Questions to ask yourself before you start
You have a great idea and want to start a business. But do you have what it takes to make it a success? Every year, more new small businesses fail than succeed. But that shouldn’t stop you — test your idea and yourself by answering these questions.
Do I have what it takes?
Running a business can challenge your resilience. Some business owners work long, unpredictable days with little respite until they make a profit.
It helps if you are:
- Passionate: If not, you’ll find it hard to keep going when you hit a hurdle.
- Prepared to make changes: You might have less money to spend. Time spent on hobbies and social activities, or with family and friends, is likely to change too — at least while the business is getting up and running.
- Good at managing risk: It may take time to develop a steady flow of revenue.
- Persistent: Things may not always go to plan.
- Open to learning new skills: You may have to be company CEO, bookkeeper, sales team and cleaner until you hire specialist staff or advisors. You’re also going to be developing what your business is selling — and working out how to sell it.
Going contracting?
If you’re thinking about going contracting, we have tips, tools and resources that can help.
How good is my business idea?
There can be big differences between a good idea and an idea that will be strong enough to build a business from. Often the most commercially successful ideas are the simple ones, like identifying a gap in the market that can be filled with a new product or service, or adapting and improving an existing business idea.
Take time to assess your business idea before you leave your job, borrow money, or make big changes to your life.
Watch: Turning your side hustle into a business
Video transcript: Turning your side hustle into a business
[Audio/Visual: Upbeat music starts playing as a blue introduction screen opens and the white text “business.govt.nz presents” is displayed in the centre of the screen. The music plays throughout the video.]
[Visual: The text changes on the blue screen to “Turning your side hustle into a business” displayed in white text in the centre of the screen. The screen changes to show the presenter in an office space in the centre of the screen.]
Think you've got a great idea for a business, but not quite sure how to bring it to life? There are so many things to think about and do,
[Visual: The black text “business.govt.nz” appears in a white button at the bottom of the screen and stays in place. A mouse icon hovers over the screen and clicks on the button and disappears from screen.]
but business.govt.nz has a range of resources to make it easy.
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First up, how solid is that idea really? To figure out whether your concept is going to fly, a business plan is a good start.
[Visual: The screen changes to show a person at a work bench using a tool to make a ring. The screen changes to show a close-up of the worker’s hands and the ring. The screen changes to show a worker at a work desk with a sewing machine and fabric. The screen changes to show a close-up of fabric dog scarves hanging on a wall in a store. The screen changes to show a close-up of a dog sitting on a store floor, wearing one of the scarves. The screen changes to show a counter in a café and two workers. The screen changes to show a close-up of a salad product in cardboard takeaway boxes. The screen changes to show a selection of food in a food cabinet.]
This will firm up your thoughts about what your business offer is, who your customers will be, how your product or service will stack up against the competition, what your goals are, and how you plan to reach them.
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If you need finance from a bank or investors, they will expect you to have a business plan. But even if you don't, a plan is a good way to clarify your thoughts about your business, test it out, and build a business that suits you and your lifestyle.
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What's more, the business.govt.nz website provides plenty of tips and free templates to help you get your plan done.
[Visual: The text “business.govt.nz” in a white button disappears from screen. The screen changes to show the business.govt.nz website homepage and a mouse icon click on the menu. The screen changes to show the contents of the menu and a mouse icon click on “Getting started” and then on “Business planning tools and tips”.]
You can find them by clicking on the menu icon and looking under Getting started, Business planning tools and tips.
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Writing your business plan will help you make other big decisions more easily. Case in point, choosing a business name, for example. Your business idea may have started with a single product or service, but as you write your business plan, you see scope for expansion into other products or services later. This may steer you towards a name that reflects that larger goal or a quality that the products or services share, rather than one tightly focused on the startup idea.
[Visual: The screen changes to show the business.govt.nz webpage “Choosing a business name”. The screen changes to scroll down the webpage to the section “How to choose a name”.]
If you're stuck, there are tips for choosing a business name on the business.govt.nz website.
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Whatever you decide on, even if it's your own name, you need to be sure that your business name is not being used by anyone else.
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This is where the free One Check tool can save you a lot of time and hassle.
[Visual: The black text “business.govt.nz/onecheck” appears in a white button at the bottom of the screen and stays in place. A mouse icon hovers over the screen and clicks on the button. The screen changes to show the ONECheck tool start screen and the name suggestion “Earls Electrical” being typed into the search bar. The screen changes to show the search results for “Earls Electrical”.]
Simply head to business.govt.nz/onecheck. Enter the name you want to use in the search bar, and the tool will tell you if it is available to use as a business name, website address, and social media username.
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You can repeat your search easily testing name options until you find one that's not taken and that works for you and your business.
[Visual: The screen changes to show the “Registering your business name” pop-up in the ONECheck search results. The screen changes to show the New Zealand Business Number (NZBN) webpage “Applying for an NZBN”. The screen changes to show the “Registering your business name as a trade mark” pop-up in the ONECheck search results. The screen changes to show the Intellectual Property Office of New Zealand (IPONZ) webpage “Trade mark check”. The screen changes to show in-depth information on the web domain availability for the search results “earlselectrical”. The screen changes to show the Domain Name Commission NZ webpage “.nz authorised registrars”.]
Once you've found it, you can follow links to do other tasks like getting a NZ business number, applying for a trademark, or purchasing a web domain.
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There is plenty of information to help you decide which of these things you need to do. Alongside these tasks, you'll need to be thinking about what structure will suit your business best.
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The most common structures in New Zealand are sole trader, company, or partnership, and once again, there's a free online tool that can help you make the right choice.
[Visual: The black text “business.govt.nz” appears in a white button at the bottom of the screen and stays in place. A mouse icon hovers over the screen and clicks on the button. The screen changes to show the business.govt.nz website homepage and a mouse icon click on the menu. The screen changes to show the contents of the menu and a mouse icon click on “Tools and resources”. The screen changes to show the business.govt.nz webpage “Tools and resources”. The screen changes to scroll down the webpage to the tool “Choose your business structure” and click on the button to “Get started”. The screen changes to show the Choose Business Structure tool start screen. A mouse icon clicks through the three yes-no questions of the tool and clicks the “View your result” button. The screen changes to show the results page for “Sole trader”.]
It's called the Choose Business Structure Tool, and you can find it by going to the business.govt.nz website and looking under Tools and resources.
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Based on your answers to three simple questions, which you will probably have thought about when writing your business plan, the tool will say whether being a sole trader, a company, or a partnership is the best structure for you and allow you to compare the suggestion to the other options.
[Visual: The screen changes to show the results page for “Sole trader” in the Choose Business Structure tool. The screen changes to scroll down the results page and click on the button “Learn more about Sole trader”. The screen changes to show the results for “Sole trader” in more detail. The screen changes to scroll down the results page.]
It gives you information about your recommended structure, its benefits, important considerations like legal, tax, and financial obligations, and goes through what you need to do to set it up, run it, and close it down with guidance around any associated costs.
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Depending on your business, there may be other things you need to think about like complying with privacy or health and safety legislation, or you may need to get a licence for certain industries. Plus there's tax and other financial matters.
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And yes, business.govt.nz has a tool to help with that too.
[Visual: A mouse icon selects the option “Tax and levies” from the drop down “What subject do you want to know more about?”. The screen changes to show the filtered results page. A mouse icon hovers over the topics “Annual returns”, “Tax & employer registration”, “Paying tax and ACC levies”, “GST”, “Resident withholding tax” and “KiwiSaver”.
The Compliance Matters database allows you to search various topics and see what the requirements are for your industry sector and business structure.
[Visual: The screen changes to show the presenter in the centre of the screen. The screen changes to show the business.govt.nz webpage “Tools and resources” with a close-up on the “Ten steps to start a business” and “Start up Business plan” tiles. A mouse icon hovers over the screen and clicks on the button “Check it out” on the “Ten steps to start a business” tile. The screen changes to show the business.govt.nz webpage “Guide to starting a business.” The screen changes to scroll down the webpage.]
A great place to access all these tools and resources is business.govt.nz's online 10 step guide to starting a business. That may be where you have found this video.
[Visual: The screen changes to show the presenter in the centre of the screen. The screen changes to show the business.govt.nz website homepage and a mouse icon click on the menu. The screen changes to show the contents of the menu and a mouse icon click on “Getting started” and then on “Taking the first steps”.]
But if not, go to business.govt.nz, click on the menu icon and look under Getting started, Taking the first steps.
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So don't let overwhelm get in the way of your great idea.
[Visual: The black text “business.govt.nz” appears in a white button at the bottom of the screen and stays in place. A mouse icon hovers over the screen and clicks on the button and disappears from screen.]
Head to business.govt.nz and start your business journey on the right foot.
[Visual: The text “business.govt.nz” in a white button disappears from screen. The screen changes to the full blue outro screen. The upbeat music swells as the business.govt.nz logo lifts into the centre of the screen before fading out. The Ministry of Business, Innovation & Employment, Hīkina Whakatutuki logo and the New Zealand Government, Te Kāwanatanga o Aotearoa logos then fade into view on either side of each other.]
[Video ends.]
Want to do business for good?
Will I solve a problem or fill a need?
Is your idea for a business going to solve a problem — or tap into an unfilled need — for the public or other businesses?
If your answer is no, scrap it and start again.
If your answer is yes, think about the scale of this problem or need. If it’s minor, you might struggle to make sales. You need to solve what’s giving people a major headache, or provide something they can’t get elsewhere.
This is a key aspect of business planning. It’s a good idea to draw up a basic business plan — even just a one-pager — to help test whether you have a sound idea.
Case study
Countdown to launch
Before launching tech company Common Ledger, Carlos Chambers and his team had an idea for software to streamline the information accountants received from their clients’ different programs. They spent six months speaking to accountants in New Zealand and Australia to understand their potential market and refine their product.
“We learned there was this really deep problem that accountants around the world were facing. That’s what we were looking for — huge problem, huge opportunity and a huge way to really help this industry move forward.”
The next step was to develop an 18-month plan and a three-to-five-year strategy to turn their start-up into a fully fledged company. They have since raised more than $1m and launched in both countries.
“We’re close to our targets on our initial forecasts. We’ve brought on the right board. We’ve hired the right team members. All these things are probably the result of thorough planning. We would never have been able to usefully create our strategy if we hadn’t done that first six months of research.”
Will people buy from me?
Unique selling point
Unless you’re going to sell something no one has thought of before, you’ll be competing against other businesses. Your products or services must stand out from the rest.
Customer profiles
It’s worth creating personas — fictionalised profiles of the people you most want to sell to — as you shape up your idea. Think about where you can find them, what they value, what they’re worried about, and what they need.
Pricing
It’s useful to work out what your competitors charge for the same or similar products or services, and how much customers are prepared to pay for yours – you can do this by asking a sample group of your potential customers. You should also check if there are industry-standard prices for your type of service or product.
Think about the optics of your pricing too – if you charge less than your competitors could your product or service be seen as inferior? If you charge more, can you justify this by offering better quality products, or superior service?
Numbers game
Figure out how much you’ll have to earn to cover the cost of sales and your monthly overheads. It’s also good to have realistic estimates of future income and costs to work out when you’ll be in profit. If the numbers show you won’t make profits for some time — even years — do you have funds to carry you through?
How much will it cost to start up?
Once you’ve drawn up a basic plan and crunched some numbers, you need to figure out how much money you’ll need to start your business.
Who are my rivals?
Some markets are more crowded and harder to break into than others. For example, if your area is flooded with cafes, what makes you think yours will be a success?
Ask yourself:
- How many competitors will I have?
- Are there any who will be in direct competition with me?
- How difficult will it be for others to repeat what I’ve done?
- How can I differ from my competition – why will customers buy from me, and what can I offer that the competition doesn’t?
Will I sell overseas?
If your business is successful, are you likely to want to sell your goods or services overseas? You may not want to export right now, but it pays to think ahead.
Exporting has advantages, including:
- Growth — the rest of the world offers a much bigger market.
- Economies of scale — cost per unit often drops when you make more units.
- Managing seasonal fluctuations — exporting may help to even out seasonal changes in demand for your product.
- Spreading risk — selling to more markets means you don’t have all your eggs in the New Zealand basket.
