5 Compelling Reasons to Launch Your Small Business in 2024

Are you contemplating launching small business but feel hesitant due to the current economic climate, with its rising interest rates, inflation, and spending cuts? If you’re a young entrepreneur, recent research from the Commonwealth Bank could provide a much-needed confidence boost. This study reveals a notable increase in small business ownership among Millennials and Gen Z [1]. Many Australians are motivated to transform their business ideas into reality, driven by the need for additional income, as well as aspirations for better work-life balance, and greater control, freedom, and independence in their careers. This trend is supported by new research from CBA, released in November, indicating that 46% of entrepreneurs have established a small business in the past three years. 

Motivation Factors for individuals to start a Small Business

People start businesses for various reasons. Some seek the freedom that comes with being their own boss, having gained valuable experience managing key aspects of their employer’s business. Others might start a small business as a side hustle when their regular income doesn’t quite meet their needs. Then, there are those driven by a passion for something unique, realizing that if they don’t make it happen, nobody else will.

Let’s delve into the main reasons why so many Australians are now choosing to start their own small businesses:

Launching Small Business in 2024

1. Seeking Additional Income: For many Australian workers, the cost of living is climbing at a rate faster than inflation. This is particularly challenging as households move away from fixed-rate mortgages and grapple with rising petrol prices. Employee households have seen the largest annual increase in living costs, with a 9.0% rise over the past year. This is a slight decrease from a 9.6% peak in June 2023. Mortgage interest charges have also jumped significantly, increasing by 68.6% over the year. Although this is a reduction from a 91.6% peak, it’s still a substantial hike [2]. And it’s not just employees who are affected; pensioners, beneficiaries, and other government aid recipients have also seen their living costs rise, albeit at a slightly lower rate.
   
   In response to the financial strains caused by the rising cost of living, many Australians are turning to small business ownership as a solution. Starting a small business offers a pathway to supplement their primary income, providing a financial buffer in uncertain times. This additional income can be crucial for managing everyday expenses, saving for the future, or even investing back into their business to fuel growth. The appeal of a small business lies in its flexibility; it allows individuals to monetise their skills, hobbies, or untapped market opportunities. Whether it’s a home-based craft business, a freelance consulting service, or an online retail store, these ventures provide a valuable source of secondary income that can help bridge the gap in household budgets.
   
2. Desire for Control, Freedom, and Independence: Beyond financial motivations, there’s a profound desire for personal empowerment driving Australians towards small business ownership. In a world where work-life balance is increasingly valued, owning a small business offers a sense of control over one’s time and decisions. This autonomy allows individuals to align their professional endeavours with their personal values and lifestyle choices. It’s not just about being your own boss; it’s about crafting a career that fits around family commitments, personal health, and other life priorities. Moreover, small business ownership brings a sense of fulfillment that often goes beyond financial rewards. It’s about creating something of your own, making decisions that shape your future, and enjoying the freedom to innovate and adapt. This pursuit of independence, control, and the freedom to follow one’s passion is a significant driving force behind the growing number of small businesses in Australia.

3. Leveraging Technology and Information: The current landscape of digital innovation is significantly empowering new entrepreneurs in starting and operating their small businesses. Today, technology offers an unprecedented level of access to information, resources, and tools that simplify the process of launching a business. From online courses and webinars that provide essential business education, to social media platforms offering marketing opportunities, technology is a game-changer.
   
   Emerging entrepreneurs can now easily research market trends, understand consumer needs, and learn best practices for business management through a plethora of online resources. Tools such as cloud computing, e-commerce platforms, and digital payment systems have simplified small business operations, allowing businesses to function efficiently with reduced overhead costs. Additionally, digital marketing tools and social media have opened new avenues for reaching and engaging with customers globally, providing small businesses with a level of market access previously only available to larger companies.

4. Location Independence with Digital Innovation: One of the transformative effects of digital innovation is the ability for young entrepreneurs to run their small businesses from virtually anywhere in Australia or even globally. This geographic flexibility marks a significant shift from traditional business models, where having a physical office was often seen as a prerequisite for legitimacy and client trust.
   
   In the past, the location of a business was a key factor in its perceived credibility and accessibility. However, with advancements in technology and changes in consumer attitudes, this is no longer the case. The rise of digital platforms, cloud computing, and remote communication tools like video conferencing and instant messaging have enabled entrepreneurs to establish and manage their businesses online. This allows for a broad range of businesses, from digital marketing agencies to e-commerce stores, to operate without the need for a fixed physical location.
   
   Furthermore, the consumer mindset has evolved. Customers are now more focused on the quality of service and the value they receive rather than the physical location of a business. This shift has been accelerated by the global trend towards online shopping and remote services, which has been further amplified by the recent global events like the pandemic.

5. Women Leading in Small Business: The CBA research sheds light on a noteworthy trend in the small business sector: women are increasingly at the forefront of new business ventures, particularly driven by the need for additional income. According to the study, 56% of women, compared to 48% of men, started their small business or side hustle primarily to supplement their income. This highlights a significant shift in the entrepreneurial landscape, where women are actively seeking financial empowerment and independence through business ownership.
   
   This rise in women-led small businesses is reflective of a broader movement towards economic self-sufficiency and the desire to balance professional ambitions with personal responsibilities. Women entrepreneurs are not only contributing to their households but also bringing diverse perspectives and innovation to the business world. They often juggle multiple roles and are adept at creating businesses that are flexible, resilient, and adaptive to changing market needs.

Things to Consider

Starting a small business is an exciting journey, but it’s important to consider a few key elements to set yourself up for success. Here are some key points to focus on:

1. Crafting Your Business Plan: A comprehensive business plan is the foundation of any successful enterprise. Think of your business plan as your adventure map. It’s where you jot down your big idea, chart your goals, and sketch out who your customers are. Dive into some market research to figure out who else is doing something similar and how you can do it better or differently. This plan isn’t just a formality – it’s your blueprint for success, guiding you from start-up to growth. And if you’re looking to get some financial backing, it’s your golden ticket to show investors or banks how serious and well-prepared you are.

2. Getting the Word Out – Marketing and Customer Acquisition: Now, how will you tell the world about your business? This is where your marketing magic comes in. It’s about understanding who would love your product or service and finding creative ways to reach them. Will you use Instagram stories, local flyers, email newsletters? Maybe host a launch event or offer a first-timer discount? Remember, it’s not just about getting customers through the door (or onto your website); it’s about keeping them coming back.

3. Playing by the Rules – Compliance and Legal Issues: Think of this as the ‘keeping it safe’ part. It’s not the most fun aspect of running a small business, but it’s super important. Make sure you’re aware of the rules – things like registering your business, sorting out taxes, and understanding any industry-specific regulations. You don’t want any legal hiccups to slow you down, so it’s worth maybe chatting with a legal expert to get this bit right.

4. Business Structures: Choosing the right business structure is critical as it affects your tax obligations, personal liability, and ability to attract investors in your small business. The common small business entity structures in Australia include:
   
   
   • Sole Trader: This is the simplest form, where you own and run the business as an individual. It’s easy to set up and offers complete control, but it also means personal liability for all aspects of the small business. you pay marginal tax rate for your small business income.  
   • Company: A company is a separate legal entity. This structure offers limited liability, meaning your personal assets are protected, but it comes with more regulatory requirements. You pay 25% tax on your small business income if you run your business through a company.  
   • Partnership: In a partnership, the business is owned and operated by multiple people or entities. It’s relatively easy to establish and offers shared responsibility, but partners can be liable for the actions of others. Tax outcome for this structure is dependent on partnership entities. We have encountered partnership between people, companies and trusts.
   • Trust: A trust is an entity that holds the small business for the benefit of the beneficiaries. This structure can offer tax advantages and asset protection. Some people think trusts are complicated and complex structures to manage; however, they are actually very straightforward structures, provided you have employed an experienced accountant to look after your small business compliance work. A trust provides numerous benefits like flexibility, asset protection, and choices for income splitting among family members or related parties. Trusts do not pay tax as small business profits gets distributed to the beneficiaries. 
     
     Each structure comes with its own set of advantages and disadvantages, and the right choice varies based on factors such as the nature of your business, the number of owners, financial considerations, and future objectives. It’s wise to seek guidance from Investax business accountants to identify the structure that best aligns with your business needs.

The pursuit of small business ownership in Australia has emerged not just as a path to financial resilience, but as a journey towards personal fulfillment and independence. From combating the rising cost of living to embracing the freedom and creativity of being your own boss, the motivations are as diverse as the entrepreneurs themselves. However, the venture into small business territory, while rewarding, is accompanied by complex challenges and decisions, particularly in the realms of financial management and legal compliance.

This is where the expertise of Investax Business Accountants becomes invaluable. As you stand at the crossroads of ambition and practicality, it’s crucial to have a guide that not only understands the intricacies of small business structures but also aligns with your unique business vision. Whether you’re a sole trader dreaming big, a partnership pooling diverse strengths, or a budding enterprise seeking the right corporate framework, Investax offers the clarity and direction you need to navigate the financial and legal landscapes of your entrepreneurial journey.

Remember, the right business structure can significantly impact everything from your tax obligations to your personal liability and your ability to attract future investors. With Investax’s seasoned small business tax specialists, you can unlock the potential of your business idea while ensuring compliance and optimizing financial performance.

Reference – 

CBA – Young owners drive a surge in Australian entrepreneurialism. 

ABS.Gov – Annual cost of living