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Research Report
Economic Setting of Business

BBA 5

Course
BBUS 412
Introduction to Business

Presented To,
Prof. Mansoor Anis

Presented By,
S. M. Hussam Haider Tirmizi
Dedication

Dedication to parents with love and respect,


who brought me to the level of excellence
where I am standing today and looking for
the most promising future ahead for which
they sacrificed their most past.
Acknowledgements

I am extremely thankful to Almighty Allah for


his grace and mercy and granting me the
ability to accomplishing this task.
I would like to acknowledge a special debt of
gratitude to my Teacher and research
adviser,
Prof. Mansoor Anis
For the generosity with which he gave of his
time and experience. I am also obliged for
his kind and understanding behavior that
really made this project possible to achieve.
I thank to my family as well as Sir Hunain
Khanani for the warmth of appreciation,
love and infinite co-operation.
CONTENT PAGE

1. Synopsis 1
2. Preface 2
3. Are you ready to start a business? 3-7
3.1. The reality of starting a business 3-4
3.2. The challenges of running a business 4-5
3.3. Assess your business skills 5-6
3.4. Outsource, recruit or improve business skills 6-7
4. Will your idea work? 7-9
4.1. Research the market 7-8
4.2. Protect your idea 8-9
4.3. Commercialize your idea 9
5. Turning your idea into a business 9-13
5.1. Professional advice 10
5.2. Business plan 10-11
5.3. Market research for your business 11-12
5.4. Starting, buying or franchising 12-14
6. 7 steps to business success 14-19
6.1. Consider your suitability 14-15
6.2. Consider your idea 15-16
6.3. Consider your market 15
6.4. Consider your competition 16-17
6.5. Consider your environment 17-18
6.6. Consider your financial control 18
6.7. Consider your start-up costs 19
7. Establishing your business 19-23
7.1. Business structure 20
7.2. Business and company name 20-21
7.3. Premises and leasing 21
7.4. Finances and expenses 22
7.5. Banking 22-23
8. Meeting your legal obligations 23-31
8.1. Legal requirements 24-25
8.2. Licenses, permits and regulatory requirements 25-26
8.3. Taxation 26
8.4. Record keeping 27-28
8.5. Intellectual property 28-29
8.6. Insurance 29-30
8.7. Employing staff 30-31
9. Preparing Your Small Business for Hard Economic Times 31-34
9.1. Eight ways a business can survive and prosper in a downturn 31-33

9.2. Tending to Business: Improving your company in a bad


economic setting 33-35

10.References 36
Synopsis

The main objective of the research report to study the economic setting of
business that is the starting of business. As well as in this research report it is
discussed that what problems you will face in starting or later during business.
The report consists of seven chapters.

First chapter is about different realities and challenge of business and gives idea
how to access your business skills outsource, recruit or improve business skills.

Second chapter discusses the ways you can assess and develop your business
idea.

How to implement an idea in to a business is discussed in third chapter.

In fourth chapter, seven keys steps for success of any business are discussed.

In fifth chapter, different aspects of establishing a business like business


structure, business and company name, premises and leasing, finances and
expenses, and banking are discussed.

Sixth chapter discuss all the legal obligations of business.

How to prepare your business for hard economic time or recession is discussed in
seventh and last chapter of this report.
Preface

Economic setting of business


Running your own business can be a very rewarding and fulfilling experience. On
the other hand it can be difficult, time-consuming, costly, and both physically and
mentally draining. You also need to remember the very real statistic that only in
five of all new businesses will survive the first five year of trading.

It is absolutely essential that you have the right reasons for wanting to start and
run your own business. If the idea of establishing a business is the only option
that you have then I would strongly urge you to think again. It is not an easy
option and unless you consider that it is the right option for you, it is more than
likely you will become one of the failure statistics.

However, if you have decided that you really want to start your own business then
this report is for you. It covers all the essential points you need to know and think
about before you actually go ahead. Even if you already operate your own
business, it will prove invaluable in contributing to your ongoing success.

There era no secret tricks to being successful in business. Success will only come
through hard work and through always offering something that the consumer
wants, at the price, in the right place, and in the right quantity. On a final note,
you must always remember that you must never lose sight of the fact that you
are also in business to make money. Without ongoing profit you will eventually
fail.
Techniques

Are you ready to start a business?


Running your own business can be a rewarding experience. However, it can also
mean long hour’s hard work and frequent challenges. Before you start your
business, it is important that you understand the reality, and the challenges, of
running a business.

Take the time to assess if you have the right skills to run a business successfully,
and to identify any skills you may need in the future. If you don’t have the right
skills, identify the ones you could outsource or employ someone to look after. A
wide range of training resources is available for you and your employees.

This report will help you to start a business, and point you in the right direction
for further information and advice.

 The reality of starting a business


 The challenges of running a business
 Assess your business skills
 Outsource, recruit or improve business skills

The reality of starting a business


Starting and running a business has many benefits. You can be your own boss,
achieve your dreams and enjoy more flexibility. However, the reality of running a
business can involve more hard work, frustration and setbacks than you might
imagine. An important step in assessing your suitability to start a business is to
consider the realities you may face.

Think about your incomes


The reality of running a business is often long hours, no holidays and little
income. If your business does make a profit you may choose to invest this money
back into the business rather than pay yourself a salary. If you can afford to
receive a salary, the amount and frequency of payments may be affected by the
profits and expenses of your business.

Consider your family


There can be a big difference between working as an employee for someone else,
and running your own business. You may feel that you need to spend as much
time working on your business as possible. If you do not have set hours and you
can’t afford to take annual leave, this can decrease the amount and quality of
time you spend with your family.

Assess your personality


While starting and running a business requires many skills, it is also useful to
assess your personal attributes. How do you handle pressure? Do you have a
positive personality? Can you work well under stress? Do you enjoy interacting
with other people? Answering these questions can help you to decide if you are
ready to start a business.

Reflect on your goals


When you run a business you may find that you simply do not have the time or
money to meet your personal goals. Enjoying a dream holiday, paying off the
mortgage and spending more time with children are all personal goals that you
may have to postpone as you work toward achieving your business goals.

The challenges of running a business


Starting a business can be risky, and not all businesses succeed. New businesses
often fail during the early years. I recommend that you seriously consider the
following causes for business failure. Understanding what can go wrong, and how
these challenges would affect you and your family, can help you to decide if you
are ready to start a business.

Market potential
Before you start your business, thoroughly research your market. Many
businesses fail because the market for their products or services is too small to
support them. It isn’t enough to know that a market exists for a product or
service; you must also investigate the strengths and weaknesses of existing and
potential businesses so you don’t underestimate the strength of your competition.

Capital
Carefully consider your capital requirements when planning your business. You
will need sufficient capital to sustain your business until it begins to break even or
consistently return a profit. You could also use financial benchmarking data to find
out what funding might be required to start your business.

Business plan
Prepare a detailed business plan to help you set out clear goals for sales, growth
and expenses. Operating without a business plan can cause a business to lose
direction and exceed its budget.
Growth
Carefully plan growth to give your business a much greater chance of success.
Some businesses expand too quickly, putting pressure on their financial and
management structures and damaging the quality of their products or services.

Location
You may struggle to attract customers if your business is difficult to find, hard to
access, and surrounded by competitors. Retail businesses in particular require a
prominent and easily accessible location.

Getting started
There are a range of start-up activities to complete when you start your business.

Assess your business skills


Running a business requires many different skills. I recommend that you assess
your business skills to help you understand which skills you may need to improve
or learn before you are ready to start your business.

General business management skills


 Can you delegate tasks?
 Do you have problem-solving and decision-making experience?
 Do you know how to maintain and control stock levels?

Interpersonal skills
 Can you lead, train, supervise, motivate and mentor employees?
 Do you know how to communicate and negotiate with employees and
customers?
 Are you familiar with requirements for staffing and human resources?

Entrepreneurial skills
 Do you have an entrepreneurial spirit?
 Do setbacks motivate you to try harder or do you become frustrated and
give up?
 Can you turn your ideas into a business?
 Do you know how to research business ideas?

Financial skills
 Are you familiar with profit planning, financial forecasting, and cash flow
management and budgeting?
 Do you know how to complete payroll? Pay superannuation?
 Can you cost your supplies, overheads and labor to price your products or
services effectively?
 Can you manage purchasing for the business?
 Do you know how to manage creditors?
 Do you have bookkeeping skills?
 Do you know your requirements for tax, goods and services tax (GST)
and business activity statements (BAS)?

Technical and specialist skills


 Do you have technical or specialist skills related to your industry?
 Do you have any transferable skills?

Marketing skills
 Do you have strong written and oral communication skills?
 Can you analyze your competitors and your customers?
 Do you know how to research the market, test your product and advertise
your product?
 Are you familiar with different marketing channels?
 Do you know the best way to promote and sell your product or service?

Outsource, recruit or improve business


skills
Before you start a business you may intend to take on every role yourself to save
money and keep control of the business. This can cause problems if you do not
have the right skills, or the time to look after each area of the business. It might
also be difficult for you to sustain this level of work as your business changes and
grows.

Outsource tasks
Teaching yourself specialized skills is often unnecessary when you could hire a
professional to work more accurately and economically. Even if you have the
skills, it may be a good idea to outsource complex or time-consuming tasks so
you can spend more time working on your business.

Recruit employees
You do not have to be an expert in all areas of your business. However, it is useful
to have a basic understanding of key skill areas so you can recruit the right staff
to help you.

Improve your skills


There are many ways to improve your business skills, as well as the skills of your
employees. You can:

 Enroll in university or other learning institutions, including courses


available online.
 Attend workshops and seminars.
 Join any industry association for networking, training and conferences
 Find a mentor with the Mentoring for Growth or Small Business
Solutions programs
 Read industry publications, magazines, journals and books.

As your business grows, or your role changes, I recommend that you regularly
assess your skills to identify any additional skills that you may need.

Will your idea work?


Whether you have a great idea to start a new business or intend to develop an
idea within an existing business, thorough research is essential. You need to find
out if:

 Your idea can be developed


 There is a market for your idea
 Your idea is financially viable
 You can protect your idea.

Researching your idea helps you to decide if you can turn it into a business. Your
research may tell you there is a market for your product or service, or you may
find information that persuades you not to pursue your idea (e.g. competitors
might also be starting up or the target market might be too small).

This guide discusses the ways you can assess and develop your business idea.

 Research the market


 Protect your idea
 Commercialize your idea

Research the market


Researching the market for your idea before you start a business or develop an
existing one will help you to work out if your idea could succeed. Market research
allows you to collect and analyze information about your business market, so you
can consider your idea’s merits before you go into production or begin
advertising.

As you develop your idea there are 4 key questions to answer.

Does your idea solve a market need?


It’s not enough to have just an idea - if you want to succeed, your idea must have
a market. Researching the market will tell you whether a demand exists for your
product or service. If so, will your customers be willing to pay a price that gives
you a suitable profit margin?
Who will buy your product or service?
The size of your target market is a major factor in deciding whether your idea is
viable. If your idea interests only a small group of customers, a business selling
that product or service may not succeed. Conversely, if your target market is
large you may find there are many competitors with similar products or services.

Why is your idea different?


Can your product or service improve on what your competitors are offering? It
could be better designed, stronger, faster, cheaper, easier to use or more
environmentally friendly. Understanding why your idea is different means you can
promote this feature to your target market.

Who are your competitors?


You must understand your competitors as well as your target market. Studying
your competitors tells you how your product or service is different to theirs, what
prices they sell for, and how they promote their business.

Protect your idea


Your idea may be truly innovative, or it may be an improvement to an existing
product or service. While you cannot copyright your idea, you can protect your
intellectual property (IP) through patents, trade marks and designs.

Intellectual property (IP)


“Represents the property of your mind or intellect” While it is important to
protect your IP, it is equally important that you do not infringe the IP ownership
of others. Understanding which patents, trade marks and designs are already
registered can help you to avoid serious legal and financial problems. This
research can also tell you what other products and services are already on the
market, or are about to be introduced.

IP is a complex area and I strongly recommend that you seek professional advice.

Patents
A patent is a “right granted for any device, substance, method or process
which is new, inventive and useful”. You can apply for a standard patent or
an innovation patent to protect your invention.

Trade marks
A trade mark is a “word, phrase, letter, number, sound, smell, shape, logo,
picture, aspect of packaging or a combination of these”. As trade marks
should distinguish the products and services of one business from another, it is
important to search IP for existing trade marks.
Designs
A design relates to the “features of shape, configuration, pattern or
ornamentation which, when applied to a product, gives the product a
unique appearance”. Designs cannot be registered unless they are new and
distinctive, so you should search IP for existing designs.

Copyright
IP explains that copyright protects the original expression of ideas, not the ideas
themselves. Copyright is unlike other forms of IP as it is free, automatic and you
do not have to apply for it. It is good practice to put the © symbol and date on
any work your business produces - including your website.

Commercialize your idea


Commercializing your idea is the process of turning your idea into a product or
service and making money from it.

I recommend you seek advice from an accountant, solicitor, business adviser or


mentor to help you to assess whether you are ready to transform your idea into a
business.

Turning your idea into a business


Starting a business can be challenging as well as satisfying. To give your business
the best chance of success, you need to fully understand what is required.

It is important that you take the time to thoroughly research and plan your
business before you begin operating.

This guide will help you turn your idea into a business.

 Professional advice
 Business plan
 Market research for your business
 Starting, buying or franchising

Professional advice from your business adviser, mentor, lawyer, accountant,


financial adviser, banker or insurer can help you to set up your business to
minimize your risk of legal or financial problems.

Professional advice
It is essential that you have the correct information when starting and running
your business. A good adviser has expert knowledge of a subject, and can explain
any rules and regulations that apply to your business.
Ask about fees
When choosing an adviser we recommend that you ask for information about
their fees upfront, as fees will vary. A higher fee may indicate the adviser has
plenty of experience. A lower fee may not be a bargain if the adviser has less
experience. An adviser can save you from making costly mistakes, so find the one
that is best for you.

Do your research
Meet with potential advisers to discuss their fees as well as their qualifications,
experience and how they can help your business. Request the contact details of
current or previous clients so you can ask them for feedback.

Seek advice from multiple advisers


You may find that you need to ask more than one adviser for assistance on the
same area. For example:

 Your accountant can help you to analyze your cash flow so you know how
much of your budget can be spent leasing premises.
 Your solicitor can help you to investigate and understand a business
premises lease to avoid unexpected rent rises.
 Your insurer can help you to take out the right level of insurance cover to
protect your business.
 Ask your network of business contacts to recommend advisers.
 Research potential advisers to make sure they have experience helping
start-up or small business owners.

Business plan
Your business plan will be a guide to starting your business and will help you turn
your idea into reality. A business plan details how you will handle all the
important aspects of your business. It maps your current situation, identifies your
goals, and allows you to plan for the future.

A well thought out business plan can make it easier to secure finance to start
your business. It can also help you to attract buyers if you want to sell your
business.

What’s in a business plan?


Your business plan combines several other plans that can often stand alone. This
can include:

 An executive summary
 A business profile
 Product or service and market analysis
 A marketing plan
 A legal and risk management plan
 An operating plan
 A management and personnel plan
 A finance plan
 An action plan.

Review your plan


Your business plan should be a living document that is reviewed and updated
regularly. Using your business plan as an operating guide for your business will
help you to make the most of new opportunities, identify potential risks, and act
before they occur.

Market research for your business


Market research helps you to understand your customers, your competitors and
your industry. It will tell you:

 Who your customers are, what their needs are, and how much they are
willing to pay for your product or service
 Who your competitors are, what they sell and for what prices.

 Market research helps you to make decisions about many important areas
of your business (e.g. pricing and marketing of your goods and services,
the location of your business, how you plan to compete with similar
businesses).

Research, develop and review


Market research is a cycle. You research your market, develop and implement a
marketing plan, review and improve, and then begin the process again. Sound
market research will help you to understand how you can compete with similar
businesses, attract new customers, and take advantage of opportunities.

Research your customers


 Who are your customers? Where are they? When will they buy? Why will
they buy?
 What does your target market expect of your business in areas such as
price, performance, reliability and presentation?

 You could survey a wide range of potential customers in public places such
as shopping centers. Learn more about your customers by asking them for
feedback after they contact your business.
Research your competitors
 What products or services do your competitors sell, and for what price?
How do they market their business?
 What are your competitors´ current turnovers, market shares, pricing
structures, availability of products or services, supply chains and
competitive advantages?

You can find valuable information about your competitors by reading their
marketing material, contacting their suppliers, contacting licensing bodies,
shopping in their store and reading their website.

Research your industry


Are there any political, legal, economic, social and cultural issues that will affect
your business?

Research your industry and the wider world by staying in touch with mainstream
newspapers and magazines and new media such as blogs. Read trade journals,
become a member of your industry organizations and attend industry expos and
trade shows.

Finding accurate information


There are many ways to conduct general market research, but it is crucial that
you obtain data and information that is specific to your business. So your market
research will point your business in the right direction.

Starting, buying or franchising


Consider all the options available to you – starting a business, buying an existing
business, or going into a franchise. Choosing the best option can be the difference
between running a business that makes you money or one that costs you money.

Starting a business
Advantages

 You have complete control over the business.


 You can choose and set-up every aspect of the business (products and
services, premises, equipment, suppliers, staff).
 You can develop your business and grow over time.

Disadvantages

 It may be difficult to obtain the initial finance.


 You may not have an established customer base, and you may have to
compete with strong, existing businesses.
 Your business may not be profitable at first.
Buying an existing business
Advantages

 There is an existing customer base.


 You do not have to purchase equipment and stock.
 Previous financial records give you an estimate of running costs and
profits.

Disadvantages

 The business may have financial or legal problems.


 The business’s success may depend on the skills and experience of the
previous owners.
 The previous owners may be selling as they see tough times ahead so you
may not be able to grow or expand the business.

Going into a franchise


Advantages

 You are supported by the franchisor and have access to training,


information and resources.
 Market exposure is higher than with most businesses as your business is
an established brand.
 Your expenses may be lower through the collective buying power of the
franchise.

Disadvantages

 You cannot run your business independent of the franchisor.


 If you want to make changes to your business you may not be able to. You
can be restricted by your franchise agreement.
 Your reputation can suffer if other franchisees have a poor reputation.

Seek advice before you sign


You must obtain professional advice before you start or buy a business, or go into
a franchise. Your solicitor, accountant and business adviser can help you to
thoroughly examine a business or franchise before you sign a sales contract or
franchise agreement. I recommend that you consult advisers who specialize in
buying or franchising, as they have the experience and knowledge to help you
avoid any problems.

Starting, buying or franchising checklist


 Speak to your business mentor, solicitor and accountant for advice on
starting, buying or franchising.
 Find out if running a home business would suit you.
7 steps to business success
Starting your own business is a rewarding and challenging career option.
However, be aware that a high percentage of new businesses fail in their first 3
years of operation due to poor planning and management.

Following 7 steps will help you improve your chances of success.

1. Consider your suitability


Start a business where you already have industry or management
experience.
2. Consider your idea
Assess the merit of your business idea and determine whether people will
be willing to pay money for your product or service.
3. Consider your market
Develop a way of consistently reaching your customers - your business
needs them to survive.
4. Consider your competition
Keep a close watch on your competitors - you will need a competitive
advantage to succeed.
5. Consider the environment
Keep in touch with what’s happening in your industry.
6. Consider your financial control
Keep accurate and up-to-date financial records and carefully manage your
cash flow.
7. Consider your start-up costs
Make sure you have enough money to cover your start-up.

1. Consider your suitability


Will this business let you achieve all your goals?
 Make a list of all your goals (e.g. business, family, health, spiritual,
financial, social).
 Which goals will this business help you achieve?
 Identify areas of potential conflict. How can you eliminate or reduce
conflict between goals?
 What goals are absolute priorities? What goals are you willing to
compromise?

Do you have the right skills and knowledge for this


business?
 Review your strengths and weaknesses.
 Investigate the skills and knowledge that other people have in this
industry.
 Make a list of the training you need. Include managerial and business
training if you are not experienced in managing a business.
 Consider whether you are ready to start a business.
Do you have the motivation, time and energy to
operate this business?
 Ask family and friends if they support your decision to go into business. Do
they believe you have the necessary personal qualities?
 Think about what motivates you. How will you stay motivated through
difficult times?
 Consider how much time you can realistically devote to the business. Are
you in general good health? Long hours and stress can affect your energy
and motivation.
 Do you have someone who will help you stay motivated? Are your family
and friends supportive?
 Build up networks of people doing similar things to you, so you can learn
from and motivate each other.

2. Consider your idea


Will people be interested in what you are offering?
 Ask a wide range of people what they think about your idea. Would they
buy your product or service? Why or why not?
 Conduct some market research to test whether there will be adequate
demand for your product or service. Research your market using the
internet, newspapers, magazines, trade directories, local, state and
university libraries, research institutions and publications from market
research organizations. Interview family and friends. Adapt your own
surveys.

Have you considered a range of business ideas?


 Make a list of the advantages and disadvantages for different options, such
as buying a business, franchising or starting from scratch.

Is there enough demand for your product or service?


 Ask people working in your industry about the level of demand for similar
products or services. Sometimes people in similar businesses are willing to
help, but, if not, try talking to suppliers or businesses interstate who are
not your direct competitors.
 Consider observing other similar businesses to determine the level of
demand and survey customers to find out the average sale value per
customer.
 If it is a new idea, be sure to conduct market research to determine the
level of demand.
 Contact relevant industry associations for information from experienced
and helpful people in your industry.
3. Consider your market
What type of people will buy from you and who will you
target?
 Make a list of characteristics of the people who will buy your product or
service.
 Where do the majority of these types of people live? Perhaps you need to
do a bit of research to find this out.

How will you reach different segments of your target


market?
 Identify smaller groups of people with similar characteristics who might be
seeking similar features or benefits from your product.
 You may need to sell and market differently to each segment. What sort of
marketing strategies will you use for different segments?

Do you have enough time and money to devote to the


initial marketing?
 Consider how many people you need to reach to achieve your expected
level of sales.
 Consider the cost and time of each promotional campaign. In the first year
or two you might need to spend a lot of time and money gaining new
clients before you can rely on word of mouth, referrals and repeat clients.

4. Consider your competition


Have you researched the level of competition for your
product or service?
 Assess the level of competition for your product or service in your
particular location. Use online resources and directories to determine the
number and type of competitors based around your potential business
location.
 Does the level of competition mean that you should consider a few
different locations?
 Are there benefits to being located near your competitors?

What do your competitors offer?


 Find out what products and services your competitors provide. Collect
flyers, price lists and any other material from your competitors.
 Consider purchasing from your competitors to assess their product or
service.
 Compare advertisements and websites your competitors use. Are there
similarities or differences in what they are offering?
What can your business offer that is better than your
competitors?
 Consider what features and benefits customers are looking for and what is
not currently provided by your competitors.
 What features or benefits of your product or service differ from what your
competitors provide?

5. Consider your environment


What external factors might affect your business?
 Can you identify any trends or impacts that could affect your industry?
These factors may have a positive or negative effect.
 Think about political, global, technological, social and environmental issues
such as climate change and water restrictions.
 Think about the different types of risks associated with operating a
business, such as potential loss from fire or injury, or the impact of higher
energy costs, and the possible flow-on effects to your business. How will
your business deal with the various types of risks?
 What are the features of your location and how might this impact on your
success?

What internal factors might affect your business?


 What will be the strengths and weaknesses of your business?
 How will you use your strengths to your full advantage?
 What strategies can you put in places to address your weaknesses?
 Will your strengths make up for your weaknesses?

What is the future outlook for the industry you are


entering?
 Try to find out more information about trends in your industry by visiting
your local library, searching the internet or reading trade magazines and
newspapers on a regular basis.
 Is your industry predicted to grow or decline? What impact do you think
this will have?
 What are the growth areas in your industry?
 Ask your relevant business and industry associations for research
conducted on your industry.

6. Consider your financial control


What are your start-up costs?
 I recommend overestimating, rather than underestimating, your start-up
costs.
 Consider finance. How will you fund your start-up?
 Use financial benchmarks to understand what some of your costs might
be. If there are no benchmarks for your industry, talk to your
relevant industry association.

Can you generate enough income to cover your costs


and make a profit?
 Calculate key figures such as break-even point, gross profit and net profit.
These will help you estimate the level of sales you need to cover costs and
make a profit. If you are uncertain of how to calculate these terms, visit
an accountant or undertake financial training.
 What level of profitability can you expect?
 If you need extra finance you must develop a business plan for your
lenders or investors, complete with a cash flow projection.

What will you charge for your product or service?


 Contact competitors to find out what they are charging for similar products
or services.
 Collect flyers and advertising brochures. Collect information on the
specials and promotions that your competitors offer.
 What is the worst-case scenario?
 Estimate how long you can survive without making any money from your
business. What if interest rates rise or fall? What if finance is not available
to the extent you need?
 Develop a household budget to manage your money until the business
starts earning income.
 Get an accountant to help you prepare cash flow forecasts and develop
your record-keeping system.
 If your business is unsuccessful, will you have the ability to earn income
from other sources and repay debts?

7. Consider your start-up costs


Have you considered all legal and regulatory issues of
starting a business?
 Have you considered what business structure you will use (e.g. sole trader,
partnership, company)? You should seek professional advice before you
decide.
 Check with your local council about town planning, zoning and usage rules
that may affect your business.
 Check with your local council about water restrictions and other
environmental issues which may impact upon your business.

Do you have the necessary resources to get started?


 Make a list of the essential items you need to start. You can buy non-
essential items later.
 Have you considered the type and cost of insurance? Talk to an insurance
broker - if you are not insured, you could lose everything.
 Consider what staff you will need if you grow quickly.
 What sort of access to finance do you have? Prepare contingency plans
now before problems arise.
 Consider opening a separate business bank account to keep personal and
business income separate.
 Suppliers can often be a great source of information on what your
competitors are buying.

Do you have the best location you can afford?


 Make a list of features that are important for your location, such as main
road, space, low cost, and parking facilities.
 Consider a number of potential business locations and assess the
advantages and disadvantages of each.
 Read about leasing premises. Before signing a lease, make sure you know
your rights. Contact your solicitor for assistance.

Establishing your business


Establishing your business takes research and planning. If you take the time to
understand what is required, you can make the best decisions for your business.

This guide will help you establish your business.

 Business structure
 Business and company name
 Premises and leasing
 Finances and expenses
 Banking

Business structure
Choosing the best legal structure for your business is important as each structure
has different rules regarding issues such as tax, liability, succession, ownership
and disposal of the business.

Think about the future


The structure you choose for your business now may not be the best structure for
you in the future. Ask your solicitor if your structure can be altered as your
business grows and your circumstances change.

Common business structures


The 4 most common business structures are:
 sole trader
 partnership
 company
 Trust.

Learn more about the advantages and disadvantages of each business structure.

Business structure checklist


 Ask your solicitor and accountant for advice on the best structure for your
business, and any related legal, financial and tax issues.
 Once you decide on a business structure, your solicitor will need to
prepare any required legal documentation.

Business and company name


A trusted and clearly identifiable business name can be a valuable asset to your
business. Your business name should accurately reflect your business, and clearly
convey to potential clients the type of products or services you sell. Ideally, your
business name will be memorable.

Registering a business name


A business name is a trading name that helps customers recognizes your
business. You should:

 Consider registering a business or company name


 Check if your proposed name is available
 Search for existing business or company names
 Search the trade marks database.

Business structure
Consider your business name or company name at the same time as your
business structure. I recommend that you seek professional advice before
deciding on your business name and structure.

Business name checklist


 Ask your solicitor and business adviser for advice on the best structure
and name for your business.
 Register your business name with the “Office of Fair Trading”.

Premises and leasing


The location of your business can be crucial to the success of your business.
Renting, leasing or buying premises is often costly, so you must consider which
option is best for your business.

Choose a business location


Thorough research will help you to find the most suitable and best-value location
for your business.

Leasing, renting and buying


 Short-term renting - suitable if you expect your business to grow quickly
and you will soon need bigger premises.
 Long-term leasing – can give your business stability if you find a great
location with an affordable rent.
 Buying premises - gives you the freedom to customize your location. The
premises also become an asset to your business.
 Home business - working from home lowers your overheads and can
give you more of a work-life balance.
 Online business - operating an online business may reduce your need for
a shop front, lowering your overheads.

Premises checklist
 Ask your financial adviser or accountant to analyze your cash flow to help
you set a premises budget.
 Contact your local council for information about any legal regulations or
compliance requirements (e.g. planning permits, zoning, and parking) for
your suggested premises.
 Ask your solicitor to investigate and explain the terms and conditions of a
lease or sales contract before you sign.
 Ask your insurer to read the lease or sales contract so you understand who
is responsible for insurance.

Finances and expenses


You must have enough money to start your business. If your business is
undercapitalized, it may not survive. You will need enough money in reserve to
keep operating until you begin to break even or turn a profit.

Estimate your expenses


Your accountant can help you to prepare a cash flow projection for the first year
of your business’s operation. This should include the amount you need to start-up
and operate plus a contingency fund.
Funding options
You can fund your business through debt finance (borrowing money that you pay
back with interest within agreed time frames) or equity finance (investing your
own or someone else’s money in your business).

Grants and financial help


Your business may be eligible for financial assistance from the local government.
A wide range of funding programs is available to help new and established
businesses grow and succeed.

Manage your cash flow


Accurate and up-to-date financial records will help you manage your cash flow. By
regularly reviewing your business’s performance, you and your accountant can
address financial problems immediately.

Finance and expenses checklist


 Ask your financial adviser or accountant to help you estimate your
expenses and prepare a cash flow projection.
 Visit Government Business Information Service (GOBiS) for a quick and
easy search of available grants.

Banking
You should set up a business bank account to help you to separate your business
finances from your personal finances. A separate business bank account makes it
easier to track and control your business’s income and expenses.

Determine your banking needs


Speak to your financial adviser or accountant about the accounts, products and
services you need to run your business. Discuss which transaction banking and
merchant facilities your business needs.

Once you have listed your needs, ask your preferred banks for a competitive rate
on this package. Bank fees can vary considerably so do your research to find the
best deal for your business.

Transaction banking
Having the right transaction banking products can improve your cash flow and
streamline your business operations. You must be able to access and monitor
your business’s financial transactions, and transaction banking products help you
to do this. Common transaction banking products include:
 Business accounts (accessible by cheque, ATM, EFTPOS, phone or internet
banking)
 Overdraft and other limit facilities
 Cheque book
 Payroll processing.

Merchant facilities
Using merchant facilities makes it easier for your customers to pay for products
or services as they can use their credit or debit card (i.e. they don’t need to use
cash). Merchant facilities improve your cash flow as funds are available quickly.

An EFTPOS terminal is the most efficient way to offer merchant facilities.


Customers can visit your store and swipe their credit or debit card at the counter.
If you take payment over the phone, you can also manually process credit or
debit card payments through EFTPOS.

Banking checklist
 Seek advice from your accountant about your banking needs.
 Research the best deal on banking products and services to suit your
business.
 Ensure you have a direct contact at your bank (e.g. an account manager)
that can help you to manage your banking, and answer any questions you
may have.

Meeting your legal obligations


You must understand your legal obligations when you start or run a business. If
you do not meet your obligations under the law your business can experience
serious problems.

This guide will help you meet your legal obligations when starting a business.

 Legal requirements
 Licenses, permits and regulatory requirements
 Taxation
 Record keeping
 Intellectual property
 Insurance
 Employing staff
Legal requirements
You must consider your legal requirements when starting your business. If you do
not follow legislative requirements and regulations, your business can face serious
penalties. A range of legal requirements may affect your business.

Business structure
 You must keep all registrations for your business structure up to date. For
example, your business name must be renewed when due and you must
lodge annual returns if you operate a company.
 Taxation requirements of businesses include GST.
 If you go into a partnership, your solicitor should draw up a written
contract before you begin trading or make any financial commitments.

Leasing premises
 Your solicitor should read any lease before you sign to ensure the terms
and conditions are appropriate and you understand your obligations before
you sign.
 If you operate a home business, local authorities may limit the number of
people who can work there.

Intellectual property (IP)


 Protecting your IP gives you the legal entitlement to that IP. You can
protect your IP using trade marks, patents and designs.
 You will need to review and, if appropriate, renew IP protection regularly
(e.g. trade marks must be renewed every 10 years).
 IP issues are complex and you should seek specialist advice.

Employment
 Legally, when you employ staff you must meet certain requirements.
 You must select the right person for your business in line with the job
description and selection criteria you have specified.
 You should make offers of employment in writing, including conditions of
awards, agreements and the employment contract.
 All employees should attend induction training to become familiar with the
workplace and any workplace health and safety issues. A carefully
developed induction training process can protect your business from risks
including health, safety and environmental (HSE) issues, discrimination
and unfair dismissal claims.
 Before dismissing a staff member you must ensure you’ve followed due
process.
Supplier agreements
 Getting your agreements with suppliers in writing will minimize
misunderstandings and disagreements. Agreements may include creditor
terms, supply conditions and any marketing and promotion support.

Risk management
 Manage risks by avoiding them, minimizing their negative effects,
transferring them to another party, or deciding to accept some of the
possible consequences should they arise.
 Several forms of insurance can help with risk management.

Contracts
 Contract law is complex. Your solicitor can develop standard agreements
for your business to reduce confusion and costs.
 All parties must have the legal capacity to enter into a contract.
 A contract of sale involves an exchange of goods, services, or property
from the seller to the buyer for an agreed amount. It refers to a specific
type of legal contract.

Health, safety and the environment (HSE)


 Your business must have a responsible attitude to HSE issues.
 You have a duty of care to the health and safety of your staff, clients and
the general public.
 You also have a responsibility to address environmental issues.
 Health, safety and environment issues include workers´ compensation,
food handling, and food safety, safety related to construction sites,
ergonomic requirements and security issues.

Legal requirements checklist


 Before you start your business, seek legal advice from your solicitor and
other specialist advisers.
 Review your legal requirements on a regular basis. Your business may
change over the years, and so may legislation.

Licenses, permits and regulatory


requirements
The licensing, permit or registration requirements for your business will depend
on your business type and structure, its location, and whether you employ staff.

You must operate your business with the correct licenses and permits. If you
don’t, you could experience serious penalties.
Contact your local council
Every council has different regulations. Contact your local council to discuss town
planning laws, zoning requirements and other issues such as home business
requirements. You must gain council approval for any relevant issues before you
begin operating.

Registrations
There are many areas of your business that you may need to register, including
your business name, trademark and domain name, as well as registering your
business for tax.

Licenses, permits and regulatory requirements


checklist
 Read the industry guide for your business to understand the operating
requirements specific to your industry.
 Visit Government Business Information Service (GOBiS) to search for
support services available for your business.
 Seek advice from your solicitor regarding any licenses, permits and
regulations that affect your business.

Taxation
Your business’s tax requirements will vary according to the type of business you
run and the number of employees you have. Tax is a complex area. Outsourcing
your tax to a professional or employing an experienced accountant can help you
to avoid legal and financial problems.

Tax help
Before you start your business you should seek advice from a tax professional.
They can explain tax considerations such as:

 Goods and services tax (GST)


 Payroll tax.

Record keeping for tax


When you operate a business you must keep certain records to explain your
transactions for tax purposes. Your accountant can help you to set up a good
record keeping system.

Taxation checklist
 Speak to your accountant about your tax requirements and record
keeping.
Record keeping
Keeping accurate and up-to-date records is vital to the success of any business.
Well-kept records help you to minimize losses and manage cash. It is also a
requirement under taxation laws. Your accountant can help you set up a record-
keeping system.

Basic records to keep


Cash movement
 Cash book or financial accounting program that records cash receipts and
cash payments
 Bank account (e.g. cheque books, deposit books and bank statements)

Sales
 Invoice books, receipt books, cash register tapes, credit card
documentation, credit notes for goods returned and a record of goods
used by the business owner personally

Purchases
 Cheque butts (larger purchases), petty cash system (smaller cash
purchases), receipts, credit card statements, invoices, any other
documents relating to purchases including copies of agreements or leases

Records to keep for end of financial year


Stock take
 Details of stock on hand at the beginning and end of the year, to work out
whether the business has a taxable income for tax purposes

Debtors and creditors


 Details of all your debtors and creditors for the period - ask your
accountant what you need to give them

Depreciation
 Original purchase agreements or tax invoices, a depreciation schedule, the
cost of transporting the items to your business (if applicable) and
installation costs (if applicable) - to obtain tax deductions for depreciation
(wear and tear) of assets
Expenses
 Cheque butts, receipts, cash register tapes, copies of statements and
invoices, credit card documentation, details of payments by cash and log
books - other than the normal purchases of the business

Staff and wages


 Full details of wages, employment contracts, and tax deducted fringe
benefits, superannuation and related matters such as sick pay and holiday
pay.

Other records
 Stock records, accounts receivable, accounts payable, and other basic
accounting records
 Sales and purchase contracts, loan agreements, rental agreements, lease
agreements, franchise agreements, sale and lease back agreements,
trading agreements with suppliers, legal documentation, evidence of
deposits with utilities, contracts with telephone companies and your
business name registration certificate

Your legal responsibility


How long records need to be kept is set in most cases by law and your accountant
can advise you. For example, income tax records must be kept for at least 5
years.

Finance and expenses checklist


 Seek advice from your accountant or financial advisor to set up an
effective record-keeping system.

Intellectual property
Your ideas are your intellectual property (IP). You may have an idea for:

 A new business
 New processes or a new business model
 An improvement to how old products or services are used
 A new use for products or services
 New products or services.

Protect your IP
While you cannot copyright your ideas, there are many ways to protect your IP.
Protecting your IP prevents other businesses from using it to make money.

Learn more about IP considerations such as copyright, patents, trade marks and
designs, and whether your idea will work.
Business name and trademarks
Registering your business name does not protect it. To protect your business
name from use by a competitor, you’ll need to register a trade mark. You can
then control the use of the name or any part of the name. A trade mark can be a
letter, word, phrase, number, sound, scent, logo or image.

Think about IP
Thinking about your IP needs to be an ongoing process. For example, your
business may generate new logos and ideas as it grows and it's a good idea to
make sure you keep these protected. If you don't protect your IP properly,
someone else can use it. You will also need to review and, if appropriate, renew
IP protection regularly. For example, you need to renew trade marks every 10
years.

Intellectual property checklist


 Seek advice from IP professionals such as patent and trademark
attorneys, IP lawyers and search firms.

Insurance
Being uninsured, underinsured or having the wrong kind of insurance could force
your business to close in the case of fire, staff or customer injury, personal
illness, product defects or staff errors. The right insurance can keep your losses to
a manageable level.

Common insurance types


 Fire – protects your principal assets including buildings, contents and
stock
 Business interruption - depending on your insurer, this can cover risks
such as loss of profit, ongoing staff costs and additional operating costs
that may be incurred as a result of an event such as fire
 Public liability - covers your potential liabilities to third parties for
personal injury or damage to property if you are negligent
 Employees´ liability - this includes workers' compensation which is
compulsory for all businesses employing staff
 Burglary - theft from locked premises
 Money - in transit, on business premises and in personal custody
 Fidelity guarantee - fraud or dishonesty committed by employees
 Glass - breakage of fixed external or internal glass
 Products liability - if the use of your product causes harm, loss or
damage
 Professional indemnity - for negligent acts, errors and omissions in the
provision of professional advice or services
 Electronic breakdown - specialized cover for computers and machinery
 General property - for tools, equipment, mobile phones or stock samples
 Marine and transit - goods being transported by sea, air, road or rail
 Marine and transit (construction risks) - for builders and trades
people
 Motor vehicle: either business or private, singular or fleets of vehicles
 Directors and officers liability - against alleged breaches of duty
 Employment practices liability - covers damages and costs resulting
from, for example, anti-discrimination, unfair dismissal and harassment
actions.

Seek advice
A professional insurance broker can help you make the right insurance choices.
They can put together a comprehensive and cost-effective package of insurance
policies for your business. You should seek specialized advice if your business is
classed as a high insurance risk.

Insurance checklist
 Contact your industry association for information and advice on the types
of insurances required for your industry.
 Seek professional advice from an insurance broker.

Employing staff
Staff with the right skills and knowledge will help make your business a success.
Before hiring, you must understand your obligations as an employer. These vary
depending on the type of staff you hire, which may be:

 Permanent (full- or part-time) employees


 Casual employees
 Trainees or apprentices
 Contractors (working for a fixed term and who are established in their own
business)
 Temporary employees (e.g. from an employment agency).

Your obligations
It is important for you to understand employment legislation and your obligations
towards the people who work for you. Obligations can cover considerations such
as:

 Pay as you go (PAYG)


 Payroll tax
 Superannuation
 Awards, pay rates, leave, employee entitlements and employee hiring and
termination
 Work Cover insurance
 Workplace health and safety
 Anti-discrimination and equal employment opportunities.
Finding and hiring staff
Finding and hiring the right staff can be expensive and time consuming. Before
you hire new staff, consider whether existing staff have the skills or knowledge
that you need, or are able to acquire them with more training.

Preparing Your Small Business for Hard


Economic Times
Between 2007 and 2010 the United States' economy struggled with a recession.
While there were signs of improvement in 2010 many small businesses were still
playing it safe when it came to their Investments and expenditures. However,
despite this cautious behavior many small businesses did not take steps to
protect their business from future economic problems, such as developing an
emergency funds account.

Eight ways a business can survive and prosper in a


downturn

What doesn’t destroy us makes us stronger


There’s no question that the economic downturn (what we seem to call recessions
these days) is putting a pinch on everyone, consumers and businesses alike.
With the spiraling cost of fuel getting around is difficult but it also increases
virtually everything we buy. Businesses are pressed between the hardships of
their employees and the restricted budgets of their customers. With some clear
and creative thinking, business can still find solid ways to weather the pressures,
save money and maybe even make a little extra.

Eight ideas to get you started in turning around a


downturn
No matter your industry, whether you run an HR Outsourcing firm, a marketing
company, an information services venture, or a manufacturing concern, you can
find ways to survive and thrive in an economic downturn or recession. Here are
eight ways you can survive the current economy and maintain a healthy cash
flow, if not actually grow your business:

1. Change your paradigm. What is a paradigm? Your paradigm is the


window through which you view the world. It is tinted by your personal
experiences and the customary way you do things. Written on the window
are the experiences and prejudices you’ve developed in running your
business and your life--all of which affect how you see things.

Before you can see the opportunities before you, you must do what you
can to view the problem from different perspectives. Ask yourself what you
can do if you can’t do what you are used to. With practice at looking at
problems from other perspectives, you can become your own best
consultant. Creative problem solving is what will separate those who thrive
during a downturn and those who end up throwing in the towel.

2. Take a personal interest in your company’s financial picture. Look


to your personal expenses as they draw from your company’s profits. If
you are a business owner, the two are inextricably connected. List out on a
spreadsheet or just a piece of paper all the things you owe and what you
own.

3. Look closely at where you are spending your money and cut
back. There is some cutting back to do and it may not be apparent at first
look to what items are needs and what items are wants.

4. See what you owe, and check the interest rates for each. Pay off
money you owe that is costing you the most. You can do this by focusing
on the higher interest rates or by consolidating debts under the lowest
possible rate.

5. Cut personal expenses to reduce the draw on your company. If you


own your own company and pay yourself a salary or draw, the monthly
expense nut you need to crack personally may actually be smaller than
what you are living. Check your thermostat, your cable or internet service
at home, your cell phone contract(s), your insurance deductibles and other
monthly obligations. Saving a few dollars on each of these items can add
up to significant monthly reductions.

6. Cut future long-term expenses while investing in growth. Does your


company own or lease its property? Would you like to own it? Maybe there
is a way to do that now. There hasn’t been a time in almost 80 years-not
since the Great Depression of the early ‘30s-where there has been such a
clear buyer’s market for property.

7. Seek business you have previously refused or have never sought


before. Networking with your current customers can help you find new
business. If you are good at keeping your customers happy with your
quality services, they may know others who could benefit from your
excellence. Ask them. You are likely to uncover candidates for new
business ventures you didn’t even know about.

8. Keep positive. Downturns are just that-a temporary economic turn,


downward. Along with smart investing for the future, prepare yourself for
the upturns and then future downturns won’t be so tough. There is no
time like the present to build hedges against inflationary spirals (and they
are bound to follow serious downturns) and future cycles.

Be creative and realize that challenges also provide opportunities for


growth. As difficult as it is for people and business to deal with serious
economic challenges, taking a close, healthy look at the way you conduct
business and live your personal life will produce chances for you to
improve your personal and business situation overall. Remember what
they say about life giving you lemons? Make lemonade!

Tending to Business: Improving your company in a


bad economic setting

Stressing over a bad economy doesn’t pay the bills


Crying the woes over short money, big expenses and tightening client budgets?
Put some creativity to work, step back and take a closer look at everything that
makes business grow and shrink. Even in the face of a recession or economic
downturn, there are a number of ways you can grow your business.

The keys to staying profitable


Staying strong takes staying positive. Realizing that past economic shifts happen
with regularity and future upward cycles are just as predictable. Those who stay
engaged will find a way to survive and thrive in the next season.

Growing the business is all about cash flow. Positive cash flow is maintained
through a simple equation: keep the expenditures shrinking against the
revenue. Even a one percent change can have significant effects on your
success. The four main components of maintaining a positive cash flow include
lowering accounts receivable, reducing level of inventories, pricing to maintain a
healthy gross profit, and reduction of debt—especially high interest debt.

Make the money you’ve already earned—now!


If you are lax about accounts receivable, and many small business owners are
guilty of that, you must do something to focus on keeping the accounts receivable
from aging. It takes a certain assertive personality to be effective at bill
collecting. Human Resources, or your HR Outsourcing partner, can be a great help
in identifying the right person for the job. Such a person has a pattern to follow
including friendly reminder calls, firmer follow-up calls, arrangements for even
minimal, regular payments, presenting alternatives to customers such as
transferring the AR to the customers’ personal credit cards. With tenacity, it will
surprise you how much you can recover that you may previously consider lost.
The most important efforts focus on getting the debts people owe you off your
books and into your profits where they belong. The bottom line is that you will
earn more, in a timely fashion, for the hours you put into the work you do for
others.
Conduct a thoughtful inspection of all your debts
In addition to earning more each month, the second part of that equation is to
reduce that which you owe. You have to come to grips with, and deal with, your
own debt. One idea to reduce your own debt is take the increase in earnings from
your recovered ARs and move them to your accounts payable to a healthy lump
against a debt. Pay a little more each month, starting with the highest interest
debts. These should be eliminated first as the higher interest rate decreases your
bottom line.

Now is a great time to make acquisitions in property


The property market drop has been greater the past year than at anytime since
the Depression of the 30s. Data released? Show that house prices fell by a
greater percentage in the previous 12-month period than in any year since 1932.
If it is at all possible, take advantage of that situation. Do you lease your
company’s building? If so, is it possible to move the money you pay in lease to
pay for property ownership? It is a great time for acquiring and owning your
business space. In short, it makes the expenses of space into an investment of
your own assets instead of a drain on your profits.

Aside from property, keep up on your other investments


Although money is tight and makes disposable income scarce, it is important that
you keep investing. Planting windbreaks and hedges around your business is just
as important as planting them to improve the salability of your home.
Investments are your hedges and it is a portion of your money that can keep
making money without your personal time involvement. If you have skills in stock
market trading, use that skill. Many day traders are making a lot of money right
now because of the ups and downs of the market. If you can keep yourself in
sync with those changes, and in markets where you have familiarity (“Buy low;
sell high!” as they say), then you have another way for your money to keep
making you money.

Some really good services are free—use them!


Finally, get more out of the suppliers you have and the services you now receive.
Use your creativity to get services for free that you might just go out and hire.
Your personal banker or accountant can add a light of insight into your own
personal think tank. Better terms from your wholesalers or service provider will
help. Discounts for up-front payments provide a great expense-savings
opportunity. Pick their brains on how they go about having more effective
inventory control. On the personal side, look at home for a more efficient
telephone system, cable selection, water bill reduction, or power consumption. Do
the same thing at the office you would do at home. After all, the money you draw
as personal income, from your own business, is one of those debts affecting the
bottom line, too!

Hopefully, these few ideas aimed at generating productive thought can put you on
a track to be creative about increasing your business and reducing your costs.
Look at your situation with a new, creative point of view—get outside your usual
pattern and think how you can improve your situation. Feel good about doing
things to grow the business and let the competition cry about the bad economy
causing bad business.
REFRENCES

1. Start and run your own business By Alan Le Marinel


2. The "Financial Times" Guide to Business Start Up 2010: The Only Annually
Updated Guide for Entrepreneurs by Sara Williams