3 surprisingly important things to do when starting a business
Getting a business off the ground is a process that requires lots of planning and consideration. Here are three not-so-obvious steps that should be taken when starting a business.
When building a sky scraper, a huge amount of attention needs to be placed into the building’s structural foundations. If enough caution isn’t practiced, you might still end up with a pretty exterior, but the product of your efforts probably won’t last all that long.
The same rule applies to starting a business.
All businesses need to start from somewhere, and the first steps that are taken to establish a business can have a significant impact on how smoothly things run later on.
While some of the more standard first steps might be no-brainers, there are a few things that can have a tremendous impact on the business in the long run but aren’t as obvious as one might think.
Here are three examples of those not-so-obvious first steps.
1. Aim for and expect a humble beginning
Like most things, establishing a business needs to be done with the right mindset and attitude.
The transitional phase of turning an idea into a business requires lots of focus, but once you’ve gotten past that stage, it’s easy to become distracted.
Founders can get consumed by the excitement and glamour that surrounds success. If they feel like they’re sitting on an awesome business idea, they can sometimes fall into the trap of counting their anticipated fortune with dollar signs in their eyes.
This excitement needs to be channelled into discipline and hard work, otherwise it can blind the Founder and lead them to make very poor financial decisions.
If you take a look at some of the success stories of our time, (for example Microsoft, Disney and Amazon) many of them started off their businesses in their (or their relative’s) garage, bathroom or backyard, and lived on nothing but passion and perhaps a modest savings account.
So, the first not-so-obvious step to take when starting a business is to make sure that you’ve got the right attitude. If you start on the right foot in that respect, the remaining steps should fall into place nicely.
2. Get your corporate structure right
The next thing that should be on the agenda is setting up the right corporate structure.
A company’s corporate structure is what determines the way it’s taxed, the way its shares are divided and, a lot of the time, the way it operates.
If you’re starting this venture on your own as a side-hustle and aren’t expecting to make fortunes from it, setting up your corporate structure can be as simple as registering for an Australian Business Number (ABN) or New Zealand Business Number (NZBN) and work as a sole trader.
READ: Business structures for beginners (AU)
Under such a structure, your business’ tax rate is the same as your personal income tax rate, and once you’ve set it all up, all you need to do is declare your business income in your personal tax return and you’re all set.
If you’re entering into a business partnership, the story becomes a little more complicated and it’s important to get good advice on how to set up the company structure.
More specifically, if you’re developing your own Intellectual Property (IP), it’s often advisable to create an IP Holding company that is separate to your business, and there are various types of trusts that can be set up to ensure that your business income is being distributed properly.
The corporate structure you go with can have practical ramifications, so it’s best to engage a good accountant who can walk you through the process and set you up properly.
3. Choosing the right trading name
As is the case when having a baby – one of the first things that founders tend to consider when setting up shop is what name to give their business.
In order to get some insight into what the criteria of a good business is, I had a chat with Ben Eblen from a company that used to be called PTBIZ, but recently changed their trading name to Keepon.
Having just decided to change his business’ name, Eblen had plenty of advice to offer.
READ: Naming your new business
When asked what the makings of a good business name were, Eblen said that keeping the business name “short and memorable” was important, and to ensure that the name “stands out nicely” in the industry that you’re working in.
Eblen warned that if your business name isn’t unique enough, you run the risk of your product being confused with others.
“What you want to avoid is an instance where potential customers confuse you with a competitor in a similar niche or industry, especially if their product or service has a bad or negative reputation.”
When it comes to choosing the name itself, Eblen said that he prefers that the name which is chosen has “bit of meaning” behind it, and something that “speaks to the company’s mission or values”, rather than a mere description of what the product or service does.
“For example, LEGO is an abbreviation of the two Danish words ‘leg godt’, which means ‘play well’. This name might be quite far removed from the product itself, but it speaks to the company’s overarching ideals, mission and values.”
The last thing that Eblen flagged was that no matter how unique or meaningful the chosen name might be, the quality of the “product’s reputation” is what matters most.
In summary, if you’re starting a business with the right attitude, an appropriate corporate structure and a meaningful, unique name, your new business is far more likely to reach the sky-scraping potential that it has.