Key Questions to Ask to Truly Test Your Idea
Is your business start up idea a GO-ER or a FIZZER ….good or not?
We asked a group of highly successful entrepreneurs…….”What are the 5 Questions you ask yourself or get answers to when deciding on whether a business idea is a good idea that you will proceed with (a new direction for your business, a brand new business venture, an innovation with your existing business)?”
Here are the answers – straight from the entrepreneurs themselves…..
FRANK RESTUCCIA – FreestyleMedia
- Will the business generate annuity or recurring (ongoing) revenue? If recurring (regular & ongoing) revenues make up a big proportion of total revenues then the business will prosper.
- Is the business in a industry/sector of the economy that is growing fast? A fast growing market makes sales growth far easier.
- Is the Lifetime Value of the customer high (will they over time spend a large amount with you and your business)? If yes, this means that you can afford to acquire customers at a higher rate than otherwise. This in turn, allows you to aggressively market the business/product/service.
- Do you personally enjoy working in the business? There will be times when things aren’t going so well, but if you believe in the idea, you will get through difficult periods.
- Is the business idea unique or at least rare/non-competitive? If the answer is yes, then you will enjoy super normal profits. If there is a chance you can be No.1 in your market as a result, then you’re on a winner.
SCOTT FARQHUAR – Atlassian
The two things with any business idea that I look at
- Would I personally use this?
You can build products or services for other companies, or for unknown markets. However, it is an order of magnitude harder than building something you would use yourself.
- Do I get excited about the possibilities of this idea?
If I’m not excited about something – the potential financial upside becomes meaningless. There are only so many hours in a week, and I want to spend them doing things that I’m truly passionate about.
There is also a pragmatic reason. Someone else who is truly passionate about your particular good or service will come along, and steal your market, because passionate people will always do a better job.
JESSICA SCHEBESTA (KIELY) – The Frank Team
- How does the idea make me feel? Am I excited by it? What does my gut tell me?
- What is the target market saying about the idea/possible product? If I don’t know, ask em!
- What are the start up costs/investment involved? How will I cover that?
- What are all of the revenue streams possible? There must be more than one revenue stream.
- Is it in line with my current goals, personal and professional?
MATT WILSON – Under30CEO.com
1. How much time/effort will the idea take to implement?
Most business ideas are “good ideas” but are they easily to implement with the least amount of time and effort possible? I’m a huge believer in Tim Ferriss’ 4 Hour Work Week and how he breaks down Parretto’s 80/20 rule; 80 percent of your profits come from 20 percent of your efforts. If you want to run a business you’ve got to prioritize where you put your time/effort and forget the little things that don’t get you closer to your goals.
2. Is the idea profitable?
Business is about the bottom line. How does your idea effect your profits? Many ideas don’t affect the bottom line directly, but will benefit profits somehow in the long run, whether it’s customer relations, branding, human resources, etc. While all these business units are critical to running a successful business, these type of ideas need to revisit question #1–is it worth implementing?
3. Does the idea fit your businesses long term strategy?
Always know your company’s direction and always consider whether your new ideas fit with your businesses culture/strategy. Think about getting your business from Point A to Point B; from where you are to where you want to go; does this idea, get you to Point B? Now, consider trying to plan getting from Point A to Point B in as few steps as possible. When you get to Point B it’s time to re-evaluate your strategy and find a new Point B; set new goal and plan your route to get there.
4. How will the public view your idea?
Your customers, the media, your competition and the general public all need to be considered when testing your idea. Think about Heinz and their Green Ketchup–this took thousands of dollars in market research to be sure the public was ready. Launch an idea like this and it flops? You lose serious credibility in the market. Launch an idea like this and it sees incredible success? Everyone remembers your name.
5. How will your employees view your idea?
Great leaders learn quickly that pushing your ideas onto the people who are supposed to execute them without their consent is a death sentence. Great leaders let their team come to their own conclusions and do more listening then talking. Sure, share your ideas with the team, but let them run with them–especially if it’s them who will be implementing it! Everyone loves to execute their own ideas, so let your team rally behind the idea and expand upon it themselves. Put your ego aside and let the team feel like their executing their own agenda.
JOE OLEJNIK – Australian Small Scale Offering Board
The quality of a new business idea will significantly contribute to the success (or other-wise) of your business. The following 5 questions will assist you in identifying the potential ‘diamonds’ and rejecting less suitable business ideas.
1. Is There An Unmet Need For The New Idea?
Your new idea must fulfil an unmet need in a sufficiently large (and ideally growing) market. If you have identified an unmet need with an easily accessible path to access that market you may be onto a good idea.
2. Can You Access The Resources To Turn The Idea Into A Reality?
To make the idea a reality you must firstly identify and then be in a position to access and manage the necessary resources required. Some of the resources required to turn an idea into a reality include time, money, management skills and specialist knowledge. Many inventors have brilliant ideas however they often are unwilling to bring on board the resources (usually investors) for fear of losing control of their idea. As a result unfortunately their idea stays just that – an idea and never sees the light of day. It is often said that it is better to have a percentage of a multi-million dollar business that has grown rapidly by using investors to fund the development of the idea rather than owing 100% of an idea.
3. How Does The Idea Fit In With Your Overall Vision And Strategy?
Are you genuinely passionate about the idea and the industry? You also need to consider if the idea will assist you to realise your long term vision and goals. Time and time again, often against all odds it has been shown that a good idea backed by vision, passion and unrelenting determination will succeed.
4. Does The Idea Contribute Positively To The Business?
The idea needs to contribute positively to the business – you can access the resources and you may be passionate about it but this doesn’t mean that idea will be commercially viable. As a result you need to consider what your revenue model for the idea is and what is required for it to become profitable. In asking these questions it is important to consider the costs of all stake holders in getting the idea to market, these include suppliers and distributors. Often an idea may not be a viable commercial proposition in its current form after factoring these costs in.
5. What Is The Sustainable Competitive Advantage For Your Idea?
To be a truly great idea you need to consider how to achieve a sustainable competitive advantage. Some competitive advantages may relate to patents and other Intellectual Property (IP) owned by company, another may be a secret processes or ingredient, however simpler measures such as how you deliver the idea to market may be just as effective (eg distribution methods, level of quality or even branding). If the idea doesn’t have a robust sustainable competitive advantage to protect it then it needs to be rapidly scalable so that it can be rolled out before a whole bunch of “me-too” competitors think your idea is just as good and copy it.
Finally, whatever your new idea, the use of external funding to assist research and develop the concept can ensure the process of getting the idea to market occurs much faster and more comprehensively than would otherwise be the case.
So now you have all of THE BEST questions to use to test your business idea – hopefully it has helped you to be more sure about whether to pursue the idea or not!
For more advice check out our Testing Your Idea article.
The Real Basics of Online Marketing – Workshop
February 9, 2009 by admin
Filed under Homepage, Online & IT, Training, Workshops for Young Entrepreneurs
LEARN THE SECRETS TO MARKETING YOUR BUSINESS ONLINE EFFECTIVELY
Presented by Young Entrepreneur Fred Schebesta
Bought to you by The Frank Team – SHOW ME HOW Young Entrepreneurs Workshop Series
Want to learn some of the real basics of online marketing so that you can do it yourself or direct your web contractor more effectively?
Want to learn how to market your business online like the professionals? And unlock the potential of online marketing for your business.
Guru Young Direct Marketer & Young Entrepreneur, Fred Schebesta is running his highly popular 11 Online Marketing Secrets Seminar especially for The Frank Team to reveal and teach online marketing secrets to young entrepreneurs. Yey!
In an increasingly online world, savvy young business owners are harnessing the power of online marketing. Many recognise that it is a strategic part of the overall marketing mix, but don’t know where to start and for many it seems just too hard.
Using the power of the web levels the playing field for every business – big or small, which is perfect for young entrepreneurs. Everyone has the chance to attract customers and with this seminar you have the prefect opportunity to learn exactly how to really unlock the potential of the web for your business.
Fred will share his knowledge in a highly practical and clear way; no jargon (unless it is explained!). It will only cover the stuff you need to know about and focus on showing you HOW TO DO IT YOURSELF.
“I would like to share the secrets I have learnt and to teach young entrepreneurs the secrets to online marketing that I have learnt through trial and error. There are some really easy, cheap and highly effective ways that you can have your website and online marketing super charging your business now.” Fred Schebesta.
Here at The Frank Team we noticed that many young entrepreneurs with websites are unsure of some of the basics of online marketing. That is anything from key words, search engine optimisation, landing pages and good web page structure. As such they are not getting the most out of their website or web development team.
Young Entrepreneur Fred Schebesta, an online marketing gun, is here to save the day! We have an awesome 3 hour practical workshop that will cover the basics of online marketing in a really fun, simple & highly practical way. Low on jargon and high on usefulness is what we can guarantee.
What will be covered in the workshop?
The workshop will cover Fred’s Top 11 Tips:
1. Improved conversion into database list secrets
2. How to use your email list
3. Secret & Easy Search engine marketing tactics
4. How to quickly leverage Customer profiling
5. Landing page secrets to improved conversion
6. 4 secrets to immediately improve your online Credibility
7. Increased effectiveness secrets for your pay per click search marketing
8. Using domain names to your advantage
9. Secret Microsite techniques for 2 bites at the cherry
10. Website statistics secret formula
11. 3 Fred Schebesta secret tactics to increased traffic
The Frank Team will also provide facilitated network time to ensure you get to meet other awesome young entrepreneurs.
When: 4.30 – 7.30pm Monday 27 April 2009
Price: $66 (incl GST)* – includes workbook with all Fred’s powerpoint slides. *Special price for The Frank Team young entrepreneurs
Where: PLEASE NOTE: CHANGE OF VENUE
Venue -Place: bioFirst Seminar Room
Ground Floor, National Innovation Centre, Australian Technology Park
4 Cornwallis St
Eveleigh, NSW 2015
Googlemap – http://tinyurl.com/cdoont
Parking available on site. Enter via Cornwallis Street (do not take the main ATP entry)
Secure your seat now for Fred’s “Online Marketing Secrets”
If you wish to pay by direct deposit please contacts us to arrange.
Any questions? email The Frank Team or (02) 95186244.
What do other people think of Fred’s seminar?
Fred Schebesta is Director of innovative online direct marketing company, Freestyle Media.
Fred works with Australia’s leading brands offering insight into the world of online direct marketing. He is recognised industry-wide for his skills in combining proven and traditional approaches with new thinking and ideas.
Fred was acknowledged as one of Australia’s leading entrepreneurial minds under the age of 30 when he was listed in the 2008 Australian Anthill’s 30under30.
He was awarded ADMA’s 2006 Young Australian Direct Marketer of the Year for his pioneering work combining the traditional direct marketing with online marketing techniques.
He started Freestyle Media while he was studying at University in 2001. He built it into a fast growing online marketing agency and in 2007 listed company Q Limited acquired Freestyle Media.
Freestyle Media major clients include 3 Mobile, Hutchinson, Sanitarium, Virgin Mobile, NRMA, Constellation Hotel Group, University of Newcastle, McDonalds Australia, Acer Computers, and Robobank across Australia and New Zealand
In his presentations, Fred shares with participants the techniques he has used to create innovative, successful campaigns for his clients. He is committed to sharing these techniques and educating the industry about online direct marketing and its application across the online discipline.
He is a regular public speaker and holds seminar events that are designed to grow the direct marketing industry.
Comments on Fred from Michael Kiely
Marketing Wizard and Executive Editor of Marketing Magazine, Michael Kiely said, “Mr Schebesta has never worked for anyone but himself. He started Freestyle Media while at university and has built it into a substantial “digital direct marketing” agency, with a host of major brands on the register.”
“He runs an educational outreach program of seminars and articles to teach companies how to apply direct marketing principles to online marketing. He invents new techniques. He is making a significant contribution to the industry already.”
“Fred is part of the new generation of direct marketers who are introducing the disciplines of direct marketing into the glamorous internet ‘space’. Too much money has been wasted online by people who don’t know what they are buying who hire web people who don’t know how to maximise response. Fred is a good representative of the future.”
Recent Speaking Appearances
Fred is a regular speaker at conferences and events. Below are recent appearances.
* Ad:tech Panel Blogvertising, Corporate Blogging and Vlogs
* AIMIA, “The Future of Video Online”
* ADMA Forum
* AALARA conference
* CeBIT
* Chamber of Commerce, Randwick, Burwood, Canada Bay
* Connect Marketing
* Department of State & Regional Development, Business Development workshops, Sydney, Bangalow, Coffs Harbour, North Sydney, Sydney City, Griffith
* Emarketing Expo
* etail World Australasia 2007
* IQPC Online Marketing “Turbo Tutes” conference
* Search School, Melbourne
* Search Summit
* SmartCompany Webinar
* Search Engine Room
* The Last Thursday Club
* Women’s Network Australia Expo
Recent Publications
Fred is often asked for industry comment and has been regularly profiled marketing and business magazines and newspapers including:
* Marketing Magazine
* AdNews
* B&T
* SMH
* The Australian
* Management Today
* SmartCompany
Secure your seat now for Fred’s “Online Marketing Secrets”
If you wish to pay by direct deposit please contacts us to arrange. Email: info@frankteam.com.au or (02) 95186244
Ten Secrets to Great Email Marketing
February 1, 2009 by admin
Filed under Homepage, Homepage-Growing, Marketing, Start Up Marketing
The debate about snailmail versus email rages on between the old timer marketers and the new age digital marketers. Here we get the inside word from a digital marketer’s perspective, Fred Schebesta, on how to increase your response rates and generate a multitude of leads.
As young entrepreneurs you often start with little to no money, and using the internet and emarketing smartly is vital as it doesn’t carry to cost of other more traditional marketing methods.
1. No mistakes!
Broken links and images in your emails are an instant detraction from what you’re offering. Not only does it damage the image of your company it also disables the customer from accepting your offer.
2. Make it a quick message for a quick medium.
You have 3 seconds to grab your customer’s attention otherwise they can just press delete or move onto the next email. Make sure your message is transferred quickly as people tend to read and discard email quickly.
3. Send more than one email in the campaign.
After you’ve sent your initial email with its offer send another one a week later saying that the offer has almost expired. This creates urgency for the reader.
4. Email link to websites.
You’ll receive much faster response rates if you link to a website instead of asking the buyer to pick up a telephone and call you. Ensure that your offer is clearly displayed on your website and it’s clearly understood how to accept the offer.
5. Reply to your responses.
Unlike with other mediums, the time between when your offer is delivered and when it can be acted upon is very short. As a rule, your response time should not be longer than 12 hours.
6. Give customers a reason to refer.
At the bottom of your email put a small blurb. “If you know of anyone else who would be interested in this offer please forward them this email.” Give your customers a reason to refer a friend and you’ll see an even better response rate.
7. Layout of the email.
Understand how your audience is going to read their email. In general people only view the email in a small box. What that means for your email is that it needs to convey its message in that little box and give them a reason to scroll down.
8. Tune into WIIFM.
The WIIFM (Whats in it for me?) station is a favourite station when it comes to accepting special sales offers. Ensure that your buyer has a clear and simple way of accepting your offer. ‘Click here to receive a free case study’ – ‘ Reply to this email to receive a free copy’ – ‘Place your name in the form to begin
your registration process’.
9. Flashy images vs Text.
There must be a balance between images and text in email marketing. Preferably more text than images. One image plus a single link with a call to action in actual text is ideal.
10. Clean Subjects.
Ensure that you have a subject line that is catchy enough for your email to be opened and relevant enough for the email to be read all the way through. Try using questions (e.g. Are you struggling to find clients?) or great adjectives (e.g. Exclusive unveiling of new product).
For more info and tips from Fred, check out his blog.
Being HIGHLY effective
February 1, 2009 by admin
Filed under Homepage, Homepage-Growing, Management
We know that young entrepreneurs are always looking for ANYTHING that will help them work more effectively – to be able to get everything done that needs to be done! So try these….
‘What we are’ communicates more effectively than what we say or do. According to author Stephen Covey, the key to becoming effective is developing a good character, and the way to do that is through developing these seven behavioural habits…
1) Be Proactive –
Take the initiative! Avoid the less effective, but more common “reactive” approach. Our behaviour is based on our decisions, not our conditions – and we all have the initiative and responsibility to make things happen. In laymans, it’s up to you!
2) Begin with the End in Mind –
Where do you want to go? When we set long term goals we better understand where we are now and take steps in the right direction.
Visualisation and creating a ‘personal mission statement’ can help you get where you want to go. Make sure your business’ mission statement truly reflects the shared vision and values of everyone within your biz – to create unity and awesome commitment.
3) Put First Things First -
Prioritise work that’s aimed at long-term goals, at the expense of tasks that appear to be urgent, but are in fact less important. Delegation is an important part of this.
4) Think Win-Win –
Develop an attitude that looks for solutions that benefit yourself as well as others, or, in the case of a conflict, people on both sides of that conflict.
5) Seek First to Understand, Then to be Understood –
Have you ever felt like no-one understands you?
They probably weren’t listening! Most of the time we seek to be understood and do not listen with the intent to understand. We are either speaking or waiting to speak! Have you ever given advice before
having understood a person and their situation? More than likely your advice was rejected. Next time
you’re listening to someone, listen to their concerns and you’ll be more likely to increase the chance
of them listening to you.
6) Synergise when you work in teams –
Valuing the mental, emotional and psychological differences between people is the essence of synergy. When synergy is pursued as a habit, the result of team work exceeds the sum of what each individual can achieve on their own. Work is a team game.
7) Sharpen the saw –
Ever felt burnt out? To be effective we need to recognise the importance of taking time regularly to ‘sharpen the saw’ in four ways – physical, mental, social/emotional, spiritual.
In 2004 Covey added this 8th habit…
From Effectiveness to Greatness –
Today’s world is challenging and complex and to thrive, innovate, excel, and lead, we must reach beyond effectiveness toward fulfillment, contribution, and greatness.
Research is showing, however, that the majority of people are not thriving. They are neither fulfilled nor excited. This habit is about finding your own daily fulfillment and excitement.
‘The Seven Habits of Highly Effective People’, first published in 1990, is a self-help book written by
Stephen Covey. You can also check out his later book ‘The 8th Habit: From Effectiveness to Greatness’. We recommend them both.
Imagination & Creativity
February 1, 2009 by admin
Filed under Ideas, Management
Imagine that…
Albert Einstein said ‘Imagination is more important than Knowledge’ – but what about in business?
When we use our imagination we free our mind from its ‘factory pre-settings’ to think more creatively and develop different and potentially better ways of doing business.
After years of education where we’re often rewarded for following the rules and memorising information rather than exploring it, we look back at young children and wonder where all that fun and creativity went. How can kids spend hours with fuzzy pipe cleaners, textas and coloured paper with sheer fascination?
Imagination is a natural ability in each of us, to which our memories, experience, interests, thoughts, knowledge and freedom contribute. So consider that imagination is always in you, sometimes it just needs encouragement.
Imagination is left and right brain
In business, imagination is used to create a company but we often divide the workplace into creative and practical thinkers. Practical thinkers concern themselves with concrete details and planning, while creative people are known as divergent thinkers, arty and emotive. Rather than dividing us up, what if every one of us possessed both these qualities but just chose a different way of looking at the world?
Take the classic pessimist/optimist battle – two outlooks on life we regularly all switch between depending on our mood and the moment. Hearing your alarm clock go off at 5am hardly compares to winning a million dollars, right? The pessimist looks at life and thinks ‘why oh, why?’ just as the practical thinker tries to figure everything out. Meanwhile, dreamers and optimists envision imaginative scenarios that haven’t happened or might happen, and open-mindedly ask ‘Why couldn’t that be possible?’.
George Bernard Shaw said, “You see things as they are and ask, ‘Why?’ I dream things as they never were and ask, ‘Why not?’”.
So imagination is typically a right-brain function that needs to be supplemented with left-brain logic. And you’ve got both.
You can improve your creative thinking just by exercising it…
Ask Questions – What would you like to do that you’ve never done before? Where would be the best place in the world to live? What would be the best job?
Ask questions that get you thinking outside the square you live in.
Just Do It A Chinese proverb states, I hear: I forget - I see: I remember - I do: I understand.
Jet Set – There’s no better way to broaden and refresh your outlook than travel. Travel takes you out of a rut and exposes you to new people, customs, ideas and ways of living. Every culture provides a unique way of looking at common situations and solving problems. If the budget bites, arm-chair travel with television programs and books on the world around us, or spend the day in an unexplored part of your city.
The Power of One – The more you apply your ability to think and use the talent around you, the better you’ll become at creating new ideas. If you rely on ‘experts’ and consultants to solve your problems, your creative abilities can dry out.
Hang out with Creatives - Think more creatively by mixing with creative people. Talk to people who possess a different energy who will stimulate your thought processes.
Even more suggestions that provide creative fuel:
Rent the movie ‘Big’ or actually go play in a toy store!
Play charades or the board game Pictionary to stimulate visual communication.
Get some fresh air into your lungs & play some sport.
Play a strategy game like chess or checkers with an opponent.
Try a word puzzle like a crossword, Boggle or Scrabble to sharpen your mind.
Hobbies like painting or sculpture are workouts for your imagination.
Try a technical hobby like amateur radio, electronics or remote control ‘toys’.
Get into a good book like a documentary, biography or mystery and give your imagination something to feed on.
Read about new trends in a magazine you wouldn’t normally buy.
Doodle or draw with your less used hand.
Go to the theatre and get immersed in someone else’s life.
Or why not just stare up at the clouds…and daydream.
Good imagination and creativity is good for business.
Tax Basics Explained Simply
February 1, 2009 by admin
Filed under Homepage, Homepage-GettingStart, Money
Tax… we know it can seem overwhelming and quite scary when you’re first starting out. So we thought we’d put together some information for you about the basics of tax in Australia. All of this info is available elsewhere on the internet, but it’s here for you all in one place. We’ve also included links for further information and advice.
Now, take a breath as there is a fair bit of info coming right up. Just take it in bit by bit!
Why not start by figuring out if you are actually running a business?
Logical, I know! Some of the things to take into account include whether you have actually started to undertake business activities or started to “do” business with others (instead of just planning to at some point in the future), whether you intend to make a profit (perhaps now, perhaps down the track a little bit – the intention just needs to be there), and is there repetition and regularity to your activities.
Most businesses operate for a purpose and their everyday activities reflect this – they do the same or similar things in order to operate. The Australian Taxation Office (ATO) is here to help with some basic info for you about working out if you are running a business.
Are you running a for profit or a not-for-profit (NPF)?
According to the ATO, “a non-profit organisation is an organisation that is not operating for the profit or gain (either direct or indirect) of its individual members. This applies both while the organisation is operating and when it winds up. Any profit made by the organisation goes back into the operation of the organisation to carry out its purposes and is not distributed to any of its members.”
What does this mean? NFP’s still have staff and pay wages, including to any management peeps, but any profit that is generated is not given out to directors or employees as dividends or bonuses, that profit stays in the organisation and is then used to run it.
Some examples are churches, sports clubs, environmental protection societies and charities. Click here for more information on NFP’s.
For info on registering a NFP as well as registering click here.
If you intend on making some profit and paying out some of that profit to owners or directors, then you are probably NOT a not for profit!
Australian Business Number (ABN)
An Australian Business Number is an 11-digit number that is unique to your business.
What is it used for? It helps other businesses to easily confirm your details, it indicates to other businesses that you are operating a business (even if as a sole trader), it is required if you are claiming Goods and Services Tax (GST) credits, among other tax related things.
If you’re operating as a sole trader, partnership or company, you need an ABN. If you’re operating as a NFP, you may or may not need an ABN.
It’s pretty simple to get yourself an ABN, and it doesn’t cost anything. You can apply online .
More info for NFPs is available in regards to ABN requirements.
According to the ATO, “Anyone carrying on an enterprise (this is usually a business) should quote their ABN in relation to goods or services they supply to another enterprise. If they don’t, the general rule is that the payer must withhold 46.5% from the payment to the supplier (you) and send the withheld amount to the Tax Office. Some payments are excluded from this rule.”
So once you’ve got your ABN, remember to use it, otherwise the people you deal with may hold on to 46.5% of what they owe you, ouch!
Australian Company Number (ACN)
According to the Australian Securities and Investments Commission, “Under the Corporations Act 2001, every company in Australia has been issued with a unique, nine-digit number, an Australian Company Number (ACN), which must be shown on a range of documents. The purpose of the ACN is to ensure adequate identification of companies when transacting business.”
So what this means is, when you register as a company, you will receive an ACN. Often your ACN will be very similar to your ABN, only nine digits instead of 11.
For more info check out the ASIC site.
If you operate as a sole trader, you can do this under your own individual tax file number (TFN).
If you operate as a partnership, company or trust, you must also have a business tax file number. If you operate as a NFP, you might need a TFN.
For help in figuring out if you need a tax file number, check out the ATO site.
Your Accountant
It’s never too soon to get an accountant for your biz. Look at it this way – they live and breathe all this tax and compliance stuff! If you’re not sure about tax, account keeping, etc, why not go to an expert?
We know it is scary and you think straight away….”there is no way I can afford an accountant”! But you will be surprised at how affordable they can be, and how much they can SAVE you, thus paying for themselves in your business! The Frank Team can recommend a few great accountants – who are young entrepreneurs – who are really affordable. Ask us for their contact details.
Remember there’s no obligation to stick with the first accountant you find. Go and meet a few, find one that you trust and enjoy working with, and who obviously knows what they’re talking about. Here at The Frank Team have been with the same accountant since 1998, she is awesome!
Accountants’ fees vary a lot. Be sure to ask about fees and find an accountant that you feel is affordable. $500 per hour charge rates might not be in the budget to start off with, so why not support another small business person? Also remember that meeting all of your compliance needs could end up saving you a lot of money and hassle in the long term.
Remember also that your local Business Enterprise Centre can be a huge help here too – and they give FREE advice!
Record Keeping (or bookkeeping)
What records do you need to keep and for how long?
Keeping records of all your financial transactions (money in and out) are vital to your financial record keeping, whether you do it on a day to day, monthly or even annual basis.
All payments you make, all money you receive- receipts, invoices, bank statements, proof of purchase of assets, everything! With as much detail as possible – job numbers, what it was you bought if it isn’t clear, who you just made that cheque out to. Months later it will be extremely difficult, if at all possible, to remember.
Start early with this stuff and set up a way of keeping track, trust us!
We know of some young entrepreneurs who were years behind in their recording and tax and it not only cost them in terms of paying their tax bills but also cost them huge amounts of time to back track. So even if it is shoe boxes that are labeled, set up a way of keeping track of all money in (and what it was for) and all money out (and what it was for).Then an accountant will be much more useful for you.
Keeping all of your documentation together means when it comes time to process all of your accounts, the info is ready to go! It also means that if your accountant comes back with questions, you can look anything up that you need to, with minimal effort.
We keep our financial records in ring-binder folders, sorted month by month; if we ever need to look up a payment, find a receipt, even find companies’ contact details, we can generally find it within just a couple of minutes. Everyone needs their own filing system, electronic or paper/manual. You can even use online Google doc spreadsheets to keep yourself sorted.
If you were ever audited by the ATO, or needed to complete a financial audit for any reason, you could get in a lot of trouble for not having all of your financial records. So make it easy for yourself!
By law, you are required to keep financial records. As a general rule, your records should go five years back for regular income tax purposes, though it does vary for other taxes. For more info, check out the ATO site.
If you’re a NFP, more information about record keeping requirements is available here.
Cash vs Accrual Accounting
Ok… so now we’re getting into the technical stuff. Cash and accrual accounting are just two different ways of keeping track of your finances.
Cash accounting records only the amounts of cash that have flowed in and out of your business. So when you receive $100 for your product, you record that sale. When you pay $40 to your supplier, you record that purchase. Cash accounting is definitely the easiest place to start.
Accrual accounting records all of the expenses and purchases paid by your business, as well as those that are currently due or outstanding. So if you sent a client an invoice for $100, you would record that as a sale, even if you haven’t yet received that money into your bank account. If you receive an invoice from a supplier for $40, you record that purchase/expense. You then also have an Accounts Receivable account/category in your accounting system (money that you are due to receive) and Accounts Payable (money you need to pay).
An accounting package of some sort will help you with this system, if that is what you choose. You would use accrual when you have larger volumes of transactions happening and you need to be able to track and predict cash flow.
Tax Returns
If you’re operating as a sole trader, your business tax information will go into your individual/personal tax return. You may need to complete some extra schedules/forms, and record all business income and expense. Your business profit will then be taxed at your marginal rate of tax. For details go to the ATO site.
If you’re operating as a partnership, the partnership lodges its own tax return. BUT, because of unlimited liability, the income and expenses from the partnership’s tax return then get allocated to the partners. This means, on your individual/personal tax return, you will need to report your share of the business’s income and expenses. Your partnership profit will then be taxed at your marginal rate of tax. More info here.
If you’re operating as a company, your company will need to lodge a tax return. You will need to show all business income and expenses. Your business profit will then be taxed at a rate of 30%, or 30 cents per dollar. And yes that means for any profit you make, 30% of it is paid to the government. More details here.
As soon as your business starts to earn an income and incur expenses, you need to start thinking about your tax return. Your first financial year of operation (even if you start your business in May) is the first year you need to lodge a tax return or include biz info in your own personal tax return, depending upon the business structure you’ve chosen.
If you’re operating as a NFP, you need to be aware that only certain types of non-profit organisations are exempt from income tax. Charities and income tax exempt funds require endorsement from the Tax Office to be exempt from income tax. Other non-profit organisations can self assess their exemption.
Many non-profit organisations are taxable and may need to lodge an income tax return and pay income tax.
Taxable non-profit organisations are generally treated as companies for income tax purposes, whether or not they are incorporated.
More info here.
Tax Concessions for Small Biz & NFPs
If your revenue is under $2 million, you might be eligible for certain tax concessions. Simpler depreciation, entrepreneurs tax offset, the list goes on.
For more info, check out here.
This is where an accountant can come in really handy. Do your research; list your questions then book in some time with an accountant or Business Enterprise Centre for some specific advice for your business.
If you operate as a NFP, you may be eligible for a number of tax concessions. For more info, go here.
It really is up to YOU to be aware of and find out what obligations your business has in regards to tax, and what concessions it could be eligible for.
Goods and Services Tax (GST)
In Australia, GST is incurred at a rate of 10% on top of the company price for many goods and services. So lets say you go to clothes store and buy a new shirt, it will have 10% GST included in the price already.
You don’t need to register your business for GST until you have sales of up to or over $75 000 a year, including GST (your portion of the sales would be ten elevenths of $75 000, or $68 181).
It’s up to you if you register for GST under the $75 000 threshold, or under $150 000 if you’re a not-for-profit. There are some exceptions – like if you’re a taxi driver. Check out www.ato.gov.au for more information.
Being registered for GST means that you are helping the government collect GST. This also means that you can claim credits for any GST that you pay in the price of your business purchases.
When you are registered for GST, you need to show this information on the tax invoices that you send and give to customers when you make a sale. In fact, the difference between an invoice and a tax invoice is being registered for GST – if you are not registered for GST, you are using an invoice. If you are registered for GST, it is known as a tax invoice.
We have a sample tax invoice for you to use if required.
You can register for GST when you are applying for your Australian Business Number; through your tax agent (your accountant); or through the ATO. For more information, check out the ATO.
See Business Activity Statement below for more info about reporting on GST.
Pay As You Go Tax Withholding (PAYGW)
What is PAYW, I hear you say?
Pay As You Go tax is the amount of money that is withheld from your wages each week/fortnight/month. If you’ve ever received a pay slip, you’ll notice it has Gross Wages (e.g. $500), PAYGW (e.g. $60) and Net Wages (e.g. $540).
Now that you’re running your own business, it’s up to you to withhold that PAYGW tax (for yourself and for any staff that you employ), and then pay it to the ATO when it comes to BAS time (see below).
Personal income tax rates change from financial year to financial year. Which means when a new financial year rolls around, you need to check the new rates at which you should withhold tax.
You can get updates for your accounting software, like MYOB, which have the current tax rates. Or you can check out the ATO’s online tax calculator. It’s a simple tool to use; you plug in each person’s information and it tells you how much money to withhold for that pay period. Easy! Check it out here.
If you operate your business as a sole trader or company, it’s likely you pay ‘pay as you go withholding’ (PAYGW) installments at different times throughout the income year as you earn your income. These installments are credited against the total amount of income tax you are liable (must) to pay for the income year.
All that means is the government keeps track of those payments, and at the end of the financial year when you work out how much PAYGW you are required to pay for that year, you see how much you have already paid and then either just pay the difference or get a refund back from the ATO.
If you operate your business as a partnership or trust, you do not have to pay PAYG installments. However, you may have to pay PAYGW installments on your individual share of your partnership’s income or any income you receive from your trust.
If you operate as a NFP and you have employees, you need to withhold PAYGW just like any other business. You’ll need to determine who is an employee, a contractor and a volunteer. NFP’s also have some fringe benefits tax concessions for additional benefits for their employees. For more info, check out the ATO.
Handy Hint: have a separate bank account in which you collect your GST and PAYGW tax, and even superannuation (so you are moving money into this account regularly). If you put these small amounts away each week, or fortnight, whenever you receive payment, when it comes time to pay your BAS and superannuation, you won’t have to scrounge the money out of your other accounts. Streamline this from the beginning. There are lots of banks now that as part of your business account can provide you with a tax management account that has higher interest rates, so check with your bank.
Business Activity Statements (BAS)
So now it’s time to report to the ATO…
Generally, new businesses use an activity statement to report and pay their GST and PAYG withholding.
When it comes time to do your Business Activity Statements (or BAS as most people call it), you will need to include in your declaration the amount of sales you made (money IN); and the amount of GST collected. You will then need to include the amount of purchases (money OUT) you have made; and the amount of GST you have paid. Then you will be required to either pay the Australian Taxation Office the difference (if you have collected more GST than you have paid out) or this will contribute towards a refund from the Australian Taxation Office (if you have paid more GST than you have collected in sales).
So depending on the difference between what you have collected and paid you may have to pay the government, or they will pay you!
BAS’s can be lodged either monthly (if you make a lot of money), quarterly (if you make a bit of money) or annually (if you don’t make much money).
In each BAS, you will need to outline:
* Sales made in $ (sales your business completed)
* GST on the sales made in $
* Purchases made in $ (things your business bought)
* GST on the purchases made in $
* Wages for the period
* Pay as You Go Withholding tax incurred on those wages (which you’ve been holding for your employees, just waiting to pay to the ATO)
You may also be required to pay Pay As You Go Installments (PAYGI– different to Pay As You Go Withholding [PAYGW], which refers to employees personal taxation. We’ll call them Income Tax Installments for now to keep it simpler) to the ATO, if your business has reported an end of year profit before and you are expecting to make a profit again this year. This installment will be outlined on the BAS report you receive from the ATO.
Once you are paying PAYG installments, any installments you pay during the year are credited towards your final tax assessment after you lodge your income tax return. What does that mean? For example, if you make four installments of $1000 throughout the year and your end of year company tax bill is $4200, you’ll only need to pay the ATO $200, instead of $4200 in one big go).
The amount you need to pay to the ATO will consist of:
+ GST you collected
- GST you paid (you receive a credit for this)
+ PAYGW tax that you collected/withheld from your employees’ wages
+ Income tax installment (if relevant)
For more info, check out the ATO here.
REMEMBER – if you have any questions, find someone to ask. The Frank Team can get your questions answered – just send them through – we will then share the answers with all of the young entrepreneurs in the network.So send us your questions.
Your accountant, lawyer, Business Enterprise Centre are great as well or just give the ATO a call – we’ve had to call them in the past and found them to be extremely helpful!
Don’t bury your head in the sand about tax stuff, or ignore what needs to be done. Even though it’s not as interesting or exciting as some of the other aspects of running your own biz, it is vital to your ongoing success.
