Guide to Starting A Small Business – Our Top Tips

Small businesses are the backbone to any economy.

In New Zealand, there are well over 500,000 small businesses, making up 97% of all firms. In Australia, nearly 2.5 million small businesses represent more than 99% of companies.

These are some of the most effective small business tips to help you get your new business up and running.

TL; DR

When you’re setting up a small business, consider your finance options as part of your business planning. There are a range of options beyond simply getting a bank loan, and invoice factoring with FundTap is a particularly effective form of cash flow lending to help small businesses grow.

Importance of small businesses for economy growth

By sheer numbers alone, small businesses add crucial diversity to the economy. They have a depth and breadth of expertise across all sectors, differentiating themselves with creative service offerings and boosting the economy’s capabilities.

They provide employment, fuel economic growth and help to upskill employees to contribute to the economy themselves.

The success of any small business is closely tied to the overall success of their national economy.

Guide to starting a business

When you have an idea for a business startup and want to make it a reality, follow these steps:

Make sure your idea is viable

Do some market research and make a business plan. You may need to tweak your original idea to give it the best chance of success.

Choose a business name

Check your company name against those currently registered – it needs to be available and not trademarked by anyone else.

Choose a business structure

Will you be a sole trader, a partnership or a registered company? There are other structures to choose from, but these are the most common.

Look into regulations

There may be specific regulations that apply to the industry you’re in. For example, you may need special licences or qualifications in order to trade. Look into central and local government requirements to make sure you’re set up to operate legally.

Register your company

If you’ve decided to structure your business as a company, register with your national companies office.

Register for GST

You can usually do this at the same time as you register your company. In New Zealand, you need to be GST registered if you’re earning more than $60,000 a year. In Australia, the threshold is $75,000 a year.

Getting financial planning advice for your business

Financial management tips for small business owners are actually quite easy to come by. There’s a range of people you can talk to for small business finance tips, including accountants, business mentors, investment advisors and business incubators. You can even discover a few gems on an internet search.

Get a few people you trust and talk to them about projecting your revenue, improving business cash flow and other critical financial aspects of running a business.

The important thing is to have a plan. A financial plan gives you a road map for growing your business from an idea to a profitable startup.

All small businesses go through ups and downs, and financial planning is about recognising how to negotiate the quiet periods so you can enjoy the success that comes with the busy times.

One of the best finance tips for small business owners is to get a handle on all of your finance options to find the best ones to help you grow and expand.

Finance options for starting and expanding your business

Your business will take some time to generate a profit, and if you want to grow in the meantime, you’ll likely need some form of finance. Getting finance to find growth allows you to manage operating cash flow from within the business.

H3 Bank loans

Getting a loan from the bank is probably one of the first options you’ll consider. However, there are a range of different types of bank loans to choose from.

Also, they can be hard for new businesses to qualify for. You’ll often need a demonstrated credit history, as well as sufficient assets to secure a loan against. As the owner, you’ll be personally liable for any borrowing in case the business is unable to meet its repayments.

H3 Invoice factoring

If your business earns money through invoicing, invoice factoring is a lesser known finance option that allows you to boost business cash flow while waiting for customers to pay invoices.

Invoice factoring lenders such as FundTap finance the value of invoices as short term loans that allow you to pay bills or finance business growth. It boosts the cash you have on hand at any given time and can also mean you don’t need to borrow as much from other finance providers, which keeps the costs of borrowing down.

Using invoice factoring is a highly effective financial tip for business owners – in the last two years, FundTap users have grown their turnover by an average of 54%.

Bootstrapping

Bootstrapping is when business owners finance growth themselves. It usually takes more time to grow a business this way, but it means you don’t get into long term debt and you don’t have to get investors that reduce your equity.

Bootstrapping is often only possible in a business that doesn’t have a lot of start up costs, such as equipment to pay for.

It can put pressure on your bank account or credit card though, so it’s worth talking to a financial advisor about the sorts of expenses you can expect before committing to financing your business on your own.

Credit line

A bank credit line works in the same way a credit card does. The lender makes a certain amount of credit available that you can utilise when you need it.

You’re only charged interest on the amount you have outstanding at the end of the month, and if you have a revolving credit line then you can make repayments and withdrawals as you please, up to the approved limit.

Effectively managing account receivables for your business

Regardless of how you finance your business, if you invoice your clients then it’s important you manage your receivables. One of the common invoicing mistakes to avoid is to send an invoice and then forget about it.

Realistically, you’ll have clients who won’t pay invoices on time. It’s important to have a system that minimises how often this happens and allows you to act swiftly and effectively when it does.

For example, using an online invoicing system allows you to automate reminder emails so customers are notified when their invoices are overdue.

When clients don’t pay invoices on time, it puts real pressure on cash flow. Many small or new businesses don’t have a lot of cash on hand, so you need invoice payments to cover bills.

If you have repeat offenders, don’t be afraid of having late payment conversations with clients. It makes a real difference!

Final thoughts

Being a small business owner is a great way to take control of your own work life and get the best out of your expertise.

As a business owner, you’ll need to learn a whole new set of skills – particularly when it comes to business administration and management.

Make invoice factoring with FundTap a priority. You can just about guarantee you’ll go through quiet periods, and FundTap is a flexible, affordable small business finance option that allows you to boost your cash flow when you need it.

It’s free to set up a FundTap account, and it takes just five minutes. With no regular account fees, there’s no cost until you need to borrow money. This kind of flexibility makes FundTap perfect for small business owners.

Find out more about how FundTap makes business finance easy, or check out a free demo today.