Australia is a nation of entrepreneurs, side-hustlers, freelancers, and small business operators.
From the dog grooming businesses to antiques and coffee shops, yoga studios, and beyond, small businesses contribute to a community’s identity. Equipped with the spirit of independence, a DIY attitude and the courage to give things a go, small business owners bring innovation and entrepreneurship into the neighborhoods, contribute to the local vibe, build communities, create local jobs, develop personal relationships with their customers, knowing many of them by name.
According to the McCrindle Insights Report, Australian small business sector is critical to the economy, employing around half the workforce, and adding $380 billion annually to GDP.
That’s why, at ZippyCrowd, we’re all about giving business owners the tools to thrive in the new economy.
Table of Contents
What is the definition of a small business in Australia?
ABS defines a small business as a business that has:
- An Australian Business Number (ABN)
- Goods and Services Tax (GST) activity
- Turnover of less than $2 million per annum (p.a.)
- Employs less than 20 people
The term ‘small business’ includes micro-businesses, which are defined by the ABS as GST paying enterprises with 0-4 employees.
Small business categories include:
- Sole Traders (no employees) – 62%
- Microbusiness operators (1-4 employees) – 27%
- Small businesses (5-19 employees) – 8.5%.
Extremely small businesses with ABN, but without GST and with no employees are termed now as ‘nano’ businesses and are not included in the above small business stats.
The majority of nano businesses file their tax returns as individuals. In the last 3 years, there has been a significant increase in the number of registered nano businesses, attributed to the growth of the ‘gig economy’.
Today, in Australia, small businesses, with less than 20 employees, employ 2.3 million people, and account for nearly 98% of all Australian businesses.
A checklist on how to open a small business in Australia
Starting your own business is both exciting and challenging. We have put together a checklist of the basics and a business guide to help you get started.
Is it a hobby or a business?
Are you transforming your hobby into a business? Or is it a brand new venture?
- A hobby is a pastime or leisure activity conducted in your spare time for recreation or pleasure
- The key differences between a hobby and a business are tax, insurance, and legal obligations.
We recommend this article to dive deeper into the differences. And if you want to start a hobby that can become a business, don’t forget to check our article “13 Hobbies to do at home and earn money“.
Do I have a good business idea?
Conduct some research to work out whether your business idea has potential, and whether you have the skills and knowledge to do it. Consider your ‘Why’, skills, time and money needed to set up and run the business
Who are my customers and competitors?
You need to do some market research to understand who will pay for your product or services and why. Who you will compete against and how?
Here is some help on how to create a customer profile or persona.
Do I need to have a business plan?
Developing a business plan is an essential part of starting any business, especially if you are planning to apply for a grant or funding. Your business plan will need to cover the operational, financial, and marketing aspects of your business. The business plan will help you and investors to understand the goals, strategies, and potential of your business.
You can use this business planning template and guide to help you get started.
Have I registered a website domain?
Your domain name is your website URL address on the internet. Your domain gives your business an online identity for your customers. In order to register ‘.com.au’ or ‘.net.au’, you will need to have an ACN or an ABN.
What business structure do I need?
Your business structure refers to the way you will operate your business. You can of course change your business structure as your business grows.
In Australia there are the following types of business structures:
- Sole trader: an individual trading on their own.
- Partnership: a group or association of people running a business together and distributing income or losses between themselves.
- Company: a legal entity run by its directors and owned by shareholders.
- Trust: an entity that holds property or income for the benefit of others.
A sole trader is the simplest form of business structure and is relatively easy and inexpensive to set up. Read more about business structures in our blog article here.
I want a business name. Is it available?
Your business name is a name under which you will operate your business.
The easiest way to find out whether the name you want is available is to search the business names register on the Australian Securities & Investments Commission (ASIC) Connect website.
How do I register an ABN and my new business name?
- Your ABN is a unique number that allows you to identify your business to the government and other businesses. ABNs are free.
- Your business name is only your new business ID. If you want exclusive rights, you will need to apply for a trademark. ASIC charges you a fee (AUD$36/yr) to register your business name.
- You can apply for a business name, register your business, company, ABN, ACN, GST, PAYG, FBT and registration services through the Business Registration Service https://register.business.gov.au/
You can use this Business plan template to get started www.business.gov.au/businessplan.
How about marketing?
A marketing plan will help you set creative ways and strategies to promote your products and services.
This marketing plan template and guide will help you get started. Check it out here.
What do I need to know about taxation?
Tax requirements for your business will vary depending on your business type, number of employees, and the fringe benefits you offer your employees. Make sure you do a bit of digging and understand the requirements for:
- different types of tax that could apply to your business
- tax registrations
- paying taxes
- keeping business records
Types of tax that could apply to your business:
- Income tax for business
- Capital gains tax (CGT)
- Fringe benefits tax (FBT)
- Pay as you go (PAYG) withholding
- Pay as you go (PAYG) installments
- Goods and Services Tax (GST)
- Fuel tax credits
- Wine equalization tax
- Luxury car tax
- Payroll tax
- Land tax
Tax deductions
When you do your tax return, you can claim most business expenses as tax deductions – to reduce your taxable income. You can find all details on tax deductions on the ATO website.
Paying tax
- You need to lodge an income tax return to the ATO each year
- Most businesses also need to lodge business activity statements
- You may also need to lodge other reports or returns.
Record keeping
- Under Australian tax law, you must keep records of all transactions related to your business’s tax and superannuation affairs
- Business records are useful if you decide to sell your business
What are the top challenges I need to overcome?
Starting your own small business comes with a variety of challenges. Once you’re up and running, the challenges don’t stop, they just change. Here are key challenges to consider, and tips on managing them
1. Red tape
High time and cost, when it comes to compliance, legislation and regulations can be quite high.
2. Access to finance
Cash is king, but being small means it will be harder to get funding. Small businesses usually struggle as a result of tough lending conditions, and high expenses.
3. Quality digital presence – web and social
Businesses must have a digital presence. Having an easy to navigate website along with social media accounts is vital for reaching and connecting with potential customers. If businesses are not online, they don’t exist, as much of their world is online.
In Australia small businesses use actively the following social channels:
- 90 percent of small businesses in Australia have a Facebook presence and have paid to advertise on Facebook.
- 24 percent of Australians use social media sites like Facebook to follow or find out about particular brands or businesses in general
- 24 percent of small businesses in Australia have a Twitter presence
- 2 percent of small businesses in Australia have paid to advertise on Twitter.
- 35 percent of small businesses in Australia have a Linkedin presence.
- 7 percent of small businesses in Australia have paid to advertise on Linkedin.
- 19 percent of small businesses in Australia have an Instagram presence.
- 6 percent of small businesses in Australia have paid to advertise on Instagram.
- 46 percent of Australians use Instagram on a regular basis
YouTube
- 11 percent of small businesses in Australia have a Youtube presence.
- 51 percent of Australians use Youtube on a regular basis.
4. Staff
It is not easy to attract, afford, and retain the right talent in Australia. Gen Y and Gen Z have different priorities and are attracted by more than just the pay. They are looking for flexible working hours, a sense of purpose, opportunities for growth, competitive wages, and more.
Final Thoughts
“it’s all about who knows you…”
Starting your own business and growing your brand, your audience and customer base is a lot of hard work and it takes time. A lot of time. You’re constantly posting, liking, commenting, following, until you reach a sizable audience.
But…There’s a smarter way to grow and that’s with ZippyCrowd, the first online recommendation tool that digitizes word of mouth online. With ZippyCrowd recommendations come from people you know and trust.
They save you time and money, connect you to the right people, creating otherwise unavailable opportunities.
