Everyone seems to be getting involved in the ‘gig economy’. Maybe you are one of the people who has not had the time to do so yet.
Here is a quick guide to five essential steps for setting up an online business.
1. Decide on your business structure
This is important. Before you even start to think about a business, you need to understand the difference between using a business name and setting up a Pty Ltd company. There are lots of free resources to help you understand the pros and cons of each option.
If you plan to do business using your own name as a sole trader or trade as a registered business name, your personal assets may be at risk if a customer or person decides to sue you.
If you can afford to set up a Pty Ltd company, it is good protection for your personal assets and can be a much better option for your protection. Any claim will then be limited to your company assets and your personal assets will be protected. Set up a Pty Ltd company as soon as you can afford to do so. It may be more protection for your personal assets than spending the money on expensive insurance policies (depending on what business services you are offering).
Tip: Make sure your website states if you are operating your online business using a Pty Ltd company or business name/sole trader only. Customers need to be informed who is at the other end of the sale.
2. Check and register your chosen business name
If your business name is not your own name literally, like John Smith, you need to check:
- Is the website domain available? Do not purchase it until you see if the business name is available at ASIC.
- Is the business or Pty Ltd company name available under ASIC registration? You cannot use a name that is not your own personal name for your business unless it is registered with ASIC as a business name or a Pty Ltd company. If your name is available, register it and then you can go back and purchase your domain website name.
- Is anyone online already doing the same thing or offering similar goods/services under something that sounds or looks similar? You cannot risk confusion in the consumer marketplace or they may have a right to close your business down.
Tip: Ensure your business name is easy to spell, pronounce and is memorable. Be careful of including such things as hyphens, making the name too long and strange capitalisations.
3. Choose your website team early
Setting up a successful online business does cost money. You need professional website designers, developers, SEO providers and other specialists. You can’t do it by scrimping on costs and trying to do it all yourself. It will reflect in your business, website, growth and sales. Quality professional websites will go a long way to convincing customers you are selling quality goods or services. Do your research, get recommendations from forums (the Flying Solo forums are a great place to start!) and try to buy local services to protect yourself as it is difficult and expensive to sue an overseas company or provider if things go pear shaped. There are, unfortunately, a lot of online business owners who have learned the hard way that not all overseas service providers are honest. The other essential item is to ensure you have tight contractor agreements in place with your service providers that include: clear timelines for delivery, payment in phases not upfront, and ownership of the website AND software code after finalisation. This is important to be able to change developers if you want and also to be able to show your full ownership for investment purposes.
Tip: Make sure you have a good website contract in place with your developer that has strict timelines with payment for each phase and that you will own the website including the software code at the end of the process. Otherwise, it may cost a lot of money for no end product!
4. Get compliant
You don’t know what you don’t know, for example, what you need when you collect personal data, what the banks require for a merchant account and what consumer law requires you to include on your website. These are all legal notice requirements.
It is not worth spending the time and money trying to copy other business’ terms and it is illegal as you are breaching copyright! There are inexpensive template options available (Plug alert! Like our Legal123 website package for $159+GST!) which make it crazy to spend the time trying to source, draft yourself and take the chance that you are not legally protected.
Plus you need to look professional, so your own ‘cut and paste’ from another website will not make you look like you are running a serious business.
Tip: Privacy and consumer law requirements are not an option for your online e-commerce business. You may be fined for non-compliance if you do not have the regulated required notifications.
5. Set up good systems
You need to have a good invoice and accounting system to make your business work professionally and make your life easier. You also need to have good shopping cart and payment processing systems to make it easy and secure for your customers to purchase. When your business suddenly takes off, you will understand how important it was to ensure you had good systems in place early to manage this!
Tip: Xero is a great accounting package for your invoices and accounting purposes and can cut costs for your business accountant as many accountants also use this service, and it can also lessen your workload.
Setting up an online business is a lot of work, requires 24/7 love and attention and may not bring in as much income as quickly as you would like. But would you turn back? Not a chance!