Starting a small business in Australia – The definitive beginner’s guide

Starting a small business in Australia – The definitive beginner’s guide

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.

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

Starting a small business in Australia - Business size measured by employment

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:

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:

Facebook

  • 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

Twitter

  • 24 percent of small businesses in Australia have a Twitter presence
  • 2 percent of small businesses in Australia have paid to advertise on Twitter.

LinkedIn

  • 35 percent of small businesses in Australia have a Linkedin presence.
  • 7 percent of small businesses in Australia have paid to advertise on Linkedin.

Instagram

  • 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

Word of mouth marketing: The secret weapon for free advertising

Word of mouth marketing: The secret weapon for free advertising

“Word of mouth marketing is a ‘free’ advertising technique used to generate discussions about and recommendations for a brand, product, or business. It has  become inherently viral over the years.”

Essentially, getting people to talk about your brand, product, or business is the goal of this type of marketing.

Traditionally, word of mouth marketing was spread from one person to another based on recommendation. The modern version of it describes both targeted efforts and naturally occurring instances where users share their satisfaction with a brand.

In today’s hyper-connected world, a single recommendation can have a far greater impact – leading to word of mouth marketing strategies to capitalize on the opportunity.

Modern word of mouth marketing happens in 2 ways: organically and through the use of marketing and advertising campaigns.

These two types of word of mouth marketing are called and defined as:

  1. Organic word of mouth

Organic word of mouth marketing occurs naturally when people are happy with the product or service and have a natural desire to share their support and enthusiasm.

  1. Amplified word of mouth marketing

Amplified word of mouth marketing occurs when businesses launch campaigns designed to promote business exposure, encourage or accelerate word of mouth in existing or new communities.

Word of Mouth Marketing advantages

Word of mouth marketing - ZippyCrowd

Before printing and broadcasting transformed communications, people relied on word-of-mouth to tell others about their goods.

Today, without a doubt word of mouth marketing is the easiest way to spread the word about your business organically. Many companies employ word-of-mouth marketing tactics to build their customer base. 

According to Neil Patel, word of mouth marketing strategy is the ‘World’s Best Form of Marketing‘.

Let’s have a closer look at what are the advantages of word of mouth for small business owners:

Builds Brand

Building your brand is critical, but it’s really difficult to stand out in the crowded online space, especially if you are running solo. Using word-of-mouth marketing helps build positive feelings about your products and services, and that helps build your company’s brand. 

Creates Trust

People trust friends, family (and even strangers) more than they do ads. Trust is an integral part of word of mouth marketing. It means your brand is being recommended in the most trustworthy context possible. People trust and are more likely to buy from brands and businesses recommended by friends.

Encouraging and facilitating word-of-mouth marketing helps you establish a higher degree of trust by relying on influential customers willing to talk about your company.

A positive word of mouth marketing strategy keeps customers coming back. And referring other customers who also keep coming back. And refer more customers…

Generates Long-Term Value and Repeat Business

  • Traditional advertisements work on the principle of reaching as many potential customers as possible in the hopes that a few will be intrigued and try the advertised products. 
  • By contrast, a single satisfied customer might only tell a few close friends about a positive experience with a business, but a strong recommendation from a friend is more likely than an advertisement to make a lasting positive impression.
  • Customers who purchase your products or services based on a referral are more likely to buy more than people who find your company through traditional marketing methods. 
  • If referred customers are happy with your service, they will refer their friends and family, which will grow the value of the first referral exponentially.

Grows Sales with Low Costs

Compared to the thousands of dollars required to run a consistent ad campaign in print, on television, or on radio, word-of-mouth marketing is a relatively inexpensive marketing tool to increase your business. Customers satisfied with the product or service will tell their friends and family about you and your business without any extra incentives. 

  • Word of mouth marketing can provide additional sales, even if a company doesn’t spend money on advertising.
  •  It’s especially useful for small and local businesses, which may have limited advertising budgets.
  • Today a simple comment online can be shared and commented upon and has the ability to reach millions of people in a few seconds.

Builds a community of trust, not just a network of buyers: 

  • Word of mouth marketing works to build a loyal and engaged fan base rather than one-off buying customers.
  • Higher engaged customers buy more often and recommend their friends more often, extending your return on time spent on the strategy and generating a high customer lifetime loyalty.

More funding, more freedom: 

Brands with high customer lifetime loyalty and therefore repeat purchases receive more angel and venture funding. 

The reason for that is because Customer Acquisition Cost to Lifetime Value (CAC to LTV), is one of the most important aspects of a solid business model in the early days of a company’s lifecycle.

What can a small business do?

“Transform your word-of-mouth marketing strategy from passive to driven by using a range of tactics designed to engage your customers and get them talking about you and your amazing business.”

It is really difficult to get people talking about your service in a meaningful way. The good news is you can increase your sales and earn profit from one of the most underrated marketing strategies – word of mouth marketing. Word of mouth plays a great role in bringing you as many clients as you want. What can you do to make word of mouth work for you, especially if your business is small and online? Here are a few tactics that have been found to work:

  1. Create unique identity

Have a great story about you and your business: how you started, why you believe in what you do – something that others will want to hear and retell others.

  1. Offer great product partnered with exceptional customer service

Make sure you offer a product or service that people are asking for and respond to all customer questions in a quick and effective way. 

  1. Build trust, solid reputation and a good name for yourself

Trust is an integral part of word of mouth marketing. People need to trust you to be able to recommend your services. 

  1. Keep your loyal community engaged
  • Know your people, remember names, engage online. 
  • Turn any interaction with customers into an opportunity to gain word of mouth.
  • Turn complaints into praise. 
  • Actively ask happy customers to tell friends & family or leave great reviews.
  1. Give more than expected

Appreciate loyalty and show appreciation. That might mean throwing in some little freebies or upgrading a level of service  – by way of saying thanks.

  1. Become known as a go-to expert in your community 

Share free expert tips and recommendations, create useful shareable content, like your expert tips and recommendations, that people will want to share.

  1. Partnerships

Build shared value partnerships and co-promotion events bringing together clients, vendors, and business partners. 

How powerful is word of mouth marketing?

Let’s have a look at some of the statistics to comprehend the significance and power of this strategy:

  • Neilson report says 92% of consumers rely on suggestions from friends and family more than advertising;
  • About 74 percent of consumers determine word of mouth marketing as their influencer when making purchasing decisions; 
  • According to the Referral Rock report, marketers rate the quality of word of mouth lead to be 4.28 on the 5 point scale;
  • 20% to 50% of purchases are the result of a word-of-mouth recommendation [AdAge];
  • Beyond friends and family, 88% of people trust online reviews written by other consumers as much as they trust recommendations from personal contacts;
  • And 74% of consumers identify word of mouth as a key influencer in their purchasing decisions;
  • According to the National Law Review, it can cost five times more to acquire a new customer than keep a current one;
  • And Bain & Co estimate that a 5% increase in customer retention can boost a company’s profitability by 75%;
  • HubSpot shows that 75% of people don’t believe adverts, yet 90% trust suggestions from family and friends, and 70% trust consumer reviews;
  • Word of mouth increases brand loyalty; a study from the Wharton School of Business found that referred customers are between 16% to 24% more loyal on average;

Final Thoughts

“it’s all about who knows you…”

Growing a brand 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. 

Today, word of mouth marketing can be found in likes on Facebook, Linkedin, Instagram. In reviews on Amazon, Yelp, Tripadvisor, Trustpilot, and similar. In blog posts, forums, testimonials, and brand mentions. 

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