How to Start your Sole Trader business the right way
Want to start a business as a sole trader working in disability or ageing support that you’ll run and manage yourself? Congratulations! And I wish you all the best for the next steps in your career.
In this article I will explain the first steps to becoming a sole trader the right way.
TRUTH BOMB: 60% of small businesses fail within their first 3 years of operation. But if you want your business to grow and be a success, and not become one of the statistics, there is some preparation work you should cover before you go any further.
It is common knowledge that 60% of small businesses fail within their first 3 years. This seems like a very high number of false starts, doesn’t it? So why is that?
Registering as a sole trader is a great option for people wanting to start a small business. It’s the simplest and cheapest business structure to set up with very few obligations, unlike other business structures. Being a sole trader is perfect for someone who plans to manage and run a business by themselves. You don’t need to separate company tax returns because you can include all your business expenses and outgoings in your personal tax return.
Technically, all you need to do is register as a sole trader and get to work! Right?
NO…not right at all!
There is more to it than that if you want to start your business on strong footing and a sound strategy. So, let’s explore a few things that will help put you on the right path to success.
Of course, working in Disability & Aged Care there are some other factors you need to consider also, these you can find in my E-Book: Becoming a Self-Employed Sole Trader Working in Disability or Ageing Support.
Book yourself a free 30 min consult to discuss
1. Do your research
I can’t stress enough the importance of doing your homework. Becoming a sole trader without doing your research first is terribly remiss. Given that you will no doubt be competing in your area of expertise, it’s an absolute must that you know what you will be up against and how to position yourself in the market.
So before you do anything else, get moving on some serious market research – and don’t gloss over any negative findings or feedback.
Top tips:
- Start by asking friends and family for a brutally honest opinion about your plan to become a sole trader in your line of work. What is their opinion of it? Listen carefully to the good and the bad. This will help you make educated decisions as you move forward.
- Research your competitors in your area, as well as existing services or products that have business in the area you want to operate in. Find out as much as you can online and in person, so you have a good idea of how they are operating and communicating to their market. Through doing this research, you should establish what you can do that’s better than them. Why will customers come to you instead of your competitors? If you don’t have an answer for this, you have a problem!
- Establish who your ideal client is and whether the numbers add up to make your business viable. Are there enough target clients who can easily access your business – and where are they? How will you communicate to your customers? Check out how your targeted demographic prefer to receive information about businesses.
GET THE HELP OF A SMALL BUSINESS ADVISOR OR ACCOUNTANT TO HELP YOU. MONEY SPENT HERE IS INVALUABLE AND COULD PROTECT YOU FROM MAKING VERY EXPENSIVE MISTAKES.
Does this all sound daunting? Don’t worry – it really isn’t.
Once you begin your research journey, you’ll find yourself on an exciting learning curve. The more you learn, the more confident and prepared you become. Based on your learning and new info, you’ll probably adjust your direction or incorporate new ideas to make your business stronger and make it ‘fit’ better to client needs and demand.
2. Create a Business Plan
When you intend to become a sole trader and run your own business, having a good business plan it vitally important, as it will allow you to stay the course and be consistent in your messaging and focus. Like Winston Churchill once said:
Your business plan needs to explain what your business will do, the goals you have set, how you will reach them, how it will be funded and when you expect to make a profit from it.
Here’s a quick overview on what your business plan should contain:
- Introduction – The business profile
- Vision – The aim of the business
- Clients – Who are they?
- Feasibility – Will it work and how
- Time frames and goals – When each stage with start and how long before you make a profit?
- Equipment, qualifications, resources, vehicles etc. – What will you need?
- Marketing strategy – How will you get clients to your door or website?
- Funding and investment – How will you fund it?
Top Tips:
- Keep your business plan brief, to the point and informative. The reader should be able to grasp a full understanding of your business in just a few minutes.
- Your plan is your Bible. It’s good to understand that a business plan isn’t just to help you get up and running with a clear path of where you intend to go. It’s a very useful tool to help you through the many stages of your small business. It should be a working document to which you should refer to all the time, and update as you need to. Keep it current and keep it real.
- Get professional help if you need to in order to get it right. If you haven’t run a business before, you are not skilled at planning a business or writing business plans of value. It doesn’t cost much to speak to a business coach to help you unpack what is in your mind, and get it organised on paper. This will pay for itself over and over again over the course of your business.
3. Business registrations and Tax
When you become a sole trader, you have different tax obligations to when you were an employee. The good news is you can also claim your business related expenses, like a business coach, or bookkeeper, on your tax return.
Here’s what you will need:
- It is important that you get the right professional advice here when setting up your business from the beginning, so you don’t get yourself in trouble, or get faced with surprise after surprise. A registered accountant or business consultant will be able to advise you on the best structure suited to your particular circumstances.
- Upon this advice, register for an Australian Business Number (ABN) if you’re becoming a sole trader, or go through the process of incorporation by getting an Australian Company Number (ACN) if you’re going to start a company, which identifies your business.
- If your business is likely to invoice $75,000+ in its first year you will need to also register for Goods and Services Tax (GST). IMPORTANT NOTE: While certain services pertaining to personal care are GST exempt, you still need to be GST registered if you invoice over this amount and can apply for GST credits.
4. Some other important factors to consider
Just like with anything, it is very important that your plan is a good solid 360 degree view of what you’re going to need in order to give yourself the best chance to be successful. Make sure that you use a lot of foresight, and that you’re not just thinking about the here and now, but also about the next year and potentially, the year after that. Here are a number of factors to consider:
- Keep good records. Cloud based technology really has taken the hard work out of a sole trader’s record keeping and tax obligations. Software subscriptions from companies such as Xero, MYOB and Intuit provide user friendly yet impressively comprehensive online platforms for keeping track of business finances, reporting, invoice payment and much more.
- Be visible. Have a small website, where you have built a good profile of yourself. Let people be able to research you and what you’re about. It builds trust and looks professional.
- If you’re considering leasing a workspace, think really hard about whether you actually need to. Commercial rents and associated costs can be very high, and usually come with a long lease. This is a huge commitment for a startup business or fledgling sole trader. Unless it’s essential to work from commercial premises, its best to avoid them if you can work from home and/or provide a mobile service.
- You’re going to need insurance. As a sole trader you are personally responsible for all the liabilities of the business, so make sure you have adequate insurance for you, your clients and your business.
- Be willing to change direction, rise to a challenge and move quickly when faced with opportunity. If you remain agile in business, your chances of success are far greater. Agile businesses get things done and keep moving. They finish important bits and get into practice, then observe results, refine what they offer and how they work, and repeat.
- Don’t give up your day job unless you are immediately rushed off your feet with clients that require your full-time attention. It can be a good idea to continue working while you grow your business and client base. You retain a steady income which takes some of the pressure off you in the early stages. It also gives you a little freedom to experiment, without the odd failure crippling your bank balance.
Conclusion
So, to give yourself the best chance at success, make sure you do your homework. Plan well and get professional advice to ensure you do things right from the very beginning. Don’t get yourself into trouble by trying to save a few dollars. It could cost you thousands in unpaid fees and taxes. One of the best strategies for new businesses that we can’t stress enough, is to be visible to be researched. Everything you do in your business should be building trust in your clients. So being setup well and correctly will build consistency and confidence in your business, and you’re on your way to being successful in your endeavours. Good luck!!
Sue Mills
