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Understanding business startup costs in Australia

May 16, 2022

It’s the million-dollar question: How much money do you need to start a business?

We get it: budgeting is hard, especially when you’re not sure how much income your business will generate early on. Our best advice when estimating the setup costs for a small business is to think big: set a business goal to work towards, give yourself a timeframe to achieve it, and then work backward.

Will you need to hire staff to achieve this goal? Does the business that you imagine have a marketing presence? Will you need a physical location? All of these are part of your business startup costs, even if they’re not all incurred at the very beginning.

While not every bill is going to come at once, understanding how much money you need to start a business is an important step in developing a business plan. Figuring this out early will also shape your strategy, influence the price of your products, and help you create milestones that keep your goals on track.

Nearly all company startup costs and the cost of running your business can be deducted from profit come tax time. Some startups won’t be profitable for about 18-24 months, the costs of getting a business off the ground can be deducted from future profit; reducing its tax burden while it's still growing.

Research, research, research

This list is designed to get you thinking about the general cost of running a company in Australia, but the exact startup costs for individual businesses will vary (e.g. if you're selling products you'll also have to factor the manufacture/purchase of those into your budget too). Be prepared to do some research – talk to other business owners about how much they pay for things or get advice from business finance professionals (we know a few accountants who could answer some questions 👋).

Common setup costs for small businesses include:

Establishment costs

These are likely to be your first business start-up costs, and will depend on your chosen business structure and what you need to run your business day-to-day. Some may seem insignificant compared to larger expenses, but trust us, they’ll add up quickly.

  • Company registration: Check the fees here
  • Business name: Can be paid per yearly or every three years
  • Business licences: Learn what licences you need here
  • Logo design and brand identity: Read this if you’re still not convinced this is essential
  • Premises fit-out and equipment: This cost is often overlooked
  • Bank account fees: Vary from bank to bank and account type
  • Rent: Scope out the market before committing to a physical location
  • Utilities: May even be included if you take out a commercial lease
  • Internet: Investing in an unlimited, high-speed plan is sensible
  • Domain name: Cost will depend on the extension, aka .com vs .com.au
  • Email host: An email address with your business name in it looks more professional than a generic address like Gmail or Outlook

Technology

Technology is essential to running a business these days, but it can get pretty pricey. Remember to budget for both physical devices and the various software or apps that you’ll run on them.

Check out what our tech stack looks like to give you an idea of what tech you might need to budget for.

  • Computers and accessories: This includes anything from monitors to hard drives
  • Smartphone: Factor in the cost of both the device and your monthly data
  • Software and subscriptions: The right programs can hugely boost your productivity
  • Cybersecurity: If you’re collecting customer data you might need to pay to protect it

Insurance

Here are some policies we think you should look into, depending on the type of business you run:

  • Public liability: Some businesses won't work with you if you don’t have this
  • Building and contents: If you have a property you can’t afford to not have this
  • Stock deterioration: If you house or sell anything perishable
  • Technology insurance: This protects not just devices but the info stored on them
  • Employee dishonesty cover: To protect you from embezzlement
  • Professional indemnity: To protect your business if you accidentally provide incorrect information
  • Cyber liability insurance: To protect against compromised customer data claims

Upfront legal fees

These can be higher than some people expect, but covering your business legally is a worthwhile investment in the long run. Some documents you’ll need a lawyer to draft are:

  • Privacy policies: Outlining to your customer how you plan to protect their information
  • Terms and conditions: A way to gain formal consent from your customers
  • Contracts: Clarifying agreements with groups like employees or suppliers
  • Trademark applications: If you have branding elements that you need to protect
  • Agreements between founders: Outlines the terms of the business relationship

Hiring

As your business grows, you might need to take on employees to share the workload. While an extra pair of hands will massively improve your productivity, be aware of the costs of taking someone on.

If you’re feeling nervous about the prospect of making your first hire, check out this article for a guide to the process.

  • Wages: Find the market value of the expertise you’ll need in the role. Here is a great place to start looking
  • Job advertisements: From boosting Linkedin content to posting ads on job boards
  • WorkCover: Cost varies from state to state
  • New equipment like furniture and technology: A major expense that lots of businesses forget to budget for

Marketing and advertising

With the huge number of marketing tools out there, it’s easy to feel like you could do it all yourself. In reality, marketing is going to take up a huge amount of your time and is often best left to the professionals. Some common marketing expenses are:

  • Website and hosting: An essential for any business to attract online customers
  • Market research: To learn about your target audience
  • Marketing plan: How are you going to reach your target audience?
  • Content creation and social media management: To connect with your customers
  • Paid advertising: To help get the most bang for your buck

Taxes

If you’re one of the few businesses that are profitable as soon as you launch, congratulations! Now, make sure that you’re putting some money aside for tax. New business owners tend to reinvest all of their money back into their business, which is great until they find themselves out of pocket come tax time.

Accounting

In the same vein as marketing, the amount of great accounting software out there means it’s never been easier to manage your own books. We might have a slight bias, but we think that it’s still worth outsourcing as much of this work as possible to let you get on with growing your business. Your major expense here will either be your bookkeeper or your accountant, who looks after:

  • Invoicing and receipt management: Your system of keeping financial records
  • Bookkeeping process: The day-to-day management of your finances
  • Tax returns: Due annually at EOFY (filing through a tax agent grants an extension)
  • Business activity statement (BAS): Submitted quarterly for most small businesses
  • Payroll: The process of paying your employees their wage and super

Expect the unexpected

Always make sure you’ve got some money in the kitty for unexpected expenses; this is only a list of costs you can plan for! You never know what's around the corner, and you’ll need to build that uncertainty into your budget. One of the best ways to grow your business is to be responsive to changes in your industry or in technology – you don’t want your idea to be outdated by the time you’re ready to launch. If you’re having trouble building this kind of uncertainty into your budget, get in touch with us and we’ll get you on the right track.


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