Starting Up - the dream
Structuring – tax effectively
It’s important to get the structure correct up front – separating operating assets from investment assets (such as business premises) and also ensuring that the structure is the most suitable from a tax viewpoint.
Asset protection / risk mitigation
Following on from the structuring issue, you need to consider protection of business and family assets and carefully review borrowing arrangements and related obligations/guarantees. Personal insurances (life, TPD and income protection) are also very relevant, to provide for unforeseen events.
Premises – lease or buy?
Most businesses start in leased premises. Securing the right property with an appropriate lease is an important box to tick early. Options should also be explored in relation to purchasing premises through an investment vehicle or SMSF if sufficient funds/equity exist.
A business plan doesn’t need to be a 50 page tome that nobody reads! A business plan of a few pages, which sets out the strategy and milestones in the four key areas of Operations, Marketing, HR and Finance, is an important “blueprint” document.
Sourcing appropriate funding is a fine balancing act. Equity versus borrowed funds and for the latter – type of facility(ies), duration, terms etc must all be considered based on forecasts.
It’s important to have a banker who understands your business!
Where a business “partnership” is being contemplated, it’s vital to have a Shareholder, Unitholder or Partnership agreement which sets out the rights and obligations of the business owners. Everyone needs to understand what’s expected of them and how any disagreements or disputes will be resolved and how unforeseen events will be dealt with.
A fundamental pillar of all business activity is making sure all the relevant insurances are in place. A broker with thorough knowledge and experience in business insurances will provide the right guidance and insight.
Key service providers
Identifying, understanding and working closely with key service providers is also fundamental. Your financial, legal and banking advisor relationships will be vital in the years to come.
Managing cash flow
Critical to the long term success of any business is managing the supply of cash to the business and key to this is building profit and cash flow models using “best case”, “worst case” and “most likely” scenarios.
Once business commences, careful monitoring is essential!.
Intellectual property protection
Patents, Trademarks and other such “protections” should be considered and potentially held in an entity other than the main trading entity and such “IP” can be licensed for use to the trading entity.
Key staff appointments
Key management and operations staff appointments must be made, appropriate Position Descriptions developed and responsibility and authority levels clearly set out.
Business owners must be clear about their own roles, responsibilities and obligations to the business and be mentally prepared for the inevitable challenges that will arise.
What will it look like?
Once up and running, it becomes necessary to be clear about what “success” will look like – size, scale, products, services, territories…….
Where do you hope to be in 12 months, 2 years, 5 years?