Personal Assessment

1. List all the personal qualities and characteristics that are needed if you are to be successful in business.
2. What are the pre-requisites for success in business?
3. Have you assessed your chances for succeeding in this new business?
4. Do you have knowledge and understanding of the business about to be undertaken and do you know exactly what business you are in?
5. Do you know the total amount owing to personal creditors at this present moment?
6. Have you prepared a list of personal assets and liabilities?
7. Precisely how much money do you need each year to meet all your regular outgoings and living expenses?
8. Do you believe some training is necessary before undertaking this business and do you know where to obtain small business training?
9. In what aspect of business have you had management experience?

Business Organisation and Structure

1. Have you considered which legal structure is most appropriate for your business?
   • Sole trader
   • Partnership
   • Pty Ltd Company
   • Trust
2. Do you understand the advantages and disadvantages, if not, have you spoken to a professional adviser concerning you proposed structure?
3. Will you be trading under a business name, if so, has it been registered with the Corporate Affairs and do you understand the benefits and rights to be obtained from registration of a business name?
4. If you intend trading as a partnership, have you considered/organised a formal partnership agreement?
5. Do you understand the responsibilities and duties of a director of a Proprietary Limited Company?

Business Planning

1. Do you know what is meant by the term - business plan?
2. Have you set definite objectives, and plans to achieve those objectives?
3. Do you know how to structure a business plan and what are the essential elements?
4. What might be contained in the business description/profile?
5. What industry you are in and how large is it? What are the special characteristics of this industry?
6. For your particular industry/business do you know -
   • acceptable markup and gross profit?
   • acceptable stock turn rates?
   • typical net profit to sales ratio?

Establishment Costs and Breakeven

1. Have you calculated your start up costs?
   • Capital?
   • Revenue?
   • Do you understand the difference?
2. Have you identified and estimated your operating expenses?
3. Do you understand what is meant by "fixed" and "variable" expenses and when estimating these expenses are you dissecting them into fixed and variable categories?
4. Do you understand the term "breakeven" and how to calculate it?

Location and Premises

1. Selection of your business location can be critical! Is it positioned to gain maximum access and exposure to your client base? A good retail location needs people, visibility, accessibility (PVA) if you don't have these three factors, your location is probably sub-standard.
2. Have you checked with the local government shire/council about:
   • Licenses and permits?
   • Zoning?
   • Work orders or health requirements?
   • Restrictions on signage?
3. Have you contacted the various appropriate authorities to arrange connection of telephones and power?
4. Have you considered how to arrange your premises to display your merchandise to the best advantage?
5. Are your premises well lit, clean, attractive and eye catching and will the floor space be used to its maximum potential?

Lease of Premises

1. If you are required to complete a lease agreement for your premises, do you understand the legal implications of the document and your rights and responsibilities, if not, have you considered obtaining legal advice in this matter?
2. Did you know you are entitled to a "disclosure statement" from the landlord, at least seven days before signing the lease?
3. Do you know what the market rate rental is for premises similar to those you are about to lease?
4. Whilst there are many important clauses in your lease, make sure you pay particular attention to clauses addressing:
   • Expiry Date
   • Option Period and notice required
   • Rent Increase Formula
   • Variable Outgoings
   • Assignment
   • Sub Leasing
   • Goods and Services or Value Added Taxes applicable

For further information on retail leases see: "Look Before You Lease: Avoiding the Pitfalls in Retail Leasing" (2010)

[If you have difficulty locating this publication, send an email GayLawNet® with "Look Before You Lease" in the subject line and a copy will be emailed to you.]

Finance and Funding

1. Do you know how to calculate the total amount required to -
   • start a business,
   • run a business?
2. Do you know what is meant by cash flow lending as distinct from security lending?
3. Do you understand the term "gearing" and have you considered the most appropriate balance of equity and debt capital for your circumstances?
4. Make sure you establish a good working relationship with your banker that is, frequent communication particularly if you are likely to experience liquidity problems.
5. Do you know if it is possible to borrow the required funds and have you identified sources of finance? What proportion of funds are equity and borrowed?
6. Have you considered the types of finance available and what is most appropriate for your requirements? Do you understand the terms:
   • Short term loan?
   • Long term loan?
   • Equity Capital?
   • Overdraft
7. What is venture capital and is it an appropriate consideration for your financing needs?
8. Have you obtained a realistic valuation of the assets available to secure the loan as most banks are security lenders? Do you have appropriate security available to obtain a loan?
9. What information will you financier require before agreeing to facilitate the loan and do you know how to prepare an adequate case to substantiate the finance application?
10. Will you be purchasing your plant, equipment and fixed assets or leasing them? What are the advantages and disadvantages?
11. Have you considered "factoring" your debtors to speed up cash flow?
12. Do you understand the advantages and disadvantages of hire purchase?

Taxation

1. Do you understand the taxation departments PAYE requirements with regard to employees?
2. Have you considered the taxation department's regulations and requirements with regard to your own income tax commitment?
3. Do you understand the implications of:
   • Provisional Tax?
   • Payroll Tax?
   • Sales Tax?
   • Prescribed Payment Tax?
   • Capital Gains Tax?
   • Fringe Benefits Tax?
   • Goods and Services or Value Added Taxes?

Employees

1. Have you identified the people required to organise and manage the business once it is running?
2. Have you clearly defined the levels of responsibility for each of your employees?
3. What are your policies regarding recruitment and dismissal and do you have a staff succession plan?
4. Are there any formal staff training programs?
5. Does each person understand his/her job?
6. Are you aware of your responsibilities under the Health, Safety and Welfare Act or any similar legislation?
7. Are you aware of your responsibilities under Anti-Discrimination laws?

Insurance

1. Have you determined what insurances will be needed and obtained quotes?
2. Insurance checklist:
   • Fire
   • Burglary
   • Workers Compensation
   • Personal Accident and Sickness
   • Keyman
   • Public Liability
   • Cash in transit
   • Professional Indemnity
   • Plate Glass
   • Loss of Profits

Inventory

1. Have you contacted wholesale suppliers and determined cost, delivery and terms for merchandise purchases?
2. Do you know what stock to buy and how much (quantity)?
3. Do you have a buying policy, which means acquisition of merchandise:
   • At the right price?
   • In the right quantities?
   • Of the right quality?
   • From reliable suppliers?
4. Effective inventory management will prevent tying up excessive capital in unwanted or unnecessary merchandise, so make certain you establish appropriate records to produce accurate data on current stock position.
5. Do you understand the term "stock turn ratio" and its importance in profit planning and how it is calculated?

Credit Collection

1. Don't be too eager to make credit sales before appropriate payment terms are arranged.
2. Have you determined your terms of credit and your credit collection policy and have you organised a credit application form for all your new customers to complete?
3. Do you need to offer credit at all, perhaps you can trade on a cash basis?
4. In connection with applications for credit, do you follow up referees and check customers bona fides?

Bookkeeping and Records

1. Have you organised the basic books or business software for recording the business transactions?
2. Records checklist;
   • Filing System
   • Time and Wages Book
   • Petty Cash Book
   • Cash Receipts Analysis
   • Cash Payments Analysis
   • Bank Reconciliation
   • Computer (Electronic Recording)
   • Assets Register
   • Debtors System
   • Creditors System
   • Bank Account/s
   • Cheque Book/s
   • Deposit Book/s
3. Are all your sales "cash sales" or will some be made on credit? If so, do you require a Debtors Ledger?
4. Do you know how to compile your basic cash receipts and cash payments books?
5. Are you able to reconcile the financial position disclosed in your cash book to the bank statement?
6. Have you arranged for your printed stationery? Invoices, receipts, letterheads, business cards?
7. Do you know what records are required for taxation purposes?
8. Do you know what depreciation is?
9. If you have considered automating your financial records on computer, make certain you obtain expert advice before purchasing a system.

Working Capital

1. Do you understand the term "working capital"?
2. Have you considered how to conserve working capital and the effect that excessive inventory and ineffective credit control has on working capital?
3. How does effective credit control, that is management of your debtors ledger, improve your working capital position?
4. How does effective inventory control, that is ensuring sufficient merchandise is on hand to fulfil customer requirements, improve your working capital position?
5. Do you understand the importance of trade credit as a source of working capital?
6. If you are planning to increase sales rapidly, have you given consideration to the effect on working capital and how the expansion can be financed?
7. Do you know what is meant by working capital ratio, how to determine it and its purpose?
8. Do you know how to calculate the number of days it takes to collect your debtors and why you would want this information?
9. Do you know how to calculate the number of days inventory you have on hand and the relevance of this information?

Management Information

1. Do you understand the need for frequent timely and accurate management information?
2. Do you know how to interpret and use the information to correct adverse trends?
3. What do you understand by the term, "management skills" in relation to your business and what form should this information take?

Budgeting and Financial Control

1. Do you know the various types of budgets and their purpose?
2. Do you know what is meant by cash budget or cash flow statement and its major elements?
3. Do you understand the difference between profitability and liquidity and the financial statements and techniques that provide the information?
4. Do you understand what is meant by profit budget and its component elements?
5. Have you calculated the net profit required, sufficient to reward you for effort and provide a reasonable rate of return on investment?
6. Do you understand the importance of your pricing policy and its impact on sales and profit?
7. Will you be able to determine the gross profit contribution from each product or product group?
8. Do you know what constitutes "cost of goods sold", its components and relationship to gross profit?
9. Do you know the importance of identifying gross profit percentage and how it is calculated?
10. Do you know the effect on net profit and cash flow if there is a change in sales volume or gross margin?
11. Are you aware that once a budget is constructed it must be carefully monitored and even amended, if significant changes occur to the actual results? It is no use continuing comparison with figures that are hopelessly out of date.
12. Do you understand the difference between "mark-up" and "margin"?

Market Considerations

1. Do you have a marketing strategy?
2. What do you know of your market and competition?
3. Do you have a customer profile? Who are your major customers and where are they? Why would they buy from your store and do they buy on consideration of price, quality or service?
4. Is your market subject to seasonal fluctuations?
5. Have you considered your pricing policy, is it consistent with your needs to develop a required gross profit, whilst meeting your customers expectations?
6. Who are your immediate competitors and where are they located? Which competitors do you respect the most and why are your competitors successful?
7. Have you undertaken personal market research and/or statistical research?

Promotion and Advertising

1. Have you considered how you will be promoting your business and do you need to advertise?
2. Assuming you know precisely what business you are in, and who your customers are, how are you going to reach them?
3. What type and style of advertising will you use and why?
4. Have you prepared an advertising budget?
5. Do you have an advertising strategy?
6. Have you decided which advertising medium is suitable for you and your business, and what kind of image do you wish to project?
7. When you advertise, do you know: What? How? Who? Where? When? Why?
8. If you propose having a web site have you carefully investigated and budgetted for the costs of setting up and maintaining the site?

Professional Assistance

1. Do you know where to obtain assistance before starting your business?
2. The following experts may be helpful to you:
   • Bankers/Financiers - Finance Packages
   • Government Agencies - Industry and small business information, statistics
   • Insurance Brokers - Insurance packages and advice
   • Solicitors - Lease problems, contracts and agreements, corporate structures and partnerships
   • Accountants - Income tax and all tax related matters, accounting systems, business structuring

Miscellaneous

1. Is there a requirement to register a trade mark or patent and have you considered seeking advice from a patent attorney?
2. Is there a requirement to obtain licenses, permits, registrations or health authority approvals?
3. Have you considered the implications of trade practices legislation in respect of your business activities, particularly in the area of restrictive trade practices and consumer protection, which includes misleading advertising?

Acknowledgement

GayLawNet® is indebted to the Small Business Development Corporation of Western Australia for the Checklist material.