Starting a small business – or even a micro business on the side – can be pretty exciting (and scary at the same time). How do you know that your idea has legs, or that there’s a customer base out there for what you’re offering? And if there is, how do you go about funding it to get your business off the ground?
These are all great questions for any budding entrepreneur and the good news is, there are lots of ways to go about bringing your business idea to life. Here’s how to start the process.
The truth about starting a business
With over 2 million small businesses running across the country, Australia has been classed by some as having an entrepreneurial bent.
While many businesses have done it tough in the past year and many continue to do it tough, you don’t need a pandemic to find owning a small business a challenge. Estimates have indicated one in three new businesses fail in their first year of operation: a sobering thought.
That’s no reason to abandon a good business idea though, especially if you’re passionate about your idea, willing to take on a certain amount of risk and importantly, ready to make a plan. A business plan, that is!
Why a business plan is essential for success
Every business starts with a vision of what it might be (or a great idea scribbled on a napkin!) But turning your idea into a reality and making it financially viable involves motivation, market research, hard work – and knowing you have a solid business plan.
It may not always be the fun bit, but a business plan is essential for helping direct your business idea and think through your objectives. It’s also where you want to identify your target market, work out obstacles and how you might navigate them and map out how you’ll bring your idea to market. Including milestones, budgets and a month-by-month projected and actual cash flow for the first year is important, too. Ensure you gather as much information before writing your business plan.
A business plan is also a must if you want to secure funding for your business, as it’s a roadmap for lenders and investors that outlines why they should invest in your idea. Spend a bit of time making sure it’s succinct and easy to understand it’ll pay off in the end.
Questions to ask yourself
Ensuring there’s a market for your product or service before you start a business or spend any money on it is important. You should ask yourself the following questions:
- What need does this product / service fulfil OR what problem does it solve?
- Is there a target market? Who are my customers? Who are my competitors?
- What costs will be involved in bringing my product / service to market?
- What materials are required and what’s the process to create the product / service?
- How will I sell the product / service (ie, online, bricks and mortar store etc)
- How will the product / service be packaged?
- What price will I have to charge to make a profit and will customers pay this?
Expect to wear lots of hats
If you’re the type of person who loves a regular pay cheque and clocking off at 5pm without fail, starting a business might not be for you. Business owners need to be driven to succeed, especially in start-up mode – and that means doing the lot: planning and strategy, customer service, sales and marketing and day-to-day management of the business.
In the beginning, you can expect to be the admin person, the HR manager, the social media manager, the PR person, the business development manager, the sales consultant and everything in between. You may also be working round the clock and on weekends to get your business off the ground – so a deep-seated passion and belief in what you’re doing is critical.
Funding your business idea
If you have any start-up capital, that’ll obviously help in the early weeks and months of starting your business. But what if you don’t? Securing funding is key.
Getting funding may be easier if you have a good track record in business already – it may be a little more challenging if you’re a first-time business owner / sole trader. But it’s not impossible by any means! Here are some ideas for financing your business idea:
Taking out a loan
The obvious choice for funding is to approach a bank or lender to get a business loan – which you’ll repay to the lender in fixed instalments. Or, this may be offered as an overdraft, depending on your business needs.
Financial backers can ease the stress and risk of starting a business and the initial costs involved, although investors will own a portion of your business and depending on the agreement, may have a say in how you run things or spend money.
Small business grants
Use the government’s grant finder tool to see if your business idea might be eligible for a grant or support program – there are thousands of grants available to small businesses and start-ups, plus free or low-cost financial advisory services and support.
This involves financing your business through loans, donations or exchanging money for shares in the business or rewards. You need to post your business idea as a ‘campaign’ on a crowdfunding site such as Kickstarter or WeFunder.
Once you’ve started the business understanding the money is super important. There are a number of programs that can help with ‘looking under the hood’ and analysing where the money is coming from, going to and everything that is happening in between. (Have a look at Xero; Reckon; MYOB for examples.)
Although it can be nerve-wracking and time-consuming to start a small business, the rewards of working for yourself and building something you’re passionate about are huge.
We hope this helps you get cracking on your business plan and market research and considering which funding option might be right for you. Good luck!