What To Do Before You Set Up Your Business
There are a lot of things to get ready once you've decided to setup your new sole trader business, and if you've discussed your new venture with others', chances are high that you'll have a lot of things to consider.
You may also be aware that many businesses start with every intention of success, but end up closing down before making it to the end of the first year of trading.
To make your business the most successful it can be, we've prepared a checklist of items to consider before you decide to register your sole trader business and start trading yourself.
1. Write Down a List of Your Businesses' Customers
You might think that this is obvious, but some people get so carried away by the excitement of starting their new business that they forget who their customers are going to be. This process is relatively simple, but we find that if an aspiring business owner doesn't at least stop and think about the types of customers they are going to serve it will take longer to get into a good rhythm of finding and servicing enough customers to continue their business stress-free.
For instance, if you're a sole trader plumber: you might think your customers are anyone within driving range that needs plumbing. However before you start your business you will need a list of at least 5 people who you've spoken to that would recommend you to fix their plumbing. Even still, you will probably need to get in touch with a service that connects customers with plumbers to find people with more immediate plumbing needs.
If you can't think of 5 people who would recommend you, or a place to find people who need plumbing done soon - you should probably think about how you're going to compete within your market, and how to change people's behaviour to select your new business over their existing process for fixing their plumbing.
2. Estimate Your Market Size
A good way to estimate your market size is to start thinking about:
- how many people have the problem your business can solve
- how often those people need your service to solve their problem
- whether or not you have to reach those people in person to solve their problem
- how long it will take you to solve each person's problem
- how they currently solve their problem
- how many competitors you may have in the market
For instance if you're a graphic designer, you can estimate the number of people who need your service might be anyone with a business. This is potentially a lot of people which is great news!
If your service is to design a logo, though, they will probably only need that service once per business which is not a frequent task. If you considered expanding your services to website design and maintenance, your service frequency would increase and therefore the size and value of the market for your services would be higher.
As a graphic designer, you can also acquire and service your clients regardless of where they are in the world - you don't need to be in their suburb or even city to design for them. This also greatly increases your market size.
You may however take a lot of time to design each person's website or logo in order to present high quality work to your hard won new customers. This, therefore, may be a limit your ability to capture the market for design work as you can only work a certain number of hours per day.
Another thing to consider is what your customers did before your business came onto the market. Maybe they designed the logo themselves? If they are happy with their logo or website they may be very difficult to convert to customers!
Finally, as big as the market for design is - if you are trying to source clients throughout the whole country you will also be competing with potentially many other designers, so a marketing plan or advertising may be necessary to gain the attention of your customers before your competitors do.
Once you have an estimate of your market size and how much work you are planning to take on, you can then get a sense of how much income you will make if you are to capture a certain percentage of your market size.
3. Write Down Your Definition of Success
Based on your market size and your estimate of how much income you can make from that market, you should take some time to write down your definition of success.
This step may also seem unnecessary now, but after your first year (and then all being well, after many years) in business, looking back on your initial definition of success will at least be educational, if not wildly ambitious! You might also be in the very advantageous position of under estimating your ability, in which case you will look back on those forecasts very fondly.
Some traditional goals for sole traders, if you are looking for inspiration, are as follows:
- To replace the business owners' salary as an employee of another company, or their normal day job,
- To get enough customers in year 1 that they can service those customers in their spare time off work with a view to leaving their current job, or;
- To start building client relationships and a professional network in a different industry to their current industry, using a new skill or training
However, your definition of success doesn't have to involve stopping your current source of income, you could simply also:
- Service clients in your spare time to increase your income for extra spending money,
- Find customers from a different industry to try out a new business idea, or
- Run a business such as an online store selling products that generates income passively or with minimal ongoing work
Whatever your definition of success, writing it down is a great idea to measure your progress towards the goal and evaluate your work at a future point in time.
4. Select a Business Account Provider
Once you've decided on a plan to be successful as a sole trader, and identified your services, market, customers and competitors - it's time to consider how you will run the administrative parts of your business.
Thankfully, once you've made it here - this is the easy part. There are a number of factors to consider when opening a business account, such as:
- Whether physical presentation to a financial institution branch is required or not
- Ease of use of your new business account
- How your business account will help you file your business taxes, and track your customers' payments
accountedfor provides business accounts to help you run your business.
One of the great benefits of accountedfor is that it is a simple, online process to open a business account that you can complete in seconds or minutes!
It is also very intuitive and easy to use as it has been designed with the sole trader in mind, and there are no complicated linkages thatare required to go from business registration to your first dollar in revenue.
accountedfor is also very unique in that rather than being a standalone business account that only processes your business payments, it gives you extra tools in the one place to start, run and grow your business.
5. Work Out How You are Going to Invoice Your Customers
Getting your invoicing system worked out is an essential part of running your business. Once you have found your customers and provided them with your products and services you will need to get paid and send them a tax invoice.
accountedfor builds in a super simple invoicing system so that you can spend less of your time invoicing your clients and more time better helping your customers.
Once your clients have paid their invoice, accountedfor will also automatically reconcile payment and mark your invoices as paid - saving you time tracking down sales figures when you need to file your taxes.
6. You're Nearly Ready! Register Your ABN and Start Trading!
If you've gotten this far, you're now ready to register your business and get started.
accountedfor has a helpful tool to register your ABN for free when you select a Sole Trader accounting plan for $29/month.
If you Register Your ABN and get started with a business account and accounting plan now, you will be up and running in minutes!
You will need a few details such as your Tax File Number and (optionally) a proposed business name to complete the form, so be sure to have them ready.
7. Serve Your First Customer!
Once you receive your ABN and business account you're in business. If you've followed the previous steps to this point, you should have your first customers ready to serve.
It's very important to make sure your first customers are highly satisfied with your work, so don't be afraid to go the extra mile to make sure you have a healthy word of mouth marketing campaign running after you're done!
But that's not all! Get Prepared For Tax Time In Advance
Once the hard work is done, it's tempting to forget about your tax position.
While the accountedfor system automates all the manual tasks required to calculate and pay your taxes for you, you will still need to plan for the end of the quarter if you're lodging a BAS or the end of the financial year if you're lodging an income tax return.
However, if you have signed up for a Sole Trader accounting plan to receive your ABN for free, you're all done! You can put your feet up and relax.
If you still have any tax questions, though, our team at accountedfor is on hand 24x7 and ready to help you pay less tax.
Talk to us today on 1300 201 329 or contact us for help starting, running or growing your business.
