As of June 30th, 2021, there were 2,402,254 actively trading businesses in the Australian economy, and during the 2020-2021 financial year (July 1st – June 30th) there was a:
- 3.8%, or 87,806, increase in the number of businesses.
- 15.8% entry rate, with 365,480 entries.
- 12.0% exit rate, with 277,674 exits.
These numbers reflect a large amount of business activity in Australia, and joining the ranks of Australian business owners is something many want to do but is challenging. The journey to starting a business begins with the idea that excites you, followed by an intricate process of brainstorming, researching, benchmarking, planning, and execution to put all ideas & decisions made earlier in the process into action.
Starting a business from scratch and taking giant leaps to grow your business is thrilling, but it can also be overwhelming, costly and perhaps one of the hardest things you can do.
We know what it is like to start & own a business in Australia, the rollercoaster of feelings owners can go through because we deal with it daily in our accounting firm. So we’ve created this blog to help aspiring Australians realise their business ambitions & make the journey a little easier by outlining what should be done to start a business in Australia.
Our objective with this writing is to help you make better-informed business decisions concerning the many things necessary to start a business in Australia and, hopefully, use our experience to guide you in the right direction for success early on.
Step #1: Define Your Idea & Identify Your Niche
The first step in our business startup checklist is defining your business idea & identifying your business niche.
This step is the MOST essential part of starting a business because if this is done correctly, the results could be a global revolution like Uber or Airbnb; however, if the decisions here are incorrect, the company may not be financially viable.
There are many theories on how to best approach this step in the process & these recommendations can range from completely ignoring yourself as an individual and 100% focusing on the needs of the market & consumers regardless of personal skillset to completely following what you’re passionate about and doing that.
A business must be able to provide a product or service to someone & be good at it! To have the highest chances of success, your business should be in an area where you have as much experience and knowledge as possible. Of course, you may start whatever business type you want to establish, but if you can leverage your existing skillset or are already an expert in the industry – that will make the journey easier.
Step #2: Do Research About Your Niche / Business Idea
The next step is to do an extensive research on your niche or chosen business idea.
Explore the potential of your business niche & idea, working to understand its strengths and weaknesses, what the market looks like, who the competitors are, what trends could change the future of this industry etc.
Understanding your business & niche is critical for long-term success. Some ideas during this step in the process are to explore what the existing players in the market already do and use their results as benchmarks. You could ask your target market questions to understand them further and discuss your ideas with reputable business advisers.
Step #3: Create A Solid Business Plan
Your business plan is like a compass that directs your business’s operation.
Developing a business plan is creating a document outlining the important aspects of the business. From resource management to marketing, a business plan must cover them all. This step also involves an analysis of the business strengths, weaknesses, opportunities, and threats.
Similarly, the business goals, products and services, target market, marketing and sales strategies, organizational structure, management team, financial projections, and other vital elements must reflect in the business plan.
This plan aims to think everything through & capture it in one central location. Typically, these plans change a lot, so a 30+ page document may not be useful long term, but it is a great exercise when moving into a new space.
To give you an overview, a business plan template usually contains the following:
- Executive Summary
- Company Overview
- Products & Services
- Market Analysis and Competition Summaries
- Risk Assessments & Risk Management Plan
- Sales and Marketing Plans
- Management Plan
- Milestones and Progress Reporting
- Operating Plans
- Financial Plans
- Appendices and Exhibits
Step #4: Select A Business Structure
After you have done your research, it’s now time to decide your business structure. It could be a sole proprietorship, partnership, or corporation.
You must decide on the right structure or business model because this is important for registering your business and calculating your tax obligation.
The 3 common types of business structures you can register in Australia are:
- Sole trader– A sole proprietorship is a business entity owned and operated by a single individual. The owner of a sole proprietorship has personal liability for all debts and legal obligations of the business. This type of business is the simplest and most common form of business organisation.
- Corporation– A corporation is a legal entity composed of a group of people, shareholders, who have invested money in the company. The company is governed by a board of directors, who are elected by the shareholders. The company must obey certain laws and regulations and can be sued if it does not.
- Partnership– A partnership is a legal arrangement in which two or more people agree to pool their resources for a business venture. In a partnership, the partners share both the profits and the losses of the business.
Step #5: Pick An Operating Location
This step primarily applies to businesses that look to have people coming to them. You must have a primary business location if you want customers, patients or clients visiting you.
There are many factors to consider when selecting a primary business location, such as cost, location, accessibility, branding, workability etc. What suits your situation is a discussion with someone like a business advisor who takes into consideration your circumstances & gives information that is relevant to your situation.
Step #6: Secure Capital/Funding (if required) & Setup
Businesses cost money to set up. How much money is unique to the aspiring business owner’s situation. Securing capital or funding to cover the business’s start-up costs is required.
There are many ways capital can be secured. It could be from your savings, a loan, or an investment into the business. As long as you’re eligible based on criteria, the Australian government may secure you grants and funding.
Step #7: Register With The Australian Business Registration Office
To comply with Australian laws and regulations in starting your business, you must have an ABN.
The Australian Business Number (ABN) is a unique eleven-digit number assigned to businesses operating in Australia. The ABN is used for tax and other business-related purposes, such as registering for goods and services tax (GST) and reporting income.
It is also used to identify companies in the company register kept by the Australian Securities and Investments Commission (ASIC).
After obtaining an ABN, you will be able to:
- Register your business name
- Identify your business to other parties, such as ordering products and services and issuing invoices.
- Get a .au domain name
- Much, much more…
Step #8: Prepare For Tax
After registering for an ABN, you must also register the legal tax requirements to avoid possible consequences. The taxes you must register depend on the business you intend to launch, its structure, expected revenue & a variety of other variables.
Some of the taxes you may need to get prepared for are:
- Goods and Services Tax (GST) – if your firm has a turnover of AUD 75,000 or more.
- Pay as You Go (PAYG) withholding tax – if you need to withhold an amount for tax reasons, such as when paying workers or salaries.
- Fringe Benefits Tax (FBT) – if you provide amenities such as a company vehicle to your staff, you must register for this tax.
Complying with the taxation obligations outlined by the Australian Tax Office (ATO) is non-negotiable. Failing to do so can be seen as a crime & to avoid penalties, it’s recommended you speak to an experienced accountant to help prepare you for the taxes you will need to manage & pay while operating.
Cost Of Starting A Business in Australia
When you start a business, there are various startup charges and continuing expenses that you will need to consider before you even begin.
Due to the costs required to start – it may take some time to get your return on investment and begin earning money. So you understand what your finances look like & ensure you have sufficient savings or other sources of income to keep the business on track while it’s moving towards breakeven & becoming profitable.
Some of the costs you may incur while starting a business in Australia are:
Business Registration Cost
Registering your business comes with a fee from the government. As mentioned, you must register for the following:
- Australian Business Number
- Business Names
- Licenses and Permits
According to the Australian Government Business Registration Service, registering for an ABN in Australia is free, but business name registrations are not free. The fees for registering a business name are:
- $39 for one year
- $92 for three years
For a more detailed guide on fees and payment options, click here.
Business Asset Purchases
The costs of your business’s physical assets depend upon your chosen industry and business type. But whatever it is, it’s always great to invest in quality assets that would help you efficiently carry out business operations.
While it is tempting to cost-cut on business assets such as equipment, machines, and tools, it is advisable to think long-term. It is cost-effective to buy quality material that would last longer than already depreciated items.
This tip is general advice but something to consider while making an essential decision like purchasing business assets.
Commercial Space / Setup Costs
Operational expenses are necessary to keep the business running, such as the cost of employees’ salaries, rent, and utilities. Marketing expenses are also incurred to promote and sell the company’s products or services, such as advertising and promotional materials.
Some of these expenses you must account for are the following:
- Rent (if this applies)
- Business Insurance
- Car, trucks (if necessary)
- Power and utilities
- Phone and internet
- Website Hosting
- Equipment maintenance
FAQS: How To Start A Business In Australia
What are the most successful startups in Australia?
It is hard to determine the most successful businesses in Australia as people associate success with various contexts and criteria. However, according to recent statistics, most Australian startups operate in the fintech and banking industries. In addition, the value of fintech investments in Australia reached around $563 million in the 2nd quarter of 2021.
Can foreigners start a business in Australia?
Yes, but you need a visa to do so. The Business Innovation and Investment Programme aims to provide visas to eligible foreign citizens who want to begin their business ventures in Australia. These visas are:
- Business Innovation and Investment (Provisional) Visa (Subclass 188);
- Business Innovation and Investment (Permanent) Visa (Subclass 888).
Are there government grants for startup businesses?
Yes there. But you need to be eligible for the type of grant sought. To see if you’re eligible, answer a few questions here.
To start a business in Australia, begin with defining your business idea & identifying your business niche. This business idea may be revolutionary, so take time to do extensive research on the subject.
In researching your niche, explore what the existing players in the market already do and use their results as benchmarks. You could ask your target market questions to understand them further.
Next, create a business plan that would direct your business operations and activities and outline the critical aspects of the business, which commonly includes a risk management plan and marketing strategies.
Then, select a business structure – it may be a sole proprietorship, partnership, or corporation. This step is followed by picking an operating location- factors to consider when selecting a primary business location such as cost, location, accessibility, branding, workability etc.
Next is to secure capital and funding if necessary. There are many ways capital can be secured- own savings, a loan, from an investment into the business. As long as you’re eligible based on criteria, the Australian government may secure you grants and funding.
To comply with Australian laws and regulations in starting your business, you must have an ABN. The Australian Business Number is used for tax and other business-related purposes, such as registering for goods and services tax (GST) and reporting income. After registering for an ABN, you must also register the legal tax requirements to avoid possible consequences.
These basic steps are advised for you to integrate into starting your business. Other things to consider are the costs of starting a business, as it may take some time to get your return on investment and begin earning money. By knowing the costs, you get a good grip on what your finances look like & ensure you have sufficient savings or other sources of income.
Some startup costs include business registration costs, business asset purchases, commercial space setup (if this applies), and operational expenses that keep the business running.
Get Professional Help For Your Business.
Learning how to start a business in Australia and all the tasks you should go through may be daunting. But it doesn’t have to be. With our Albany Accounting Firm – you’ll get a helping hand for your accounting, tax preparation, bookkeeping, and other necessary business tasks. Our team of professional accountants at The Accounting Centre know your needs, and we’re glad to be of help. Contact us today.