How to Start a Small Business in 2020

Understanding Your Reasons

First things first, we’re going to cover a few brief aspects of psychology that are important in establishing your motivations and temperament that will impact your business career. At least knowing yourself is a crucial first step in being successful.

So the first question to ask is; “Why do I want to start a business?”

There are a range of answers to this, none of them wrong. They can vary from “I want to be my own boss” to “I saw an opportunity to do this better than it was being done”. Some just have an innate, deep desire to be in control of their own destiny and some just want the flexibility that comes with owning a business (though this often isn’t quite what it seems). 

Understanding your motivations are crucial during those dark periods when everything seems hopeless and despair starts to rear it’s ugly head. Your deep internal drive will be the thing that pulls you through. Best understand it before you begin.

Your Temperament & Situation

What are your characteristics? What are your strengths and weaknesses? What do you lack that a business will need to be successful?

These are all questions to ask yourself when going through the startup process. Granted, the answers to these questions may vary from business to business and change as time goes on.

You’ll also need to consider where you are in life currently.

Are you in a full-time job? Do you have dependents to support? Are you free to give it all up and pursue your dream of entrepreneurship?

It would be wise to consider whether your business idea is best pursued after hours. The 7pm-2am phase as Gary Vee likes to call it. Is that something you’re willing to give up the rest of your life for- no more socialising, partying, even spending time with family until your dreams are realised?

There are no right or wrong answers, that’s just the reality of the situation.

Now we’ve got that figured out (granted, you may need a little more time to work on those questions..) let’s move onto to the practicalities.

Choosing Your Business and Industry

Many choose to start a business on the basis of finding an idea or concept they want to start. It sounds like something they’d enjoy and be interested. This can work of course, but the more sure-proof way of build a successful business, is to base the products and services on market needs, not personal preferences.

The industry the business resides in, is a different question. A deep understanding of an industry, the players, market conditions and other experience based factors is a HUGE advantage when kicking off any startup. So it may be a wise decision to choose the industry of which you are most knowledgeable AND you can find a market need/demand. That is usually going to be a good fit.

Next, you need to identify what your offering is. Are you going to focus on products or services? Generally speaking (and I do mean generally), services have the ability to be profitable faster, particularly if they are relying on the owners expertise. Products require prototypes & production costs (if creating your own), or wholesale purchase costs (if re-selling). Services can generally skip much of that initial outlay. The main costs come down the track, in terms of scalability.

Now it’s time to examine your USP (Unique Selling Point). What are your competitors doing the same and what are they doing that’s unique? What can you offer that either isn’t being done, or that you can do better than your competition. Your USP is essentially a big factor in what’s going to get the initial purchase or investment from a client or customer. It’s what gets them in the door. It’s gotta be good.

Going through a brief business plan can be a good idea to get a feel for the market and your competitors (Credit: The Brand Boy)

Establishing the Business

Perhaps this is the sole reason you clicked on the article. If so, we apologise for all the preamble. There are a multitude of generic articles out there around choosing a company structure etc, so we wanted to focus on what are mostly likely going to be the most important aspects of getting a business started. Nonetheless, here are the specifics;

Choosing a business structure

You have essentially 3 options:

• Sole Trader
• Partnership
• Proprietary Limited Company

There are other scenarios such as trusts, though these can be a little more complex and are best left for another article.

Detailed information on the above structures has already been done to death, so we’re going to provide you with a link to the business.gov.au resource on structures.

To provide a very simple overview- a sole trader is for operating the business yourself with the intention to be kept relatively small scale. It is for all legal purposes, an extension of you as a working individual and as such, you are personally accountable for everything that occurs with the business- including it’s financial situation. A partnership is 2 or more people running the business in the same way a sole trader would be run. Now however, you are not only responsible for own dealings and decisions, but personally liable for all the other partners as well. A company is it’s own entity, being owned by ‘shareholders’, of which you may be one. It is certainly the safest for minimising risk to your personal assets. It’s our recommendation to form a company as soon as possible, unless you intend to operate the business purely on your own or at a smaller scale, with measures to limit risk.

Registering a Name

Once you’ve decided on the structure of your business, it’s time to register the name.

If you’re running as a sole trader, you may need to first register for an ABN (Australian Business Number) if you’ve never worked for yourself previously as a contractor. It’s completely free, all you need is a tax file number. You can register here.

Next is to register the business name to your ABN. You need to register for an account with ASIC Connect and click ‘register business name’ on the right hand column of your home screen. Follow the prompts until you come up to the prompt where it asks for the name of the business you wish to register. It will tell you whether the name you have chosen is available or not- you won’t be able to register if a similar name is already registered. Once accepted, you have a yearly fee of $36 (or $85 for 3 years) to keep the name.

Registering for GST

If you think your business is likely to be earning $75,000 or more in revenue, you’ll need to register for GST.

To do so, you’ll need to first apply for a MyGov account Id, which you’ll likely have through doing taxes at your place of employment. If not, you apply for a MyGov ID.

Once you’ve done that, you can access the Business Portal to register for GST. Follow the prompts and get yourself registered.

Even if you’re not expecting to earn $75,000, it can still be a benefit to register. Firstly, it adds credibility to your business, showcasing that you are indeed a legitimate entity that charges and pays GST. Secondly, you will be able to keep the GST you pay out on purchases, a handy bonus during those cash strapped startup days.

The Internet has made business registration a great deal easier than the old days of filling out countless forms! The Australian system has also made the ability to start a small business much simpler and cheaper than many of our counterparts around the world.

Now comes the interesting part! You’re running a legally established business so it’s time to get to work and get your first client through the door. There are a host of other things to take care of first of course- insurance, banking, accounting, legal aspects, business planning and much much more but you are well and truly on your way. Need some help for the next few steps? Check out our business setup options.