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It has been more than three years since I wrote the article about business start-ups. A lot of people say “I have never looked back!”, but I do. I have become aware of a lot of important issues through my work with my clients. Starting a business can be an enjoyable journey full of unknowns, it may be difficult at times, but the rewards may be even greater.  However, don’t allow it to consume you or ask too much from your family.

I am very lucky, I have great support from my family, I found a great team to work with, I am loved by my wonderful clients and friends. My sincere thanks to you all!

The original article was written when I was in start-up mode myself. Three years on, I am rewriting it from an accountant’s point of view. I hope these notes and advice will help you on your adventure.

Here are the top five things, I encourage you to consider.

1.      Know the industry

Do some research! You may love doing what you are doing or going to do, but you still need to be realistic. Can you make a living out of it? If it is an industry currently existing, take some time to learn where it is trending. What does it take to enter (or exit) the industry?

Things you will need to look out for:

  • Key external drivers
  • Current performance and profitability
  • Industry outlook and life cycle
  • Supply chain and main players
  • Capital intensity and barriers to entry

At Leader Accountancy, we have access to the best market researchers and analysts. Click here for a sample of what our reports can show you. After an initial consultation to gauge your requirements, we are able to customise reports tailored to your needs with relevant details.

The key point here is to look at the current players in your chosen industry. Take a closer look at the best performers, if you can see that they are suffering, you’d better have a solid business plan before jumping in.

For example, newspaper and book retailers have faced a challenging environment over the past five years. Strong competition between operators and external players has negatively influenced prices and profit margins. Yearly “growth” is listed in the table below:


Year Revenue $ million Growth %
2004-05 7,621.7 0.0
2005-06 7,086.6 -7.0
2006-07 6,365.5 -10.2
2007-08 6,432.7 1.1
2008-09 6,231.9 -3.1
2009-10 5,509.6 -11.6
2010-11 5,511.6 0.0
2011-12 4,899.0 -11.1
2012-13 4,501.8 -8.1
2013-14 4,283.8 -4.9
2014-15 4,110.0 -4.1


This industry is expected to operate in the decline stage of its life cycle over the 10 years through to 2019-20. Should you be buying in? I don’t recommend it, only if you have too much money to burn…

2.      Create a business plan

A good business plan will be short, realistic, with reasonable assumptions. Always start by asking the question of what do you want to achieve by the end of the day. If you are planning to sell it in 5 years then devise your plan from the perspective of what your business buyer or investor would be interested in.

Here is the “One-page business plan” template I used, I modified it to suit my own circumstances, but this is a very useful starting point. A good business coach or accountant will help you develop this. Of course, this will require a bit of investment on your part, but I am sure this will prove to be very valuable in your start-up phase.

More importantly, keep it handy for reference and up to date.

3.      Cash plan and budget

After you have done the research and you have a reasonable business plan, you are ready to start. The truth is, at first, you are ready to start “burning some money”.

Be prepared, even you have a perfect plan, cash is the key.

Let’s give a quick example.

Say you planned to have $10,000 sales for the first month, but you find that expenses were $12,000. You have a $2,000 loss on the books, that’s not too bad, but you may need to have access to more funds than that to prepare for the following important elements of starting up your business.

  • Setting up your business structure
  • Purchasing insurance
  • Paying the bond for your shop lease
  • Outfitting your shop with furniture and fittings
  • Preparing for customers who may be late payers!

All those may only be small amounts, but these do add up quickly.

There is a budget manager function in Xero that can help you monitor these expenses. You may not have enough data to start with if your business is new. But if you are buying an existing business, it is always a good idea to ask for a set of financial reports including Profit and Loss and a balance sheet. Don’t underestimate the power of the balance sheet. This useful report will let you know how much cash or working capital (accounts receivable + work in progress + stock + asset + cash – accounts payable, in simple terms) you need to have your business fully operational.

So, for the start-up phase please spend more time on planning your cash budget, it needs to go further than the normal “income less expenses”.

After your initial business growth, even if you are making profit every month, your fast growing business will be hungrier for cash. Why? When your sales grow, you will use your stock faster, or if you want to add new product lines, you will need cash to purchase them. To take advantage of your own growth, ask for better payment terms from your suppliers.

Here is a quick example. If you are buying stock worth $365,000 each year from a supplier, if they give you one extra day of trading terms, say increasing the payment due date from 7 to 8 days, it will be the same as asking for a loan from them for $1000. As you may be aware, many will be ready to change your terms from 7 to 14 days or from 30 to 45 days. Then you have received the equivalent of a $10,000 interest free loan.

Once you have started, you can’t afford your energy and cash to burn out at the same time…


4.      Find an accountant

Yes, of course we’d like you to choose Leader Accountancy as your accountants.  Here are a few points to consider in making the choice of the right accountant for you.

Traditional accountants living in the v1.0 of the business world, will only want to see you after the end of the financial year. They will be likely to charge you per hour of work and with the financial year ended it may be too late and doesn’t allow for forward planning!

Here are a few soft KPI to compare and help you choose your ideal accountant:

  • Turnaround time. How quickly does the accountant complete your job? It is always good to plan ahead, but if you need an urgent contact with your accountant can he/she call you back in time? Good accountants should always work WITH you.
  • Accountants shouldn’t only reactively look at your history, but be ready to create a great plan for your future, too.
  • Does your accountant have industry peers and alliances? Do they have an active network of business relationships to support your business growth?
  • Services. What is the quality and level of engagement you receive from the accountant and the staff? Is there a match to your attitude and personality?

5.      Find a banker

In point 3 above, we discussed cash planning and your budget. To reduce the risk of late payments from your customers,  spend some time investigating what other methods your customers could be using. The goal is to make it as easy as possible for them to make the payments. Credit card companies may charge you 1% to 2% for all the money coming in, but accepting credit card payments will reduce your cash risk to a lower level. You can also try PayPal and EziDebit where there is no contract or monthly fee.

Make it a point to ask your banker to review your contract for merchant facilities. There may be opportunities to reduce the fees from time to time. You have nothing to lose. If they don’t give you a discount this time, just be persistent and keep asking!

When you can see that you may going to have cash issues, talk to your accountant.  They will help you plan it out and connect you to a good banker. If you are introduced to a banker by your accountant, it is a better starting point. Yes, it is just as important to find a banker who is a good fit for your business needs and your attitude, seriously.


That’s all for now. “Adventure is out there!”