner sitting there reading this article, you may feel that I'm over complicating things and spending lots of your money.
Over complicating – No, just mapping out several areas where I have seen business owners waste a lot of money over time.
As far as spending money – Yes, we are spending some of your money, but having seen the consequence of not investing in these areas up front, I know that it’s saving you a lot more down the track.
Running your own business can be incredibly satisfying and if run correctly, can create considerable wealth along the way. This success however is grounded by the quality of the decisions that you make each day, with this note designed to aid you making the best decisions today – so you can save money tomorrow.