JustStartUp was developed to help Australians start their own small businesses. This chapter outlines what JustStartUp is about, and what you need to succeed.
In addition to reading JustStartUp, the Australian government has useful resources which you should also explore.
Note: JustStartUp is provided as an informative guide, and isn't a substitute for sound legal, accounting, tax, or other professional advice. See our Legal Disclaimer before you get going.
What Are We Doing?
We're taking an idea, a product, a skill or a service and we're monetising it to create a profitable business.
To start a business you need to have an idea. This is usually the intersection of your expertise, a potential market and the legal regulations around that market.
Your idea should capitalise on a product, skill or service that can be financially viable. That is, it should produce a profit (with revenue larger than costs). More on this later.
Ideas should be:
- Something you can realistically produce or provide (i.e. you have expertise).
- Something that people will be willing to pay for (i.e. you can provide evidence that there's a market for your idea).
- Something that has few or manageable restrictions (i.e. doctors need a degree to practice, will you need a qualification you don't have?).
Example: Bella is a 23 year old woman who loves fashion and wants to start her own clothing brand. She's been working in the retail fashion industry as a sales assistant at a boutique, and over the years she's been asked to make clothes for others. Therefore, Bella has expertise working in fashion and making clothing items. She has a market of people who have asked her to make clothes. She is also aware of the regulation of clothes making, having worked in a boutique before.
Is Your Idea Financially Sound?
You should perform a cost-benefit analysis to see if your idea is financially sound. That is, based on your estimations, your revenue generated should exceed your costs. Sometimes achieving a profit doesn't happen until a year or two after you start. That's okay, as long as you are aware of your cash flow (i.e. you must have enough savings to pay for things you need).
There is almost always an up-front investment when starting a business, spent using either existing savings or a loan (commonly referred to as "debt"). Your acceptance of risk will define how much debt you wish to accept. It's generally wise to use only minimal savings, and not to take on any debt (i.e. be risk averse).
To maximise financial performance, this means achieving basic functionality in your business with the absolute bare minimum spend. For example, a photographer may purchase a mid-range camera (not a premiere-range camera) for $1,000 using savings, but may have $2,500 of revenue in the first year of operating. From there, the photographer may use ongoing profit to fund further investments without ever relying on debt. This is a risk averse strategy.
To assess the financials, estimate:
- The up-front investment you require for equipment or other materials.
- Revenue you expect to take in the first year (be conservative). Use your best judgement, and data from similar businesses (if you can find it).
- Expenses you will have to make in the first year (overestimate this value).
- The "next" investment that will be required once the business is profitable (e.g. a new lens for the photographer).
Choosing Reasonable Goals
"I've got big plans about launching a homewares store internationally" is a broad and unachievable short-term goal. When starting out, aim for tangible and achievable small business. A better starting point could be "launching a small line of homemade homewares, initially sold through an online store". Dream big, but plan small.
A good way to sense check your idea and your goals is to get outside the building. That is, ask a few trustworthy friends whether your idea is reasonable, and whether your goals are reasonable.
Now you're satisfied that you have a sound business idea. We'll cover the paperwork in the next chapter.