New Year, New Business? We can help!
It’s the start of a new year, a new decade and for many, the start of new endeavours within the world of business ownership, development and operation. While this is undoubtedly an exciting time, with many prospective business opportunities on the horizon, we understand that it can also be a somewhat stressful, complex and confounding time… No matter if you’re an old hat in the business operations world or diving in for the first time. Whether you’re looking to start and structure an entirely new organisation from the ground up, or seeking to buy an existing business, there are a few key things to keep in mind before you dive in.
Structure yourself and your business
When it comes to taking on a new business operation, it’s important that you both analyse your current business’ feasibility, personal, financial and capabilities, to develop the best long-term plan of attack for you and your exciting new venture moving forward.
Have you taken the time to fully consider how this new business endeavour will affect your day-to-day obligations, lifestyle and time? Do you possess the right skills to manage an organisation, or have you employed a suitable team to accurately assist you in actualising this side of the business? Do you have enough time and financial capacity to solely dedicate to this business? Is the current business and economic environment going to allow your business to feasibly succeed and remain viable into the future? All in all, the success of this new business may be influenced by a range of varying factors, so it’s important that you do your research and create a structure and plan that will allow you to remain profitable.
As far as deciding upon which business structure to employ, Nexis’ experienced Business Advisory Team can help you better understand the rewards and drawbacks of differing organisational formats. As well as, providing professional insights into the tax implications, along with registration, license and insurance requirement advice, based on which structure you choose.
To help you begin thinking about this, the four most common business structures in Australia are:
- Sole Traders: an individual operating as the sole person legally responsible for all aspects of the business.
- Company: a legal entity that is separate from its shareholders.
- Partnership: an association of people or entities running a business together but not as a company.
- Trust: an entity that holds property or income for the benefit of others.
Check your financial health
As everyone knows, an important component of running any business is understanding how to set up and manage your finances. This isn’t just limited to your start-up costs either, you will also need to discern how you will fund your future business plans and operations. In other words, you need to assess whether you can truly afford to both own and successfully operate your business, or how much money you will need to do so.
In assisting our clients in commencing this phase of research and planning for their new investment, some common questions pertaining to the financial health of your prospective business, (particularly when purchasing an existing organisation), may include:
- Financial statements: Have you received certified copies of balance sheets, profit and loss statements and tax returns from the last three years? Don’t rely on statements generated from Xero or other accounting software programs.
- Valuations: Has a valuation been completed for the plant, equipment, and stock that the owner intends to sell? Are there any outstanding debts on these items? What was the valuation method and who did it?
- Bank Records: Do sales and purchase records reconcile to bank statements?
- Forecasting: Have you done a future cash flow projection and profit forecast based on past years results? What are the sales patterns year-by-year and month-by-month? Is there a seasonal pattern? Are you going to be buying in low or high season?
- Risk Management: What is the client to sales ratio (or anticipated based on informed forecasts)? E.g. Do a small percentage of clients represent a large percentage of sales? And what is the risk to profits if those clients move on with a change in business management? Are there any large one-off sales that are unlikely to be repeated in the future that could impact profits?
- Prepayments: Has the existing owner received any pre-payments that should be turned over to you at settlement?
Lock-in a support team
No matter if you are hoping to create an entirely new business or purchasing an existing venture, it is important that you surround yourself with trustworthy, dependable and credible advisors. Your support team may include a lawyer, industry association, or of course, a business development advisor and accountant… And that’s where the reliable team and Nexis can assist you both now and moving forward, as your business grows. If you’re looking for assistance to help you get started or to alternatively help you in progressing your business for the better, get in touch with us today!