Do You Have a Start-Up?
Whether it’s a winning pitch on the Shark Tank TV show or politicians spruiking about innovation, start-ups and the entrepreneurs behind them have been getting a lot more attention in recent years.
But what does it all mean? Are these real businesses and does it have to be cutting edge to be considered a start-up?
Most of the focus has been on smartphone apps, new technology or 3D printing but it doesn’t have to be high tech. In fact anyone starting a new business in any field from a retail business to the latest technology hatched in one of the growing numbers of incubators around the country (that’s right it’s not just chickens and babies that use incubators!) has a start up on their hands.
No matter what the idea or industry there is one thing they all have in common – most don’t succeed. There is a wide ranging estimate on what the failure rate is but it’s safe to say that more than 60% don’t make it past year three.
Why is that? Was the idea or product bad? Economic conditions or too much competition from big companies? All of these can have an impact but in my experience the main causes of business failure are lack of planning, insufficient capital and misunderstanding of the importance of cash flow.
Tech start-ups often find support from crowd funding platforms but money will only make up for bad planning and management for so long. More traditional businesses like retail need to rely on the owner’s personal resources or approaching a bank for funding. While interest rates are at all-time lows banks are taking a cautious approach to their lending criteria and a solid business plan, budgets and an ability to demonstrate an understanding of cash flow management are vital before they’ll hand over the cash.
The Federal Government focussed on technology and innovation based start-ups in its National Innovation Statement in 2015 encouraging investors to get involved via tax concessions and announcing a plan to reduce the default bankruptcy term from three years to one year to help people have a go and not be as fearful of the impact of failure.
While start-ups in traditional businesses may not be given the same concessions there are still a range of tax measures available to assist small business that many people are not aware of. The Australian Taxation Office recently issued a reminder to tax agents on some of the key aspects of these measures as it identified that some accountants were under claiming entitlements suggesting that not all business advisers are aware of them either.
No matter what the idea or industry most start-ups face the same issues but may have different options available for solving them. One thing is for sure, it’s not easy starting any business and it always helps to have someone you can trust to help you avoid becoming a statistic.
Contact Halifax Advisory today to find out how we can help make your start up a success.