The statistics are sobering. One in three new small businesses in Australia fail within their first year. By the end of year two, that number climbs to two out of four. Yet here’s the twist: only 3–5% of Australian businesses prepare a formal business plan, despite “financial mismanagement” and “lack of business experience” consistently ranking as the top reasons for failure.
Martin Iglesias, a credit analyst at Highfield Private with over two decades of experience in corporate banking, has witnessed this pattern repeatedly throughout his career at ANZ Bank and Commonwealth Bank of Australia.
“A lot of business owners just hate doing that sort of thing,” he observes. “It’s not the fun stuff of running a business.”
But it’s precisely this planning that separates successful ventures from cautionary tales.
Drawing on his extensive work with SMEs across manufacturing, retail, and service sectors, Martin shares a structured approach to launching a business that moves beyond optimism to create a feasible, legally protected operation.
Step 1: Prove It Before You Build It (Feasibility & Planning)
Before investing a single dollar, you need to determine whether your business concept can actually work in the real world.
Conduct a Feasibility Study
This fact-finding stage helps you understand the risks, the effort required, and how deep your pockets need to be. It’s your opportunity to test whether the idea is genuinely viable or simply appealing in theory.
Complete a SWOT Analysis
Document your internal Strengths and Weaknesses alongside external Opportunities and Threats. Crucially, be brutally honest about weaknesses. Lack of management skills, insufficient industry knowledge, or limited financial resources aren’t shameful—they’re common. But ignoring them is often what brings a business down.
Write a Business Plan
If your feasibility study shows promise, draft a formal business plan. This blueprint should cover financial projections, marketing strategies, and operational processes. More importantly, it’s essential for securing finance.
Martin emphasises this point from his banking experience: “The main things to get for a business, particularly mid-size, is to get its corporate governance in order. They need to get their financials in place, and they need to show and reflect the performance and reflect the need for that financing as well on the balance sheet. If it doesn’t, then the banks will quickly turn them back.”
Even if you’re starting small, establishing this discipline early creates a foundation for growth.
Step 2: Choose Your Business Structure
Your business structure affects everything from taxation to personal liability. Get this decision right from the start.
Sole Trader
The simplest and most affordable option. You maintain complete control, but you also assume unlimited personal liability for all business debts and legal risks. Your personal assets—your home, your savings—are on the line if things go wrong.
Pty Ltd Company
A company is a separate legal entity, providing limited liability protection for your personal assets. It’s also easier to raise funds or bring in partners down the track. However, it involves higher setup costs and more complex reporting requirements.
Making the Choice
Consider your growth ambitions and risk tolerance. Whilst you can change structures later, starting with the appropriate one saves considerable hassle and expense. For businesses with significant growth potential or higher risk profiles, the company structure often proves worthwhile despite the additional administrative burden.
Step 3: Registration and Licensing
Make your business official in the eyes of the government.
Obtain an ABN
You need an Australian Business Number to operate legally. This is your first port of call with the Australian Business Register.
Register Your Business Name
Unless you’re a sole trader using your exact legal name, you must register your business name with ASIC. Remember: registration doesn’t grant trademark rights, so check for intellectual property conflicts first to avoid costly disputes later.
GST Registration
You generally must register for Goods and Services Tax if your current or projected turnover reaches $75,000 or more ($150,000 for not-for-profits).
Pro Tip: You can register voluntarily below the threshold to appear more established or claim input tax credits on business purchases.
Step 4: Secure Your Finances
Undercapitalisation kills small businesses. Martin has seen this pattern throughout his career, particularly with SMEs winning major contracts without adequate funding structures in place.
Estimate Start-up Costs
Calculate your capital investment for equipment, tools, and setup costs, then add 20% as a buffer. Unexpected expenses always emerge.
Prepare a Cash Flow Forecast
Create a month-by-month cash flow analysis covering at least 12 months. This ensures you can meet your financial obligations—rent, wages, supplier payments—before revenue stabilises.
Martin explains that one of the most common small-business challenges is when their demand precedes their cash flow. “Sometimes the bigger customers will stretch the terms out as far as they can, but the supplier needs to come up with all of the working capital at the beginning. They need to wait, say, maybe 60–90 days, or even longer.”
This working capital mismatch is where many promising businesses stumble. They win the contract but can’t fund the delivery.
Develop Your Pricing Strategy
Decide whether you’re positioning as premium or discount, and understand how competitors might react. Your pricing must cover costs whilst remaining competitive—a delicate balance that requires market research and financial modelling.
Assemble Your Support Team
Align yourself with professional advisers including an accountant, lawyer, banker, and insurance broker. These relationships become invaluable when challenges arise, and they often help you avoid problems altogether.
Step 5: Risk Management & Insurance
Protect the business you’ve built with proper insurance and legal frameworks.
Mandatory Insurance
If you employ staff, Workers’ Compensation insurance is a legal obligation. Non-compliance carries serious penalties.
Essential Policies
- Public Liability: Covers third-party injury or property damage occurring on your premises or as a result of your business activities.
- Professional Indemnity: Crucial for service providers giving advice. This covers negligence, errors, or omissions that cause financial loss to clients.
- Business Property & Interruption: Protects physical assets and covers lost income during forced closures due to fire, flood, or other insurable events.
Legal Documents
Implement clear Terms of Trade, privacy policies, and employment contracts. These documents prevent disputes, limit liability, and demonstrate professionalism to clients and partners.
The Current Landscape
Understanding the broader economic context helps you plan more effectively. Australia’s current environment presents both challenges and opportunities for new businesses.
“The inflation rate has spiked up again,” Martin notes, referring to recent economic data. “It grew from 3.2% to 3.8% in one month.” This inflationary pressure, combined with cost of living increases, affects both consumer spending and business costs.
Interestingly, banks are adjusting their assessment criteria in response: “Cost of living rises are being factored in by the bank on their assessments. It’s gone up about $1,000 in monthly expenditure in the last few weeks. That’s cutting back or curtailing the borrowing capacity for customers.”
However, there’s also a positive development: “The major banks are starting to come a little bit more flexible around shifting to just one year’s worth of financials for some particular applications. They always used to take the last three or four years, sometimes only two years, but now they’re taking averages in terms of financials for self-employed applicants, just the last 12 months in many cases.”
For new businesses, this shift towards more recent financial performance could make accessing funding easier once you’ve established a track record.
How Small Business Owners Can Plan for Success in 2026
“No business plans to fail, but many fail to plan.” This maxim holds particularly true in Australia’s competitive small business landscape.
The difference between businesses that thrive and those that become statistics often comes down to preparation, financial discipline, and the wisdom to seek expert guidance when needed.
Your business story begins with the decisions you make today. Invest the time in proper planning, choose the right structure, maintain disciplined financial management, and build relationships with advisers who understand your strategic objectives.
The path from idea to successful operation isn’t easy, but it’s far more navigable with a clear map and experienced guides. Taking these structured steps dramatically improves your odds of being among the businesses that not only survive but thrive.