For those who venture into the property and construction space, launching a new business can be both exciting and incredibly daunting. While all new businesses carry risks, failure rates for construction businesses are among the highest of any industry in Australia.

Yet where there is risk, there are also great rewards. The majority of construction businesses in Australia are small businesses that employ less than 20 people – yet they contribute significantly to the collective $360 billion in revenue that the industry generates. 

new businessThe key to longevity lies in proper planning right from the outset of your business journey. Time and time again we’ve seen small mistakes (that could have been avoided) lead to the insolvency of a construction startup.

With a little help from experts and a strong commitment to see it through, you can mitigate the risk of this happening to you – and reap the rewards that Australia’s dynamic property market has to offer.

To help you establish a solid foundation for growth, here are 5 essential tips from our accounting and business advisory teams.

1. Get your business structure right

There are different ways to structure a business, with the most common being sole trader, partnership, company, or trust. Often, the best solution is not a single entity, but a combination, each with its own function.

Each structure has its own legal and tax implications, and it’s very important to understand how these would impact you and your business from the outset – especially if you want to maximise cash flow by taking advantage of certain tax incentives.

The way you structure your business can also have an effect on investor interest if you are planning to raise capital at some point in the future.

2. Get to know your compliance obligations

Learning as you go is a risky way to approach compliance in the property and construction sectors, purely because they are so heavily regulated. In addition to national standards and laws, each state and territory (as well as local governments) have their own sets of rules that you need to follow.

Your compliance obligations also extend to:contracts, reporting

  • tax and GST
  • financial reporting
  • insurances
  • contractor or employee engagements

Because compliance is vital, but also highly complex, it’s essential to seek guidance from your accountant and lawyer. For example, there is a raft of GST provisions that apply to property businesses that you may not be aware of; and a simple error could lead to you having to pay stamp duty twice! When the numbers are significant, getting things wrong can be costly.

The small fee you pay for guidance up front may save you from tens or hundreds of thousands of dollars in additional taxes, duties, and penalties.

3. Keep great records

We find many new starters underestimate the value in good record-keeping which then leads to bad habits which ultimately need to be corrected – sometimes at significant cost.

Consider investing in quality cloud accounting software early on, which can make it a lot simpler to keep good records and stay on top of your numbers.

Importantly, good records make it easier to run feasibility tests at the start of new projects to project future cash flow and profitability. Being able to predict a project’s profit will help you make smart decisions at the outset, and this can have a positive flow-on effect – ranging from securing a solid reputation as a trusted employer of contractors (because they always get paid on time) to be able to take on larger projects in the future.

4. Leverage technology for greater efficiency

You don’t need to be an established property developer before your business can benefit from advancing technology.technology

There are some great solutions that are capable of streamlining your finance and business operations – including automating mundane tasks to free up your time to focus on other activities.

The benefit of some of these solutions is that they also provide much-needed data around how your business is tracking. Data is vital to informed decision-making and could quickly set you ahead of competitors as you spot new opportunities and risks and rapidly correct course.

5. Stay on top of what’s happening in your business and sector

While it’s easy to get caught up in the daily activities of running your business, try to carve out some time to stay abreast of what’s changing in your industry. This will help in the development of forward-thinking strategies so you can scale your business much faster.

In terms of your business operations, it’s also important to keep a close eye on issues as they pop up and get advice from experienced advisers before taking action. Especially when it comes to tax or compliance issues, asking your accountant before you do something is far better them telling them about it later. When it comes to tax and compliance, seeking permission is far better than begging forgiveness.

Remember: measure twice, cut once!

Engage RSM to help establish and grow your businessinnovation_illustration_colour.png

At RSM, our experienced accountants and business advisors can work closely with you to:

  • structure your business to achieve your goals
  • understand your compliance obligations
  • implement cloud accounting software
  • review property purchase and sale contracts for GST implications
  • fulfil tax, GST, and financial reporting obligations
  • track and forecast cashflow
  • manage bookkeeping activities

Because we have specialist expertise in the property and construction industry, we can help you avoid many of the common mistakes that startups make which will put you on a faster trajectory towards success.

We also have access to timely and valuable industry news which we will share to keep you constantly informed and a step ahead of your competition.

To learn more about how we can help your startup get a solid foothold in the property and construction industry, contact your local RSM office.