Ten-point checklist for business start-ups
Starting a business can be a busy and hectic period, with lots of different things requiring your urgent attention. Once you’ve established that your business idea is viable, this 10-point list will help you to focus on the practical steps you’re likely to need to take before you’re ready to open your doors for business.
1. Choose and register a company name
Unlike companies, sole traders and partnerships can use any business name; however, it makes good business sense to avoid a possible legal battle from businesses with a similar name. Once you have narrowed your selection of names down to a preferred few, do an online search of the business register at the Companies Office website and at the Intellectual Property Office website to ensure that identical or very similar business names have not been registered. You can also search other registers for the names of incorporated societies and charitable trusts, and telephone and business directories.
Based on your findings, you can then select a company name and if you are forming a registered company, you can request to reserve a company name online (you will first need to register as an igovt user and open a Companies Office account). Reserving a company name costs $10. The steps to take are outlined on the Companies Office website. You will receive confirmation of reservation (or rejection, with reasons) by email and will need to form your company within 20 working days of successfully reserving your company name.
You do not need to register a company name if you are planning to operate as a sole trader or partnership.
2. Decide on the legal form of your business
You’ll need to decide on the legal form that your business will take. Most businesses are either formed as sole traders, partnerships or limited liability companies, although you could also choose to form a co-operative, trading trust or loss attributing qualifying business.
A sole trader, for a single business person, or partnership, for two or more people embarking on a business venture, is easy to start but comes with limited protection and extensive personal liability, and most serious businesses either start out as limited liability companies or grow into one.
The Business.Govt website has more detailed information to help you decide on a legal form for your business. Your lawyer or accountant could also give advice on which form would be most suitable for your business and your growth plans for the business.
3. Comply with other legal requirements
As a business owner, you’ll need to register for tax and meet other legal requirements. These include registration with the Inland Revenue Department, registering for GST, and registering with an employer and meeting certain health and safety requirements.
If you are setting up as a sole trader, your personal IRD number is used as your sole trader number. For partnerships, you will require a personal IRD number for each partner in addition to an IRD number for the partnership. Limited liability companies are required to apply for their own IRD numbers.
You will need to register for Goods and Services Tax (GST) if your business turnover is $60,000 or more a year. You can register for GST online but will need to know your Business Industry Classification (BIC) code and how often you need or want to pay GST. Your annual turnover affects whether you are required to pay GST monthly, bi-monthly or twice a year.
If you plan to employ staff, you will need to register as an employer with Inland Revenue. Your employees will need to fill in an IR340 or IR341 to allow you to deduct PAYE from your employees at the correct rate.
You will also need to find out more about ACC and the health and safety requirements you’ll need to meet as an employer.
4. Draw up a business plan and cash flow forecasts
Drawing up a detailed business plan will help you to prepare to start, and run, your businesses. It identifies the key objectives for your business and explains how they’ll be achieved. It also identifies what you need to put in place to achieve your objectives.
Cash flow forecasts will tell you the sort of sales and turnover you need to operate profitably, when you expect to break even, and how much finance you are likely to need to start your business.
Once you’re up and running, your business plan and cash flow forecasts can also be used to benchmark your actual business performance against your plan’s expectations or expected cash flows.
5. Open a bank account and arrange finance
Although it will probably be easier to open a business account with your personal bankers, this is not necessarily the best decision for your business. It is a good idea to visit a couple of banks to familiarise yourself with the business services on offer. Your final choice will depend on the range of services and costs, as well as a gut feel for whether you’ll be able to establish a comfortable working relationship with the person likely to be your bank manager at your local branch.
Your start-up capital and business finance could come from a number of sources. You might plan to invest your own capital, borrow money from family members or friends, or you could decide to apply for a bank loan or find an angel investor. If you have a good business idea supported by a sound business plan, this should not prove to be a big obstacle.
6. Licences, permits and consents
You might need a licence, permit or resource management consent to operate your business. Find out from your district or local city council exactly what licences, permits or consents you will need. This link provides useful information on resource consents.
7. Setting up your business premises
There are a number of steps involved in setting up your business premises. You will need to either rent or purchase suitable business premises and ensure that it has power, an adequate water supply and ablution facilities.
You will probably need to arrange signage for the premises, buy office equipment and arrange for a telephone and Internet connection. If you’re likely to run more than a couple of computers, you will probably also need to set up some network cabling and arrange for on- and off-site data storage and back-ups.
You will need to advertise for staff, conduct interviews and appoint suitably qualified people.
Other things to consider are:
- Stationery – business cards, letter heads, invoices, statements, etc.
- A website
- Sales literature and brochures
- Telephone directory entry
- Yellow pages entry and other advertising.
8. Establish relationships with suppliers and customers
There are a range of business suppliers you’ll need to contract and establish a relationship with before you start your business. This includes stock suppliers if you are supplying physical goods for resale, but also includes office furniture suppliers, stationery dealers, and a range of service and support suppliers like lawyers, accountants, consultants and IT support suppliers.
If your business relies more on networking than passing trade, you’ll also want to start establishing relationships with potential customers as soon as possible. Identify potential customers and give them advance notice of when you plan to open, the goods and services you will offer and why they should deal with you instead of your competitors. If you’re planning to offer opening specials, let them know well in advance so they can take advantage of your offers.
9. Set up management systems
It’s a good idea to set up basic management and record keeping systems for finances, production, stock and other things you might need to keep track of before you start operating. Your accountant or business adviser will be able to help you set up a simple system. Alternatively, you can hire someone with sufficient experience to set up and run these systems for you.
Business owners can get so involved in setting up the practical side of their business that they often overlook the need for risk management. Take the time to look at your business and identify where things can go wrong. Do you need insurance? Do you need security for your premises? Should you register trademarks, or protect your intellectual property?
10. Prepare your launch
Specific preparations for your launch will depend on the type of business you are opening, but regardless of your plans, the first thing you will need to do is decide on a realistic launch date. Be careful not to be too ambitious – you don’t want to let staff or customer expectations down before you even open for business.
Plan your launch advertising campaign well in advance. Tell people about your plans. Use word-of-mouth to promote your opening. Try to plan something that will get people’s attention and get them talking. If your budget is limited, use affordable media, like Twitter, to reach a large number of people.
If you are planning launch specials and promotions, make sure that you have enough stock and staff to deal with the anticipated demand and have a back-up plan. For example, ask you supplier if you can return unsold stock if your launch is not well attended, and find out whether they have more stock on hand if demand exceeds your expectations.
Content provided by The Small Business Company
