Starting a business

Why it matters

Roughly one in five new Australian businesses does not survive its first year, and about half are gone within five. The usual causes are not a bad idea but poor cash management, no real demand, and administration that overwhelms the owner. Getting the foundations right costs very little and removes most of those risks early.

Validate before you build

Validation means finding evidence that a specific group of people has a problem they will pay to solve, and that your way of solving it is one they would choose. The cheapest evidence comes from conversations: ten honest interviews with people who match your target customer will tell you more than a month of desk research.

Ask about the problem, not your product. "How do you handle X today? What does it cost you? What have you tried?" If people are already paying for a workaround, that is a strong signal. If they say "that sounds nice" but have never spent money or time on the problem, treat it as a weak one.

• Write down who the customer is in one sentence, including what they are trying to achieve.
• Talk to at least ten of them before committing money.
• Look for a pre-order, deposit, letter of intent or signed trial: commitment beats compliments.
• Estimate the size of the market in customers, not dollars: how many of these people exist and how many could you realistically reach?

Choose a structure that fits where you are going

Australia has four common structures. A sole trader is the simplest and cheapest: you are the business, you report income on your personal tax return, and you are personally liable for its debts. A partnership is two or more people trading together under a partnership agreement. A company is a separate legal entity registered with ASIC; it limits your personal liability and pays its own tax, but costs more to run. A trust holds assets for beneficiaries and is usually set up on advice for tax or asset-protection reasons.

The right answer depends on risk, growth plans and tax. A one-person consultancy with low liability often starts as a sole trader. A business that will hire staff, take on debt, sign leases or seek investors usually benefits from a company from day one, because changing structure later means moving contracts, bank accounts and registrations.

Register the right things, in the right order

Every business needs an Australian Business Number (ABN), which is free and issued through the Australian Business Register. If you trade under anything other than your own name, register the business name with ASIC. Companies also receive an Australian Company Number (ACN) when incorporated.

GST registration is required once your turnover reaches the registration threshold (check the current figure on the ATO website), and is optional below it. Many business-to-business suppliers register voluntarily so they can claim GST credits and look established. Some industries also need licences or permits from state or local government: food handling, building, trades, childcare and alcohol are common examples.

• ABN (free, via the Australian Business Register).
• Business name (ASIC) if trading under a name other than your own.
• Company registration (ASIC) if you have chosen a company structure.
• GST registration if you are over the threshold, or choose to register.
• Industry licences and permits from state or council (check the Australian Business Licence and Information Service).
• PAYG withholding and superannuation obligations before your first employee starts.

Set up the money habits before the first sale

Open a separate business bank account even as a sole trader. Mixing personal and business money is the most common reason small business books become unusable. Choose an accounting package early, connect the bank feed, and decide who does the bookkeeping: you, a bookkeeper, or your accountant.

Decide how you will price, how you will invoice and what your payment terms are. Then write down a simple monthly budget: what it costs to keep the doors open, and how many sales you need to cover it. That single number, your break-even, is the most useful figure a new owner can know.

How to start trading in Australia

1. Define the customer and problem One sentence each. If you cannot write it, you cannot sell it.
2. Interview ten potential customers Look for evidence they already spend time or money on the problem.
3. Choose a structure Sole trader for simplicity, company for liability protection and growth. Get advice if unsure.
4. Apply for your ABN and register names ABN via the Australian Business Register; business name and company via ASIC.
5. Register for GST if required Required over the turnover threshold; optional and often sensible below it for B2B.
6. Open a business bank account and accounting software Connect the bank feed on day one and keep personal spending out of it.
7. Arrange insurance and licences Public liability and professional indemnity first; add industry permits.
8. Make the first sale and collect feedback Treat the first ten customers as a research project, not just revenue.

Real-world example

A Geelong bookkeeper decides how to start

Priya has worked in an accounting firm for eight years and wants to offer bookkeeping to local trades businesses. Before resigning she speaks to twelve tradies she knows. Nine say their books are a mess, six already pay someone and are unhappy, and four say they would switch to her next quarter. That is enough evidence to proceed.

She starts as a sole trader because her liability is low and she wants to keep costs down, registers the business name "Bay Books" with ASIC, gets an ABN, and registers for GST voluntarily because her clients are all GST-registered and expect tax invoices. She opens a business account, sets up accounting software with a bank feed, takes out professional indemnity and public liability insurance, and launches with four clients. Her break-even is seven clients at her monthly retainer; she reaches it in month four.

Common mistakes

• Building before validating Spending on branding, websites and stock before anyone has committed to buy. Talk to customers first; a landing page and ten conversations cost almost nothing.
• Choosing a structure on price alone Starting as a sole trader to save a few hundred dollars, then paying far more to restructure once staff, leases or investors arrive.
• Mixing personal and business money One account for everything makes tax time painful and hides whether the business is actually profitable.
• Ignoring GST and tax until the first BAS is due Set aside GST and income tax from every payment so the quarterly bill is never a surprise.
• Under-pricing to win the first customers Early discounts become the expected price. Price for the business you want, and offer a time-limited launch deal instead.

KPIs to track

• Customer conversations held Before launch: aim for ten or more interviews with people who match your target customer.
• Months of runway Cash available divided by monthly costs. Most founders want at least six months before leaving other income.
• Break-even sales The number of customers or units per month that covers all fixed costs. Know it before launch.
• Time to first paying customer Measured from the decision to start. Shorter is better; it forces you to sell before you polish.

Frequently asked questions

Do I need an ABN to start?

Yes for almost all businesses. Without one, other businesses must withhold tax at the top rate from your invoices, and you cannot register for GST. It is free and usually issued immediately.

Should I register a company straight away?

Not always. If your liability is low and you work alone, a sole trader structure is fine to start. If you will hire, borrow, sign leases or raise money, a company from day one avoids a costly restructure later. An accountant can model the tax difference for your situation.

Can I start while I am still employed?

Usually yes, as long as your employment contract does not prohibit it and you are not competing with your employer or using their time or resources. It is one of the lowest-risk ways to validate demand.

When do I have to register for GST?

When your turnover reaches the registration threshold set by the ATO, or if you provide taxi or ride-sourcing services regardless of turnover. You can register voluntarily below the threshold.

Key takeaways

• Validate demand with real conversations before you spend on infrastructure.
• Choose a structure for where the business is going, not just for today’s cost.
• Register the basics in order: ABN, names, GST, licences, then employer obligations.
• Separate business money from day one and know your break-even number.
• Treat the first customers as research: their feedback shapes everything that follows.