Thinking of starting a business in 2023? You’re not alone. The number of micro-businesses in Australia grew 10 per cent from 1.41 million in June 2021 to 1.55 million in June 2022. Yet, around 20 per cent of businesses fail in their first year, with cash flow stress a common cause of failure. Coco Hou, CEO of Platinum Accounting Australia, shares seven key things people should do when they start a new business to achieve profitability sooner.
Starting up a new business is one of the most exciting things you can do as part of your career journey, however it can also be one of the most stressful and expensive. There are many costs associated with setting up a new business, so it is important to manage costs or risk putting yourself in a precarious position from the start.
The key is to minimise spending while maximising revenue generation. Unfortunately, many people are not good at minimising spending.
From day one you need to be thinking about moving into the black. This is an accounting term that relates to profitability. In simple terms, you need to be bringing in more income than you are sending out the door through spending. If you are still in the red, then your business is not sustaining itself financially.
7 ways to minimise spending and achieve profitability quickly
1. Buy second-hand
While purchasing equipment for your business may be tax-deductible, you need to outlay the funds upfront to buy things.
Where possible, set up your business with second-hand items. Second-hand marketplaces are full of desks, chairs, cupboards, fridges, shelving and other items that are ideal for offices and warehouse setups. This will save you considerable money and help you to get up and running quickly.
2. Use free software and apps
Running a business can be very expensive so you need to look for ways to keep your costs down. Utilise the plethora of free apps and software available online to support and run your business. These include apps for collaboration, communication, creative design, account management and more.
When choosing which apps are best for you, consider things such as integration and scalability. As your business grows and your needs increase, you may need to advance to paid versions to access different services.
3. Engage a good bookkeeper and accountant
There are some things that you must have from day one when you start a business and having a good accountant and bookkeeper is very important. When starting a business, every cent matters so you need to keep track of your expenses and receipts, and ensure invoices are being generated quickly and efficiently and payments are being followed up.
A good accountant will ensure that your structure and business have been set up correctly from day one to meet your needs from a risk and tax compliance and minimisation point of view. They will also work with you to put in place systems to manage your cash flow, invoices and expenses in a central and manageable manner. Your accountant will also be able to recommend bookkeepers who are skilled and trustworthy at taking care of your day-to-day accounts.
4. Digital assets
Websites, social media and customer databases are critical in business and form a key part of your overall operations and digital assets. Ensure you have registered all available and relevant domain names, social media pages and your branding with IP Australia.
These assets will grow in value over time and become integral to your brand and business value. If you don’t secure domain names and social media handles early on, it may cost you more once your business is established to purchase these assets.
5. Outsource help
When starting up a new business the key is to sell hard and bring as much revenue in the door as possible, while scaling up in a measured way. You also need to keep fixed costs and expenses as low as possible to bring the business into the black.
If you find you are growing fast and need more help to deliver the work to customers, opt for Uber-style task platforms such as Airtasker and Upwork to get tasks done quickly on an ‘as needs’ basis. Outsourcing the work in this manner is more cost-effective in the early days than bringing employees on board.
6. Security
Security is an important issue for business owners regardless of your size of operations or stage of growth. Ensure your computers, website and other assets or systems that sit in the cloud or are connected to the internet are secure.
A lot of businesses are being hacked and blackmailed. Websites are being hijacked and social media accounts are being hacked into and stolen. Ensure you have good security in place from day one and maintain high levels of vigilance. Being hacked can be devastating and bring your business to its knees.
7. Swap services
Value exchanges are important strategies while you are growing. If you need an IT person to set up your computers, then offer products and services in return to reduce the cost of the services.
Many business owners are happy to swap services in order to gain access to expertise they need while using their own services as currency. This is a good example of bootstrapping and it is an extremely valuable tactic to use while you are growing and moving into the black – and also a good strategy to use to stay in the black.
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