Many of my career coaching and career transition clients consider starting a business if they feel ready to leave the corporate world. They want to go it alone.
Especially when going through a redundancy, with a bit of a nest egg as a redundancy package, they gain the courage to try something that they previously thought was out of reach. But, there are many things to consider before taking the plunge!
I conduct ‘Road to Entrepreneurship’ workshops regularly at Lee Hecht Harrison, a global outplacement company, and also assist my private clients through the process of identifying and setting up a suitable business venture, and their marketing strategy to attract their ideal customers.
We always enjoy the exploration process and there are many questions. As there is so much to consider, when I come across great business resources, I like to share them.
The following is an excellent article by Vanessa Emilio, who writes for Flying Solo, and I’m sharing this in it’s entirety as it covers 7 of the important things to consider when transitioning into business ownership and setting up a retail business.
When it comes to starting your own business, most problems are caused by the things we don’t realise we don’t know. This article will help you get ahead of the game before you begin.
Starting your own business takes guts, a lot of hard work, some good planning and what will seem like endless hours of your time. Not sure where to start? Who to ask?
Here are the top questions I get asked about starting your own business:
1. Do I need to register a business name, company name or is a domain name enough?
A business name must be registered if you are conducting business under a name other than your own personal name or if you do not have a Pty Ltd Company. If you are a sole trader and are running your business under your exact name, you don’t need to register. However, be aware that there is no protection for your personal assets if a customer makes a legal claim.
A Pty Ltd company registration will protect your personal assets from most claims. Provided you are not fraudulent, grossly negligent or similar, any claim is limited to the assets of the company and they cannot make a claim against your personal assets. This is the best protection for your home and family. Consider starting out your business with a Pty Ltd set up right from the start.
“Most new business owners have very little money (read NO money) to spend at the beginning. So where is the best place to spend those limited funds?”
To register a .com.au domain you need to be a registered Australian business (Pty Ltd company, sole trader, partnership or trust) with an ABN.
2. What do I need to consider when naming my business?
You need to own your own business name – this is crucial. I’ve encountered too many situations where someone’s registered a domain, got a business running under that name … and then found out a little bit later that name is registered to someone else and have had to do an expensive re-brand.
To ensure the name you choose is available:
- Do a search on IP Australia for your name first. It may be registered to someone else for a similar business. If you’re really attached to that name and you don’t want to let it go, you can consider a variation in the spelling to make it memorable and more unique.
- Check the domain name is available or a variation for your business plus the derivative versions (.com, .org, .net etc) on com.au or a similar domain registration service.
- Check the ASIC website to see if your name is available.
- Don’t forget to check the social media platforms. You can use an online tool like com to help you.
You need to be happy with your name so ensure you take the time to research, name and brand your business properly as it can be a very expensive process to rebrand at a later date. Smart new business owners will also consider trademarking their business name at this early stage. That way you will own the rights to the brand.
3. What are my obligations with regard to refunds?
As a seller of goods and services you need to know and understand your legal obligations as a business. Consumer law is very strict on regulating anyone supplying goods and services to Australian consumers. This includes non-Australian businesses or anyone in Australia supplying non-Australian goods and services to Australian consumers.
You have a minimum requirement as a business to offer a guarantee on your products or services. This means that even if you use an overseas manufacturer, supplier or drop ship, you still must abide by the consumer law requirements in Australia.
As a seller of products, you cannot send your customer to the manufacturer if something goes wrong, it is your obligation as a seller to manage this process and provide the refund or replacement.
So when can you say ‘No Refund’?
You do not have to provide a refund for someone who changes their mind or decides they don’t need it anymore but you do need to offer a free repair, replacement or refund if there is a problem with it, it is not as advertised, if it is faulty, or if it is not of acceptable quality or fit for the purpose intended.
4. Do I need terms and do my customers have to agree to them?
You also need to decide how rigorously you want to be protected:
- Best protection: having customers sign your terms, agreements and quotes. This is generally not practical with an online business nor is it seen to be very commercial.
- Medium protection: having customers tick a box in agreement to your terms. This is known as active agreement and there are different ways you can do this: email acceptance, tick box.
- Least Protection: having terms on your website that state: “by using our site/purchasing our goods/services, you agree to these terms and conditions”. You cannot be certain nor prove they have even read them but this may be the most commercial way for your business to notify customers of your terms.
You have to assess the risk level in your business, your risk appetite and weigh it up against the commercial factor of having customers actively agree to any terms.
5. What are the most important things to spend your limited funds on when starting your own business?
Face it, most new businesses have very little money (read NO money) at the beginning to spend. So where is the best place to spend your limited funds?
Think about the top things that would attract you as a customer (to buy from your business), and invest money on those:
- Your logo/brand is critical. Spend the time and money to get it right in the first place. This is important or it could end up being an expensive error later on.
- A well-designed shopfront/website is important. Do your research to know exactly what you want and who you want to do it. Do not do this cheaply, it will reflect on your business.
- Good suppliers are necessary. Your business reputation is on the line so ensure you get the best products or services possible. Do not cut corners and have a good service level agreement in place to ensure they deliver what you require.
- Professional high-quality hosting is vital. A fast and reliable website is imperative to your sales process. Otherwise, don’t bother.
- A Pty Ltd Company will protect your personal assets. Set one up as it is the best protection for your home and depending on your tax situation, may be the best tax structure to manage expenses and income.
6. How do I know when to quit my full-time job?
This is THE most frequently asked question on everyone’s lips. It’s an individual decision but should be based on a number of factors including:
- Have you proven that your new venture is viable and has a profitable future?
- Have you minimised your personal budget and ensured you can survive on 50-70% of your current salary?
- Are you sure working full-time on your new venture will grow it faster?
There are no hard and fast rules and it is near impossible to get the timing right. If you can afford to quit your day job, you should do it. If you don’t, you are handicapping your odds of your business being a success.
7. Is it smart to outsource overseas when starting your own business?
Outsourcing overseas can be a good experience or it can be a bad one. There are both pros and cons to outsourcing overseas.
The Pros: Potential to source less expensive/inexpensive talent, manufacturers and suppliers; more diversity in options; potential new products or services not available locally.
The Cons: Hidden costs may eat any savings you thought you initially made. You may not be able to control the quality of the goods/services produced as the country of choice may have different quality requirements, there may be little/no recourse for any contracts made in other countries, you may suffer reputational risk if the goods/services are not delivered as promised; you may have to offer refunds where you did not anticipate and cannot recoup so it may be an expensive venture in the end.
If you’d like support when thinking about setting up a business for yourself, let’s have a chat. Book in for a Career Clarity Chat here (it’s complimentary) and find out how I may be able to assist you.
I can highly recommend anyone thinking of setting up a small business to visit www.flyingsolo.com.au as you will find a wealth of small business advice and training to assist you!