New Zealand is the best country in the world to do it in – and that’s official! The World Bank’s 2017 Doing Business survey has again ranked us number one (among 190 economies) as the best country in which to start a business.
That’s not to say, though, it will be all smooth sailing. We’ve all heard the stats about the percentage of new businesses that fail in the first five years. So if you want to give your fledging business the very best chance to fly, here are some key considerations:
Starting a business is a massive learning curve. If you want to avoid the usual rookie (and costly) mistakes, a good accountant and business adviser will be worth their weight in gold.
It’s also valuable to talk to others, particularly in your same field, who’ve been there/done that. Ask to have coffee with businesspeople that you know and respect. And check out the free resources available in your region, including seminars and access to business mentors.
Choosing the right legal structure for your business will be one of the first and most important decisions. Many small businesses start life as a sole trader; it’s easy and affordable. But if you’re planning to grow your business to a decent size, there are significant benefits from setting up a company.
The legal entity you choose – whether it’s a sole trader, partnership, or limited liability company – will have implications for tax, your personal risk, and the growth or sale of the business. Your accountant, lawyer or business adviser can explain the pros and cons.
Getting ready to start a business is exciting - and you’ve probably got a hundred different ideas, plans and thoughts buzzing around in your head. You need to put them down on paper and create your business plan.
There are various templates you can download (most banking websites have them). Business plans can have different levels of detail, but at the very least, you need to get clear on:
- a profile of your business and its competitive advantages
- how it will operate (including staffing)
- where and how you will find customers/clients; and
- budgets and financial forecasts.
This is where the proverbial rubber hits the road. Getting a business up and running will usually end up costing more than you think (a bit like building a house). Premises, utilities, equipment, software, staff and marketing are some common initial costs that will require capital up front.
Unless you’re using your own savings, you’ll need to borrow– either privately, or through a lending institution. These days, the mainstream banks aren’t your only option. There are a growing number of non-bank lenders, peer-to-peer lenders, and even crowd-funding. Your new business might also qualify for a government-based subsidy or grant.
Those initial set-up costs won’t be your only expense. Maintaining healthy cash-flow is a challenge for many small businesses – particularly in the first year when income levels are inconsistent (and sometimes non-existent).
You’ll need to think carefully about where the cash is going to come from, and how much you’ll need if the initial business earnings are less-than-expected. The forecasting within your business plan will give you clarity around this. By getting all your ‘financial ducks in a row’ – you’ll be ready to launch your business with confidence.
Any burning questions?
Send us your burning question on Starting a New Business, and we’ll be happy to answer it.
Or if you want to know how KPMG Enterprise could help your business, give us a call on 0800 576 472.