First Business online resource
First Business online resource
Welcome to First Business online
resource, designed to help you decide whether
starting a small business is right for you.
This resource includes eight parts, including how to get
started, business planning and support and information on laws and
regulations and insurance tax.
Each part includes a scenario to put everything in context,
reflect on and help grow your business idea and an activity to
apply your new knowledge.
Once you have finished working through this resource and decided
that you are ready to bring your idea to life, download the First
Business app to help guide you through the requirements for
kick starting your new business.
It is important to note that this resource focuses on a
sole trader structure without employees, and does not discuss
the various types of business structures in detail. What type of
business you set up is a really important part of the decision
process for your business and we recommend you take a look at more
information on the different types of
structures, including sole trader, partnerships, and companies
to see if any of these business structures are relevant to your new
Download the Curriculum Alignment for this resource.
1 Getting started
There are over two million small businesses in
Australia, so there are lots of people out there living their
Let's talk about why you might want to be in small business.
There's probably more than one thing motivating you.
Here's some typical reasons
- You want to be your own boss and have more control over your
- You want to make more money
- You have a fantastic business idea
- You're looking for more freedom and flexibility in your work
hours to suit your lifestyle
- You want a career change or you're unemployed
- You want to be more creative and innovative
These are all great reasons to start a small business, but let's
quickly take a look at the flip sides. Click the reasons that
are relevant to your situation so you can understand the pros and
You want to be your own boss and have more control over
This is a really popular reason. No-one to answer to, making all
the rules yourself - what bliss! The problem is, you'll also be
making all the decisions on your own, and if you're a tradie,
you'll be quoting and organising all the work yourself, then
chasing up the payments. You'll no longer be getting a guaranteed
paycheque every second Thursday. It can be very rewarding, but it
can be a struggle to adjust, managing the admin as well as the
actual work, especially at first.
You want to make more money
It's true that thousands have made money in small business. But
there wouldn't be many that haven't worked long and hard to get to
that point. Chances are, you'll earn less per hour of work than you
did before, and there are likely to be times when business is slow
and you won't earn much at all. At this point you might start to
doubt your decision, and you'll need to be pretty determined to
stick with it. Steve Jobs didn't get rich overnight. He started his
first small business in his parent's garage and barely made ends
meet for quite some time.
You have a fantastic business idea
This is a truly great reason to start a small business, but … do
your homework. You might think your idea is gold but you absolutely
have to be sure that people will want to pay for your product or
service, and that someone does not have a similar idea. Otherwise,
you'll go broke! Airbnb is a great example of an idea that appealed
to the masses and has grown from a small business to a huge
You're looking for more freedom and flexibility in your
work hours to suit your lifestyle
How great would it be to be able to choose your own hours?
Imagine surfing until 10am every day or finishing work at 3pm so
you can go for that run. Here's the wakeup call. Starting out in
small business is a massive responsibility, especially in the
beginning when you'll likely be working day and night just to keep
your head above water. If you're not scared of hard work, and you
can handle the lines between work and home getting blurry
sometimes, then go for it. Down the track you might just get to
work hours that suit your lifestyle a bit better.
You want a career change or you're
Hate your job? Doesn't feel like the right fit for you? Been
made redundant? Don't worry, you can always push the default key
and start up your own business. But take note, it can be a really
tough gig. You shouldn't do it just because you think it'll be
better than the job you have now. You need a real passion for what
you're about to do, or it just won't work.
You want to be more creative and innovative
Perhaps your job isn't creative enough for you or every idea you
have at work gets slammed. But … keep in mind that running a small
business comes with loads of really important and way less creative
(even boring) jobs like record keeping, paying bills, chasing
debts, marketing and networking. You'll have to wear lots of
different hats unless you can afford to pay others to do it for
None of this means you shouldn't do it at all. If you're not
100% sure, you could start your own very small business in your
spare time, to see if it has legs and to find out if you're ready
for it. This could work really well for people who are able work on
weekends (for themselves) like landscape gardeners, hairdressers,
plumbers, and builders. You could balance a new business with other
part-time or casual work so you can keep paying the bills while you
build up cash flow in your new business.
Activity: Why start a small business?
Activity: Why start a small business
When it comes to business opportunities, the sky's the limit.
But you really have to know what to look for and what questions to
ask yourself when thinking about setting up a business.
Obviously, your skills and experience will drive the direction
you head, but think about the following and do your research.
Will your product/service meet a need?
This one probably sounds ridiculous, why would you go into
business without thinking about and researching this? You'd be
surprised how many people do! Does what you offer solve a problem
of some sort? If the need is already being met by other businesses,
how will you do it better? Will your product be delivered quicker,
cheaper, be of higher quality, or more convenient? What makes yours
a value added product or service?
Will your business idea work in your area?
Demand for a product or service can often change from location
to location. Say you're a builder. There might be better
opportunity for you in an area where there's lots of new
development. Or it may not be a good idea for a hairdresser to
start a business in an area where there's already six others. An
upmarket coffee shop might do really well in a busy shopping strip,
but not so well in an industrial area.
Do you have the resources you need?
We're not just talking about tangible items here, but also
skills and knowledge. As an electrician, having a work van and
tools is one thing, but you'll probably need extra help like an
accountant, a financial adviser or business mentor to help your
business succeed. You'll also need to think about marketing your
business, and how you will establish a customer base. Can you
afford these extra resources?
Do you have the right price point?
What pricing can your potential customers tolerate? Can you
provide a good service at a price the public is prepared to pay and
still make a profit? This is a vital thing to think about. You
could have customers clamouring for your service at a rate that
makes you go broke, or have a price point that no-one is prepared
to pay. Finding a price the customer is happy to pay is really
Is the time right for your business?
Think about the first four points - all of these things have to
add up at the right time to make it all work for your business. If
everything points to the time not being quite right, keep
researching and watching for the right time for you. And don't
forget, sometimes there's opportunity in times of financial
downturn. For example, there's research to suggest some women
spend more on beauty products and hairdressing during economic
Business goals and opportunities
Ok, if you're still seeing an opportunity, you're ready to set
your business goals.
Goal setting is so important in both our personal and work lives.
If you don't have goals, how will you know where you're going, how
to get there or when you're there?
Can you think of any personal goals you've had in the past? It
may have been something as simple as getting a part-time job while
you were studying, saving for a holiday, buying a second-hand car
or finishing an apprenticeship. Goals are great as they make you
focus on the big picture. Ever noticed how once you've decided to
buy a certain type of car, all of a sudden, you see that make and
model everywhere? This is because your mind is attuned to the goal
and is working hard to make it happen!
Your business goals can be big or small, short or long-term, but
as with all goals, they must be SMART.
Here are some questions to ask yourself to make sure your goals
Specific - Is your goal clear and precise? There
should be no grey areas around your goal.
Measurable - Will you be able to easily tell
when you've reached your goal?
Achievable - There's no point setting yourself
up for failure. If your goal is impossible, you'll just give
Relevant - Is the goal in line with what you
are trying to achieve? For example, does your business idea allow
you to build on your existing training and experience?
Time-based - Have you set a timeframe for your
goal? Give yourself a deadline to achieve your goal, if it's
open-ended, you'll never get there.
So how does this all work in the real world?
Tim is thinking about going into business for himself. He's a
fully qualified pastry chef, is used to the early starts and thinks
he has what it takes to run his own small business. He's thought
about the pros and cons and jotted down a couple of broad business
- Get a loan from the bank
- Find a shop to run the business from
- Get equipment for the shop
- Get shop up and running
Let's make Tim's goals SMARTER!
- By 30 Nov this year, find a shop within 20km of the CBD with
rent up to $25,000pa
- Get a business loan for $50,000 by 1 January next year
- Spend up to $10,000 on ovens and bakeware by 31 January next
- Start trading by 28 February next year
By making his goals SMARTER, Tim will be able
to focus on his priorities and be responsible for making them
happen. And he'll easily be able to measure when he's achieved
Activity: Making SMARTER goals
Activity: Making SMARTER goals
2 What is your personality type for
We all have different personalities, and depending on the
situation, we demonstrate the different ways we approach work. In a
small business you might need to utilise some of your less common
characteristics in order to succeed.
Let's take a look at one way our work personality types can be
The Doer - hates change
This person loves to get their sleeves rolled up and do the
work. Their main focus is on getting the work done. Management,
procedures and change can fly out the window according to Doers.
They like things just the way they are. They feel comfortable when
their job feels like a big, familiar comfy couch that stays the
The Manager - only supports change where
Unlike the Doer, the Manager's main focus is order and processes
and how they can work better. The Manager creates work and
supervises. They only change things if there's a problem, in which
case they'll develop a process to solve it.
The Entrepreneur - loves change
No-one loves change as much as the Entrepreneur! Never content
with the way things are, they are creators, innovators and
visionaries. Things can always be done better according to the
Entrepreneur, who lives in the future, always wondering 'what
Activity: Which work personality type are you?
Activity: Which work personality type are
3 Budgets and cash flow statements
Budgets and cash flow statements are both essential for managing
the finances in your business.
What's the difference?
A budget establishes the financial position of your business and
what expenses you will have to pay in a set period time, for
example 12 months. This is very important when setting up your
business, to understand what expenses you will incur, from licences
and registrations, rent, insurance, raw materials and more. Into
the future, a budget will help you break down the costs involved in
reaching the goals in your business plan, such as new equipment,
additional staffing, or new licences.
A cash flow statement is in real time, what is going in and
going out of your business.
It is important to remember that budgeting for your own personal
life is just as important for your business, however remember to
keep these separate. You need to know the cost of your own
expenses, such as paying rent and utilities, loan repayments, food,
and transport costs. Knowing this will help shape your decisions
around how to start your business, for example do you have enough
cash to set up your business and support yourself for a period of
time, or will you start your business part time, and continue
working in another casual job to stay afloat?
The MoneySmart website provides further information on budgeting,
and some tools to help you get organised, and Business.gov.au also
start-up budget template for your business. Let's take a
closer look at cash flow statements.
Cash flow is the life blood of small business and managing it
effectively is critical to your business success. In fact, some
businesses fail, not because they aren't profitable, but simply
because they run out of money.
But it's not rocket science. There are lots of tools out there to
help you. Before we get started, let's take a look at an example of
what can go wrong.
Khalid is a 24 year-old plumber who started his own successful
business two years ago. He loves his work, has a stream of regular
clients that keep his revenue up and has managed to keep on top of
his paperwork with the help of a local accountant. Life couldn't be
After two years of working really hard, Khalid has a bit of cash
in the business which has given him a bit of a buffer from slow
payers or lean months and so far everything's worked out fine.
Khalid is halfway through a really lucrative 12 month contract
that should see his business turn a hefty profit for the year. The
contract is with a large, well-known firm so Khalid isn't worried
about extending credit for more than the usual 30 days; after all,
he has some money in the business to tide him over. But the debt
quickly goes from 60 to 90 and then 120 days and all of a sudden
Khalid has worked four months without a payment. He is assured by
the accounts department that he will be paid, but after six months,
the firm goes under and Khalid is left with an outstanding debtor
of more than $40,000 that will never be paid.
Khalid now knows that no matter how big the customer, it's
unwise to extend credit past the usual 30 day term. It's also not
the best move to have all your income coming from the one source
because if that client goes bust, your business might too.
There are more small business case studies on our First business
Managing cash flow
So you can see from Khalid's story that managing cash flow
correctly can make or break a business. Managing it well means you
will always have money to pay your bills when they are due.
Many things have a direct impact on cash flow. In Khalid's case,
customer payment terms were a huge part of the problem, as was
having all his work eggs in one basket.
So here are some essentials for you to think about:
Plan your cash flow
A cash flow statement will help you estimate money coming in
and money going out. Cash flow templates are readily available on
the web, but you will need to record:
- the opening balance to record how much money you have at the
beginning of the month
- total monthly cash coming in (income)
- total monthly cash going out (expenses, including any drawings
you take from the business to 'pay yourself')
- net cash flow (the difference between money coming in and money
going out) to make sure there's more money coming in than going
- closing balance (opening balance plus net cash flow) which will
be your opening balance for the following month
Monitor your cash flow
It's important to compare your cash flow estimates against
actual amounts, to see if you are tracking as you planned. Don't be
scared to revise and amend estimates. It's a normal part of cash
Planning for the best and the worst
If your cash flow statement at the end of the month shows some
shortfall of funds, you'll need to figure out a way to cover this
until you get back into positive territory. A short-term loan or
bank overdraft might have to be arranged. Any loan repayments will
need to become part of your outgoings.
If you're in the great position of having excess cash, you could
think about paying off any business related debt or purchase assets
that will help you generate more income. It's also a good idea to
keep some cash in reserve in case of emergencies.
Tips to improve your cash flow
- As in your personal life, good financial management means
spending less than you earn. In business-speak this means
increasing your profits and keeping your expenses under
- Whether you're a plumber, a café owner, a dog groomer or motor
mechanic, if you hold stock to help you do your job, try to keep it
to a minimum. Supplies that have been bought are tying up valuable
cash and well … just taking up valuable space.
- Always follow up on your overdue accounts. Have tight credit
terms and stick to them. Try to arrange longer credit terms with
your own suppliers to give you a bit of breathing space.
- Look at how you're taking money in. Payment by credit card or
EFTPOS is convenient for your customers and means you can get your
money quicker. Talk to your bank about ways you can make this
happen, make sure you ask about transaction fees and factor these
into your prices and budget.
- Increase money coming in by taking a look at your pricing. Are
you charging the right amount? Consider promoting your business or
improving processes to generate more income.
- Monitor your expenses, cut back where you can and minimise
wastage as much as possible. Going 'green' with your energy and
water can also save you money.
- Educate yourself in financial management or get professional
help where you need to. There are lots of small business workshops
you can attend to upskill yourself and seeking help from a
financial adviser or accountant is just a phone call away. You
could also consider a business mentor, who may be a friend or
family member, former boss, or someone you admire from your
industry who may be willing to support you.
If you are going to be relying solely on business income to pay
yourself a wage, you'll need to factor this into your cash flow as
Getting started - What have you learnt?
4 Business planning and
Benjamin Franklin famously said, 'if you fail to plan, you are
planning to fail'. It seems he may have been onto something.
Why you need a business plan
Planning is one of the keys to small business success, yet a
high number of small business start-ups don't have a proper
Key reasons why planning helps you:
- Identifies your goals and keeps you focussed
- monitors and reviews your
- conveys your business idea to others
- describes contingency plans in case things don't go as
All very sensible, right? Read on to learn more.
Business planning starts with setting goals. As identified in
part one, goals provide focus and direction and keep you motivated.
You might set a series of milestones to achieve as part of your
overall goal. Small achievable milestones keep you focused and make
reaching the goal seem possible. The Part 1 of this resource looked
at making SMART goals. You may wish to refresh your memory on SMART
Monitoring and reviewing progress
A business plan is not a static document, it will evolve as your
plans are reviewed and revised. Comparing your plan to what
actually happened and tracking your progress against milestones
helps you make decisions about your business and hopefully improve
Conveying your business idea to others
If you need finance to get your business off the ground, putting
your vision in writing is absolutely essential! Investors or
lenders will want to see that you have researched your product or
service and undertaken market analysis, so they have a credible
basis for believing that your business has what it takes to
succeed. It also makes sure that other people you're working with,
including advisers and mentors, are on the same page.
Making contingency plans
While planning improves your chances of success, it's important
to understand that things don't always go to plan. It's important
to consider what could go wrong, what is outside your control and
plan for unexpected events. In business, you can hope for the best
but you need to plan for the worst. Consider doing a SWOT analysis
and including it in your business plan.
Research your business idea to see if it has a reasonable chance
of success before you start on your business plan. This is covered
in Part 1, if you haven't already taken a look, now's your
Business planning basics - what do you
Your business purpose
Ok, so we've looked at all the reasons why a business plan is a
good idea where to start.
Your plan doesn't need to be long and overly complex. It just
needs to be set out:
- The purpose of your business
- Your product/service, what it does and why
- Your target market
- Your ideas for bringing your product/service to the market
- Your overall goals and progress milestones
- Your financial needs
- How you will measure success
That doesn't sound too hard, does it?
The purpose of your business
Sounds simple doesn't it, but you might be surprised how many
small business owners can't tell you 'why' they're in business. The
purpose of your business is not the same as a mission statement.
Google some well-known businesses and you'll find examples of some
interesting mission statements:
- Sony: to be a company that inspires and
- Samsung: inspire the world, create the
- Cadbury: Cadbury means quality, this is our
- McDonald's: to be our customer's favourite
place and way to eat and drink
You'll notice that none of these statements accurately describes
the purpose of the business. For example McDonalds' business
purpose is to provide low cost fast food that is consistent across
outlets anywhere in the world, notwithstanding country specific
differences in product offerings. Be careful not to confuse a
mission statement with a business purpose.
Your business purpose needs to describe what you will do, not
what you dream of becoming. It is the reason you are starting a
business. It will describe the actions you will take as you deliver
your product or service.
Examples of a business purpose:
- To provide an affordable plumbing service to the people of
south western Sydney
- To provide efficient bookkeeping services to businesses in the
Examples of a mission statement:
- To be the best mechanic in town
- To provide the best tasting coffee on the surf coast
Start by briefly describing your product or service. Is it
unique or are there others offering the same, or similar, product
or service already? If there is already competition, what will be
your point of difference? Also think about what your business won't
provide. Lots of small businesses struggle trying to be all things
to all people, instead of focusing on a defined product or service
with clear boundaries.
- technical specifications or details of your product or
- how your product or service will benefit your customers
- how you're different from your competitors
- how you will deliver your product or service
Determine your market
This one sounds pretty easy, but sometimes it can be hard to
nail down. Who are your customers? Who will buy your product or use
your service? Where are they located? Be realistic and understand
that not everyone will be a customer. You'll need to work out the
people or businesses that will use your product or service so that
you can target your marketing efforts towards them. People buy
products or services for three main reasons:
- to satisfy basic needs - like buying groceries
- to solve problems - like getting their car fixed
- to make themselves feel good - like buying new clothes or going
on a holiday
Here are some great tips for
helping you undertake market research.
Getting to market
Decide the best way to bring your business idea to the market
and develop a marketing plan.
- your pricing - you'll need to work out what price your
customers will be willing to pay and make sure it allows you to
make a profit
- advertising strategies - consider how will you advertise and
promote your business, which method is likely to reach your market
most effectively? Channels such as radio, direct mail, letterbox
drops and social media have different costs which will need to be
factored into your budget
- how other businesses promote their goods and services,
especially the ones that 'think outside the box'. What creative and
innovative ways can you promote your business?
Goals and milestones
Milestones are like checkpoints for your business, steps you
take to reach your overall goals. You are more likely to achieve
goals that are written down and that have realistic timeframes. It
will give you something you can measure progress against to keep
you on track. You may wish to refresh your memory on
SMART goals from part one.
No business can survive without cash. You'll have start-up
costs, regular expenses and probably a few unexpected ones. You
will need to estimate when you will receive income and when you
will have to pay expenses. In a start-up phase it's likely your
expenses will be greater than your income so accurately estimating
your expenses and making sure you have the funds to cover them is
vital to the success of your business. You may need to pay an
accountant or bookkeeper to help you if finances are not your
As well as projecting cash flow, you'll need to develop other
financial forecasts such as a projected profit and loss statement
and balance sheet. Consider:
- Start-up expenses such as fitting out a shop or buying tools of
- Fixed costs - expenses that won't change, such as rent or
- Variable costs - expenses that will fluctuate according to your
sales, such as materials, stock or motor vehicle running costs
- Expected revenue - how much money do you expect to make and
when do you expect to receive it
Do you need to register for GST? If you do you'll need to
complete a quarterly BAS statement to the ATO and make any
necessary tax payments.
Your business is unlikely to turn over enough profit to pay you
a decent wage for a while. You will need money from another source
to pay your personal expenses while you build your business.
If you've put the time into setting your business up properly
you'll want to know how you're tracking against your business
plans. If your goals are SMART then they should be
measurable, so what should you be looking for when comparing your
plan to what actually happened?
- Are your income and expenses in line with what you budgeted? Do
you need to revise your cash flow or profit statements?
- Are you following the plan? If not, why not? Does the plan need
- Have you reached any of your goals? Which ones? Are your goals
- Does the plan still reflect the business you set out to
Depending on your goals and budget, also decide about how often
you would like to review your business plan, for example every six
months or every 12 months, and make sure you stick to the time
Don't let all this faze you. There are some
excellent business plan templates out there that make it as
easy as possible for you to complete these really important steps
in setting up your business.
Activity: Business planning - reflection time
Activity: Business planning - reflection time
5 Getting help
Now that you've got your business plan sorted, you may have
discovered some skills gaps. Think about whether you want to fill
these gaps by developing or improving your skills or by seeking out
business professionals, mentors or coaches to help you.
Your plan may have highlighted the need for skills in areas such
- financial management
- advertising and marketing
- sales and customer service
- communication and negotiation
- job scheduling or project management
It's a big list, and you won't need to know it all but spending
money to get good advice in the beginning can be a factor in
determining whether or not your business becomes a success.
Luca is a 23 year old house painter who started his own small
business three months ago. He's working really hard, has picked up
a few big clients and is loving the chance to choose when and where
Luca has a rough business plan he's put together with the help
of a business
planning templates and tools and enough enthusiasm to sink
a ship. There's just one little problem. Even though he's very good
at painting, his business plan did highlight some areas where his
skills are lacking. He's completed the following skills gap
|Managing the finances
||Dad - who's an accountant
|Marketing and sales
||Short course through local council
||Brother Carlo who has a small business of his own
||Business breakfasts through the local Chamber of Commerce
||Family friend, Marisa, also a successful small business
As well as this, Luca has asked Marisa to fill an overall
mentoring role for his first 12 months in business. He was
worried about his skills gaps but he's worked out how to fill those
gaps. All successful small business owners started somewhere and
most would not have achieved success without some help. Eventually
Luca hopes to build up his own skills so he's less reliant on
others but this will take time, so for now he has some good mentors
and he can focus on what he does best.
Activity: Skill gaps
- Skill gaps
Upskilling and mentoring
Luca is lucky because he has people close to him that he can ask
for help. But what if your table shows areas where you need to
upskill or outsource, but you don't know where to start?
There are lots of ways to educate and upskill. Formal or
informal, face-to-face, online or a bit of both. There are plenty
of ways to learn and a lot of free resources online, so education
doesn't have to cost a lot, which is a real bonus for small
workshops and seminars are run across the country. You can
search for these at business.gov.au or your local council. Some
councils and state governments even have web pages or small
business hubs dedicated to the local small business community.
You'll find topics such as planning, marketing, financial
management, innovation, employing staff and exporting, just to name
The ATO runs small business
workshops across Australia where you can learn about tax
essentials and record-keeping.
Start looking and you'll see there's a whole community of small
business owners in various stages of business development who love
sharing their experiences and ideas. You've heard the term 'why
reinvent the wheel?' … it's spot on in this instance. If you can
hear about and learn from other people's experiences, you could be
on the fast track to success.
mentoring and coaching programs in every state and territory to
help you find a mentor. Family friends, relatives and acquaintances
are also potential mentor material.
Networking events can be a great way of keeping up to date on
what's happening in your industry and can also be a useful place to
promote your own business. Our First business app has a networking
section that might help.
Of course, sometimes you will need to pay a professional for
services such as legal or accounting. Word of mouth can be great
way of finding appropriate professionals. Once you build up your
network of small business friends, there's every chance they've had
the same needs at some point and will be able to refer you to
practical and affordable help.
Siobhan is 19 and has always loved baking, and she's really good
at it. She's been studying psychology at uni but it's not inspiring
her the way she hoped it would. So after giving it a lot of
thought, and with the support of her parents, she's decided to
start her own business making high-end designer cakes.
She's going to start her business working from home but as she
still lives with her parents she needed approval to take over their
kitchen. She'll also have to get a licence to use a domestic
kitchen for commercial purposes.
Siobhan has a reputation among family and friends for producing
amazing cakes so she's pretty confident she can turn her skills
into a viable business. She's built a basic website but knows
she'll need a better online presence if she's going to build her
brand and attract new customers. Problem is, she doesn't know how
to do it.
Siobhan's based in Melbourne, so she googles 'help for small
business Melbourne' and finds the
Small Business Victoria website. She finds a selection of
marketing and online workshops, most of them free or offered for a
small fee. She then googles her local council and finds out they
have a business hub that
supports the local small business community by providing
training and other tools and resources designed specifically for
Over the following year Siobhan joined the local small business
community and built a network of people, like her who were running
small businesses from their homes. They have been a constant source
of encouragement and motivation for her and she's picked up some
wonderful ideas. Best of all, through this network she found
someone to help her launch an amazing new website and develop an
online marketing strategy.
6 Legally speaking
When it comes to small business, there's a whole heap of
licences, permits, approvals, registrations, codes of practice,
standards and guidelines that might affect your business.
Luckily there's an easy way to get your head around all the
Case study: Bethany
Bethany is a 24 year-old animal lover who works as a qualified
vet nurse at a veterinary practice in Townsville. Over the years
she's gotten to know the regular clients and their pets really
well. Bethany hears her clients talking about how hard it is to
find somewhere to get their pets groomed, walked when they can't do
it, or somewhere to stay when they go on holidays. Some of the
elderly clients in particular, have trouble with some of these
Bethany realises that developing a service for pets could be a
really good small business idea. As a vet nurse, she has a lot of
experience dealing with animals and has a good rapport with the
clients. She knows she can reduce her hours at the clinic if she
needed the time to build her business.
Bethany started to turn her idea into a business plan. She lives
on acreage with her family so there's lots of room to develop a pet
grooming salon and pet accommodation, as long as her family are OK
with the idea. Then she thinks about maybe needing some form of
'licence' and freezes. Rules and regulations are not Bethany's
strong point and she starts to worry.
Bethany googles 'small business licences' and finds ABLIS - the
Business Licence Information Service. She enters details of her
business idea and finds out that she will need:
- An Australian Business Number (ABN)
- To register a business name with the ASIC's business names
- Kennel/cattery licence (Townsville) if she decides to take in
pets for overnight stays
- Local council permission if she wants to erect kennels on the
Wow … what started out as a simple idea has suddenly taken on a
life of its own!
Bethany decides to start her business off with dog walking and
pet grooming and walking services on the weekends and see how it
goes. She'll only need an ABN and to register a business name and
she can get started. She can continue to work full-time while she
builds her business and sorts out the other licences she'll need to
expand. Before her business grows to include pet accommodation,
Bethany also wants to prepare a detailed business plan, including
set-up costs, so she has a path to follow and way to measure
Activity: Know the rules
Activity: Know the rules
7 Understanding risk and insurance
Risk is the potential of losing something of value - and you
can't avoid it. Planning for risk includes insuring against the
financial consequences of an unexpected event. When it comes to
your small business, there's a lot to think about. Here are some
events that may result in a financial loss:
- Your tools of the trade are stolen or destroyed
- Your business vehicle is stolen or destroyed
- Your work premises are damaged or destroyed
- Your devices that you use to carry on your business and keep
records become damaged or destroyed
- You become sick or injured and can't earn an income
- You injure someone while working
- You damage someone's property while working
Case study: Jin
Jin is a 25 year-old electrician. He's been working for himself
as a sub-contractor for the past year and has been doing really
well. He's put a lot of effort into building his business and has
achieved steady revenue growth each quarter in his second year of
Jin's feeling really good about how his business is tracking and
then one weekend a terrible bushfire spread through Jin's
neighbourhood and his home and most of his personal belongings were
destroyed. Jin's work van was insured and he hoped his work tools
would be covered under his home contents policy. He called his
insurer to report the loss and find out how quickly he could be
reimbursed for his losses.
Jin was shattered to find out that only $1,000 worth of his
trade tools were covered under his home contents policy which is
not even close to the $10,000 worth of tools and equipment that
were lost. To make matters worse he can only guess the value of the
tools lost because he hasn't kept proper records.
If Jin had thought about this earlier he could have taken out a
specific trade tools policy that would cover his tools whether they
are in his van, in his garage or on-site. Jin can't work without
tools so this is a huge setback both financially and for his
While Jin is talking to his insurer they ask him if he has
public liability insurance. Jin doesn't even know what this is but
learns that if you own a business you may be liable for damage or
injury caused to another person or their property while you are
working and that public liability insurance would cover him if he
was sued. Jin finds out he can take out $5 million worth of cover
for a small monthly premium.
Jin's loss made him realise that he needs to make sure he is
adequately insured for all potential losses that could impact his
business and income. He writes down all the things of value that he
needs to keep his business running:
||Yes, comprehensively with 123 Insurance
||$1,000 cover through his home contents insurance
||No - to be organised
||$1,000 a week
||$1,000 a month cover through Easy Industry Super Fund
||No - to be organised
From his list, Jin can see he needs to get cover for his trade
tools, lap-top and public liability and he will need to increase
his income protection insurance.
Activity: Assessing risk
8 Tax and record keeping
As we have already talked about in the other parts, good record
keeping is essential for any business. It helps you manage your
cash flow, keeps you organised, helps you meet your tax
responsibilities and most of all, it lets you know how your
business is going.
The four requirements from the ATO are that record keeping
- explain all transactions
- be in writing
- be in English
- be kept for five years (although some records need to be kept
If you're unsure about the records you need to keep, the
ATO has a Record keeping evaluation tool that can help you.
The ATO's website has extensive information on
what you can and can not claim, and when you can claim it. Talk
to your accountant about what deductions you can claim from your
business, as they will be best placed to provide you with specific
advice for your situation.
A few tax tips to remember is that you:
- can not claim deductions for private or domestic expenses, or
any costs relating to entertainment or fines. There are
specific options available for sole traders and
how you can claim business expenses.
- can claim operational expenses, such as wages, advertising, and
stationery supplies, in the financial year that you incur them. The
ATO has an
extensive list of these items, including information specific
to small businesses.
- can claim on the depreciation of assets, including motor
vehicles, machinery and equipment, furniture and capital assets
such as buildings over a longer period of time. Check out the
rules from the ATO for more information.
- must keep copies of your bank and credit statements. If your
bank provides these electronically, you can save them as a PDF for
- can only claim a percentage of costs for an asset you use for
both personal and business purposes, for example an electronic
device that you use for managing business email and banking, but
also use it for personal social media or to read books in the
Case study: Alex
Alex is a 22 year-old fully qualified hairdresser and beautician
who has been running a salon from the front room of her home for
the past eight months. She's been struggling to make ends meet as
she's had to spend quite a lot of money on equipment and supplies
to set up her salon, as well as advertising to get the word out
There hasn't been much time for Alex to organise any of her
paperwork in between answering the phone, fulfilling appointments,
cleaning the salon and replenishing supplies. She only takes cash
for the work she does and has been paying cash for her equipment
and supplies, she has no electronic record of her transactions.
Alex struggles with paperwork but she does have an ABN. She
hasn't registered for GST as she doesn't expect her income to be
very high. When the ATO contacts her about lodging her first
Instalment Activity Statement, she doesn't know where to start. A
friend puts her onto a local accountant for help.
Alex finds out that she should have been keeping a record of all
her business income and keeping receipts for all her purchases so
she can deduct them against her income. Otherwise she has no way to
show what her taxable income is so the ATO can work out how much
tax she needs to pay.
Alex's accountant shows her how to fill in a simple
Excel spreadsheet at the end of every day, detailing her income
and any business expenses. Alex also now knows she needs to get a
receipt for all business purchases and keep them as proof that they
are business expenses. She can use the spreadsheet to help her to
complete her Instalment Activity Statement each quarter, and it
tells her how profitable her business is.
Tax and record keeping - Test yourself
9 First Business app
Now that you have completed this online resource, and have
decided that you are ready to bring your idea to life, download the First
Business app to help guide you through more of the
requirements for kick starting your new business venture!
Last updated: 31 May 2019