Category: Blog

Some people’s dream is to nurture a business idea through to success. Calling the shots, working their preferred hours and achieving financial independence fires their dream.

Many people have a great idea but are overwhelmed when they look to turn their idea into a thriving business. Here are 5 tips for translating your dream into reality.

1. Road Test Your Idea

Speak to people whose opinion you trust and run your idea past them to gain feedback and an alternative perspective. You’ll be pleasantly surprised by how many people will be happy to help and connect you to professional expertise.

The chances of your idea being stolen are low. After all, if your idea can be replicated that easily it’s not a great a business concept!

2. Start Lean

Way too many businesses run out of money before they have an opportunity to succeed. Spend as little hard cash as possible to get your idea up and running. Get a basic website up using WordPress templates. Target Facebook Ads to reach a specific audience and look at options like Hootsuite to drive your social media presence.

3. It Takes a Community

Starting your own business can be tough and lonely! Find a friendly, affordable accountant and lawyer. Sound technical advice can save you money and tears further down the track.

Similarly, seek out people who’ve been in your shoes. Learn from their experiences and ask for feedback.

4. Follow the Money

You need capital to start your business. You may self-fund, borrow from family or friends or tap into a partner to help with your start-up. Map out a draft Business Plan, budget and cash flow projections then stick to your budget. Make sure your business has a dedicated bank account for transparency. Muddling your private bank account with the businesses is a recipe for future disaster.

5. Legals and Ownership Structure

Choosing the right structure for your fledgling business can be complex. Multiple options, each with different pros and cons can be confusing. Think about:

• Your personal liability from your business, its products or services
• Future plans for downstream partners or investors
• Administrative costs of setting up and maintaining your preferred business structure
• Tax effectiveness of your chosen structure.

Being a Sole Trader may be the simplest and cheapest option, but your personal assets are unprotected. It doesn’t give you much protection if things go horribly wrong in your business.

An Australian limited liability company (an LLC) remains the most common structure. It needs only one shareholder, one director and one resident director. There is no mandatory minimum paid-up capital and your personal assets are protected.

Whatever your structure, you’ll need to register your business with ASIC. Your form needs to identify the business’ ownership structure. You will also need an Australian Business Number (ABN) for your business from the Australian Business Register website. Then register for the Goods and Services Tax (GST). Registration is mandatory for any business generating more than $50,000 in revenue (not profits) during any 12-month of operations.

Final Observation

Setting up your own business is exciting, challenging and occasionally frustrating if you’re not prepared. Put in place smart plans, receive competent tax planning and legal advice and consider staffing lean, to begin with. Above all else, keep a sharp eye on your cash burn!

There’s an old saying in investment circles: ‘when Wall Street sneezes, the rest of the world catches a cold’. That’s not surprising. The New York Stock Exchange is by far the world’s largest, so what happens there is bound to be noticed by stock exchanges everywhere, including Australia.

It works on the upside too. A good day on the US market is more likely than not to be followed by a good day here (and elsewhere). This is particularly so when comparing similar indices such as the S&P 500, which tracks the performance of the top 500 US companies, and the S&P/ASX 200, comprising Australia’s top 200 shares.

Playing follow the leader on a daily basis is one thing, but shares are a long-term investment. So what happens over longer time frames? Once again, there is a remarkable correlation between the two markets. Nearly all of the major ups and downs of the S&P 500 are reflected by the ASX 200. Most of the minor peaks and troughs also match up in both markets.

While the influence of the US market on the local market is considerable, it isn’t absolute. In many cases the magnitude of the ups and downs differs quite significantly, sometimes favouring Australia, and at other times Wall Street. That’s important for investors because it creates a diversification opportunity. The performance difference between the two markets is big enough that by investing in both markets an investor is likely to be able to reduce the short-term risk of their portfolio while maintaining long-term returns.

When the performance of the two markets diverge, it is often due to the differences in the underlying makeup of the S&P 500 and the ASX 200, which in turn reflects the differences in the US and Australian economies. The Australian market is dominated by the big four banks and other financial stocks, followed by the resource sector. The US market is far more diverse, with I.T. the leading sector, but with significant contributions from health care, consumer goods and energy stocks.

The influence that the US market has on us is unlikely to change in the foreseeable future, largely due to its size and its ability to set the mood of investors around the world. It certainly can’t be ignored, so if you would like help in protecting your investments from the effects of a Wall Street sneeze, or to take advantage of the many periods of good market health, talk to your financial adviser.