Does it have what it takes to fly?
Consider these five questions to gauge whether or not you have got an idea that has potential. These questions will let you identify both strengths and weaknesses to help you refine your idea.
Is there a gap in the market for your business? Does your business have something to set it apart from the competition? Try to establish whether or not people will have a strong enough reason to buy your product or service.
Think about your target market, who do you want to appeal to, and where do they currently purchase their products? Conduct objective research, find out if your business idea appeals and whether your products and services have a market place. Ask yourself whether there will be enough customers within your target markets.
Add up all of your expenses such as rent, overheads, wages, advertising etc. Figure out how much money you will make for each product or services you sell after its specific cost - this allows you to calculate how much you need to sell to break even.
Talk through your ideas with people working in the same industry sector.
- Ask questions of them;
- Does this idea have merit?
- Have I overlooked any aspects?
- How would they go about the development?
More information and support for your start-up can be found at www.business.govt.nz
A business plan is a document outlining the essence of your business, what your goals are and what you will need to achieve them. A complete business plan also aids you when speaking with potential investors and allows you to be taken more seriously when you make an approach for business finance.
Your Business Plan
- Overview Summarise the essence of your business
- Business Profile Give an overall description of your business and where you want it to go
- Your Market Assessment of your market including customer and competitors
- Sales and Marketing Outline your sales and marketing strategies - detail products and services, promotion, distribution and pricing
- Management and Staff Produce an organisational chart. Show how your business will be managed, and outline responsibilities of key staff
- Operational Plan Detail how your business will operate. Where it will operate, equipment and material required, licenses (if applicable), insurance, suppliers and system structures
- Finance and Forecasting Show your business has value. Profit and loss forecasting, cash flow, capital outlay and how loans and investors will be paid/benefit
- Succession Planning Show how your business will work in the future
There are different ways to structure your business. Each offers varying degrees of control and responsibility.
A sole trader is a person trading on their own who controls, manages and owns the business. As an individual, you control your own business and are entitled to all the profits. You also have "unlimited liability", meaning you are solely liable for all business debts.
A partnership arrangement is where two or more people run a business together and in return share any profits or loss made and are liable for any debt within the partnership.
It is important to seek legal advice on setting up a written partnership.
An incorporated registered company is a separate legal entity - independent of its directors and shareholders. This structure comes with additional compliance costs, but in most cases, it is considered to be the best structure for offering you the most protection and credibility.
You can incorporate your company online at www.business.govt.nz
Established under a trust deed which can carry out business and/or hold investments.
You will need to consult your lawyer to set up the trust deed.
More information can be found by visiting www.business.govt.nz or through Inland Revenue.
If you are forming a company, you need to reserve and then register your business name as part of the set up process.
You must register your name at the Companies Office, this is done through their website www.business.govt.nz.
A Sole Trader, Partnership or Trust do not require registration as there is no central register for these in New Zealand.
Places to check your proposed name isn't already in use or prohibited include;
- Companies Office
- Intellectual Property of New Zealand
- UBD Directories
- White and/or Yellow Pages
It is a good idea to talk to a Lawyer to ensure there are no issues with your proposed name, and that you have completed everything needed to protect it before you launch your business.
There is a lot to organise when starting out in business, once your name is sorted you are ready to go!
- Secure your premises, organise furniture and equipment
- Obtain necessary licences, permits and resource consents
- Set up business insurance
- Get professional advise e.g. Lawyer, Accountant
- Set up necessary tax registrations
- Seek advice to understand your ACC cover and your KiwiSaver obligations as an employer
- Organise phone and email contact information
- Develop a website, business cards and office stationary
- Arrange suppliers
- Set up book keeping and accounting systems
- Set up your banking facilities and EFTPOS
- Set a start date
How much do you need and how do you get it?
- Initial capital - the amount you need to set up your business.
- Estimate all of your initial funding requirements.
- Compile a detailed list of all the costs you will need to cover, be conservative and allow a contingency for unforeseen costs and overruns.
- You may be able to borrow against your home or business assets
- You could also consider family or friends as prospective investors in your business. However, they may expect an equity stake in the business, in exchange for their investment.
The choices you make when you initially set up your business, such as structure and funding arrangements, may impact on the tax treatment of your business. Seek advice from your accountant at an early stage to assist in making the right choices for you.
Should you register for GST?
It is not compulsory to register for GST until your annual turnover is expected to to reach more than $60,000. You may wish to register anyway, even if you do not expect to reach the threshold.
- As soon as you register, you can claim back GST Paid on your business expenses and purchases
- You will need to complete GST returns on a regular basis, this enables you to keep accurate and up-to-date records
Talk to your accountant for tax advice for your business.
You can choose to register for 1, 2 or 6 month GST periods (subject to some restrictions).
You may need to register for other taxes including income tax, PAYE and fringe benefit tax.
More information can be found on the IRD website.
The information provided in the this section is for information purposes only. The appropriate or otherwise of this guide for you is determined by your own circumstances. You should not take any action in reliance on this guide without considering your individual circumstance. NBS recommends taking appropriate professional advice.
No right of action shall arise against NBS, NBS directors, officers or employees either directly or indirectly as a result of the information contained in this section.