How to turn your great idea into cash
A new financial year is an ideal time to turn a money-making idea into something serious.
Whether you're looking to start a side hustle, become full-time self-employed or begin a new small business, there are some important factors to consider.
A business idea should always begin with a plan, although not necessarily a large one, say small business specialists.
And you must have some basic financial forecasts.
The Council of Small Business Organisations Australia's CEO, Peter Strong, said many people had a great idea, got excited and started working on it without knowing how expensive it would be to operate.
"Where are you getting the money? What are the costs?" he said.
"Make sure you're going to have a business that makes money."
Mr Strong said understanding the rules around GST and other taxes
was important for many business start-ups, and professional help was crucial.
"Get advice every time," he said.
"If you don't get advice, you are asking for trouble."
New business owners often bought into franchises, Mr Strong said, but he warned people not to be too trusting because some franchisors profited much more than their franchisees.
"A classic personality of a business owner is they are trusting and optimistic," he said.
"A pessimist won't open a business."
Australia has between 2.2 and three million small businesses, depending on what statistics you read.
The lines have blurred in recent years with a surge in people signing up to the gig economy for things such as ride sharing and delivery services.
All fall under the small business umbrella, and it's an umbrella that loses more than 30 per cent of its participants within four year of starting.
Some move on to other work or businesses, some sell for a profit, others don't succeed through poor planning.
The Coalition has a policy of creating 250,000 new small businesses within five years, so there will be plenty of opportunities.
SECRETS OF SUCCESS
Xero Australia & Asia's managing director, Trent Innes, said it was important for anyone with a business idea to avoid getting overwhelmed.
"Starting a business is a process and it will take time," he said.
"Not many businesses can say they were an overnight success. Starting your business isn't one big decision - it's a lot of small decisions."
Mr Innes said Xero had surveyed more than 2000 businesses to identify recipes for success of business owners, and found four key ingredients:
• Maintain work-life balance and use automation to take over less-productive tasks.
• Form strong relationships with an adviser, discussing ideas and issues rather than everyday transactions.
• Invest intelligently in areas such as marketing and technology.
• Keep on top of finances.
"Poor cash flow is typically cited as the number one reason for a business's failure," Mr Innes said.
"Xero's own research suggests that only one in two small businesses will survive beyond five years.
ONE PAGE TO START
Mr Innes the initial steps to starting any business were assessing the idea and writing a one-page business plan.
"Does it have legs?" he said. "What's your goal and how do you intend to get there?"
A longer-form business plan with finer details, sales forecasts, market research, budgets and financing should only follow once the initial idea is written down.
The Commonwealth Bank's executive general manager of small business banking, Claire Roberts, said many business ideas started from personal interest or passion but required more thinking to turn them into reality.
"Make sure you have a comprehensive business plan to better understand the environment you will operate in, your target customers, your unique value proposition and your business goals," she said.
Ms Roberts said small business operators were increasingly using data and analytics to help with decision making, staff management, marketing and cash flow.
"Gone are the days where businesses can rely on gut feel," she said.
"We see so many bold ideas and so much innovation in the small business space particularly as industries merge and digital offerings increase. We are seeing more and more business decisions from small businesses being driven by solid data, and that's fantastic to see."
AVOID THE TRAPS
Every start-up business owner, no matter how small their operation is, wants to do well.
Ms Roberts said this would require an understanding of the changing expectations of customers, finding out what set you apart, and being disciplined when spending money.
Learning from mistakes is vital.
"Rarely anybody gets everything right the first time, especially in the complicated small business world," she said.
"It's important to quickly learn from these shortfalls and make the necessary changes to ensure it doesn't happen again."
Business owners always need to listen to customer feedback, and should also listen to mentors and other business owners.
Ms Roberts said people also needed to learn to let go of some control and delegate roles where possible.
"Business owners can get stuck working in the business and not on the business," she said.
"If you can, bring other people in to free more time to work on the strategic direction of the business, instead of being stuck in the day-to-day operations."
Even if you're a sole trader, there are ways to delegate thanks to technology including cloud-based apps, budgeting tools and online accounting software.
Mr Innes said business owners who embraced technology benefited from advanced analysis, productivity gains and "flexibility to do your work where and when it suits you".
"One of the most important relationships for any business owner is the relationship between you and your accountant or bookkeeper," he said.
"It's best to engage an accountant as soon as you decide to start your business."
The business.gov.au website has plenty of free advice, planning tools and templates, plus links to advice and support services.
SEVEN STEPS TO GET STARTED
1. Write it down on paper. A one-page business plan is a great starting point to outline your goal and how you plan to reach it.
2. Ask yourself who the customers are. If there's no customers, there's no business. How will you attract them and keep them?
3. Calculate your costs. Try to forecast the income and expenses for the first year. Create a budget that includes your financial outlook.
4. Write a longer-form business plan. Examine areas such as marketing, your unique proposition and business goals.
5. Seek advice. Accountants, bookkeepers, business coaches and specialists in your field of business can all help. Don't be afraid to pay for good advice - it can pay you back in spades.
6. Register your business. Understand your obligations around tax and reporting. You may need an Australian Business Number, Australian Company Name, Business Tax File Number, GST registration, permits, licences and certificates.
7. Get technology support. Business tools and accounting software can be a huge help and digital payroll reporting is mandatory for all employers from July 1. You may need help setting up a website and social media accounts.