Privacy and Protecting Personal Data

Posted on July 21, 2020 by Angus Jones

It may seem harmless that in the process of doing business you collect customer data to transact business or communicate with them. However, if that data is used without the user’s permission, or worse stolen, you may find yourself breaking the law. This guide will help you understand Privacy and Protecting Personal Data and what you should or must do.

Data protection is to secure data against unauthorised access. Data privacy is about authorised access — who has it and what you can do with it. Data protection is essentially a technical issue, whereas data privacy is a legal one.

WHY should I protect my customers’ personal data?

Apart from the fact that a customer will not be very happy with you, it is the law. You must comply with the Australian government Privacy Act 1988 if your annual turnover exceeds $3 million.

You are responsible for protecting your customers’ personal information from:

theft
loss
unauthorised access
modification
interference
misuse
disclosure

If your small business turns over less than $3 million you must comply with the act if you are a:

private-sector health service provider
business that sells or purchases personal information
contractor providing services under a contract with the Australian Government
credit provider/credit reporting body
residential tenancy database operator

All other small business operators are exempt from the Act however protecting your customer’s data is good business practice.

WHAT types of information are considered private?

Any information that can identify a person and could include:

name
signature
address
email
telephone number
date of birth
medical records
bank account details
place of work
photos
videos
information about their opinions

If you do have a breach of personal information you need to notify both the person it has affected and the Office of the Australian Information Commissioner (OAIC).

HOW do I protect customers personal information?

The following actions will assist with your compliance of the Privacy Act:

Do not collect personal information you do not need
Develop an internal policy to handle and process personal information
Take ownership yourself or delegate to a senior member of staff
Do not share this data with anyone else
Sensitive information like race, religion, health etc can only be collected with individual consent
Ensure unauthorised staff members do not have access
Take reasonable steps to protect personal information from unauthorised access, modification, or disclosure and against misuse, interference, and loss
Destroy or de-identify personal information when it is no longer needed
Develop a plan for a data breach

HINTS

If processing credit card transactions by EFTPOS or e-commerce store you should ensure your network/equipment is secure and encrypted. You should restrict who has access to that data and preferably do not store the card information. A security assessment of cardholder data can be done here.

If you plan to contact customers via direct marketing like an email, phone call or text, post, social media or web advertising you should enable a customer to opt-out (request not to be communicated with). If the Privacy Act covers your organisation (> $3m turnover) legally you are required to allow a customer to opt-out.

Australian privacy law gives a consumer the right to access their personal information. This includes their health information. This right does not extend to commercial information.

Be sure to read our guide on internet security.

Additional information on privacy and protecting personal data can be found here.

SUMMARY – Privacy and Protecting Personal Data

If your small business has a turnover less than $3 million it is unlikely you will have a legal requirement however for both your customer and your sake it is good practice. If possible don’t keep personal data like credit card details but if you do, ensure it is protected from theft or abuse. It is worth familiarising yourself with the intent of the Privacy Act and taking the necessary actions in your business.

Marketing to grow your business

Posted on July 14, 2020 by Angus Jones

There is a very good chance you are already doing marketing because a lot of it is common sense. For a small business, it lets people know you are in business and gives customers reasons why they should do business with you. In this guide, we will look at the basics of marketing and give you an action plan to develop some further plans.

Marketing refers to activities a business undertakes to sell more of a product or service. Marketing includes researching, advertising, selling, and delivering products to consumers or other businesses.

The simplest form of marketing is how you answer the phone or what you wear through to a complex integrated plan across newer mediums like the internet or older like radio advertising.

WHY do I need to do marketing?

For any small business to succeed you need customers who know or can find that your product exists and who trust your business enough to buy your product.

Marketing helps by looking at your business and adjusting how customers perceive your business.

Assume you are starting a new small business to paint people’s houses. You are a very good painter and plan to charge competitive rates. Imagine if you did not return phone calls, turned up to do a quote in dirty clothes and quoted by writing a price on a scrap of paper. The customer does not know if you are a good painter and interprets you as unreliable with poor attention to detail and therefore they don’t trust you to paint their house. Thus marketing is key to present your business the right way.

WHAT are the 4 Ps?

The 4 P’s describe how important it is to present a complete package to entice a customer. You cannot do just one of these and consider it is marketing instead you must do all 4 in some form, all working in harmony to drive the optimum result.

Product

To be successful in business you need a product or service that is needed or wanted by the end-user. You ideally find an opportunity or problem that needs a solution and has a market large enough to sustain providing a product or service. You cannot always design or build your product or service from scratch but you can pick the best product or solution to sell that best meets that need. The better your product or service is compared to competitors as seen by the consumer will give you an advantage.

Price

Many people work on the principle that the cheapest price wins the sale. Whilst this is often the case, it is not always and indeed you can easily under-price a product making people think it is not high enough quality or an uncool purchase. Make sure you do your homework to ensure you price correctly.

Place

Place refers to how you get your product to market. Where is it sold? A retail shop, a direct visit to the customer, or perhaps an eCommerce store. It is important to consider the best place or places to sell to be most successful. It is important to actually have what you sell available and understand the effect of selling in different places can have on one another. Having a product that you want to sell in a supermarket is no good if you can’t supply it or the supermarket will not put it on the shelves. Also, imagine what the supermarket would say if they found you selling the same item cheaper on your eCommerce store.

Promotion

Many confuse promotion or advertising as the only function of marketing. Without the other 3 P’s your likelihood of success is very slim. This starts with how you present your business from your website to business branding, your work vehicle, how you dress, and the way the staff answer the phone. Next is how you create awareness of your business which could be advertising, public relations, social media, and the content (words) you create to reinforce this. Last is understanding if the promotion you are doing is working and looking for ways to improve it.

HOW do I create a marketing plan?

A marketing plan is a systematic approach to work through developing products and services to fulfil customers’ needs.

A marketing plan should include the following elements:

Business Summary – Apart from an overview of your business the most important aspect of this section is to do a SWOT. See our full guide on developing a SWOT. In summary, SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is an excellent method to analyse your competitive position and get a clear roadmap of how to help you get to your marketing destination.
Marketing Objectives – This is a clear list of marketing objectives (not business objectives) that outline the strategic steps you will need to follow to reach the goal you hope to achieve.
Target Audience or market – Ideally, you will have the aid of some sort of research that will help you define the industry you are selling to. An analysis of your competitors, and a description of your ideal customer. Age, location, income, or interests can segment the customer.
Market Strategy – It is now time to take what we have collected in the first 3 points including the SWOT, objectives, and target market and using the 4 P’s we discussed above to build out the practical plan.
Budget – This is not only your plan about how much money you will spend but also how many resources you will allocate to making it happen. Your most important resource may actually be people’s time. Could marketing effort help you sell more than having that same person just concentrate on sales?
Marketing Levers – Last but not least, you know what you want to do and how much money you have, but with all the possible marketing levels you can pull which one will get you the best result. Marketing levers here refers to what marketing channels you select. Some of the more common include:

Traditional Advertising
- Newspaper
- Radio
- TV
Public relations
Social media
Digital Advertising
- Keywords
- Display ads
Organic assets. Includes your website or word of mouth
Philanthropic – giving back to the community
Direct mail
Catalogues

A comprehensive template from the Australian government can be downloaded here https://www.business.gov.au/Planning/Business-plans/How-to-write-your-marketing-plan

HINTS

Use as much customer feedback as you can to improve your offer to them.

Set clear objectives around what you want to achieve and how you can achieve them.

Be realistic around how much you can afford to spend on marketing and how many people are in your potential audience.

A mentor or coach may be of value here especially if you have no marketing experience.

A marketing consultant or agency for a fee can provide marketing services to you.

SUMMARY – Marketing to sell more

Marketing is about looking at how a business presents itself and working out how it can improve on that to gain additional sales. The process involves understanding an opportunity, finding a solution, understanding competitors, identifying your market and finally realising your marketing plan.

Advertising for better sales

Posted on July 14, 2020 by Angus Jones

Maybe you are starting a small business or maybe you have been in business for a while. How do you reach new customers or let more people know you exist? Ideally, when someone is in the market to buy your offering, they come to you. Advertising is a way to let people know what you have to offer and we will cover your options in this guide.

Advertising is a marketing tactic involving paying for space to promote a product or service. The actual promotional messages are called advertisements, or ads for short. The goal of advertising is to reach people most likely to be willing to pay for a company’s products or services and entice them to buy.

f you have not already done so we highly encourage you to read our guide on marketing before you read this guide.

WHY should I advertise?

How do potential customers know that you are running a special this month that makes your offering very attractive to purchase? Unless you or one of your staff tell them they probably don’t know. It is not possible for you to personally look for and speak to every new customer in most circumstances so you have a few options:

Word of mouth – a happy customer tells a friend
Having the right location – people walk by your shop
Be on a directory – You are found on Google or Yellow page
Advertising – you spend money to be found or promote a message

Advertising has a cost to it and the key is to spend the amount of money that you can afford to drive the greatest number of people to your business. Successful advertising would mean that you generate more profit from any additional sales (sales you would not have had if you did not advertise) than the cost of the advertising.

Beyond increasing sales, advertising can help establish your brand and increase the likelihood of someone recognising your brand. It can help you reach customers much further away than your place of business and position your offering as better than your competition.

WHAT do I need to know about advertising?

There are two types of adverting:

Traditional – TV, radio and newspaper, mailbox flyer, cold telephone calling and door to door selling
Digital – Internet-based including social media and digital ads (see our guide on digital marketing)

All forms of advertising have advantages and disadvantages, but in most cases, trial and error will help you decide which is best. Digital advertising can be targeted to just the right people but will those people just scroll past your ad? What sort of ads do you notice? An important lesson here is to ensure your advertisements are relevant to your audience and they see some sort of benefit. Thus, the messaging and the creative of the ad can be just as important as the type of advertising you pick.

As a small business, it is unlikely that you will go out and buy TV advertising, at least not before you are already a success or have deep pockets.

Some ideas as to what might be most effective include:

Letterbox flyers – design and print a flyer that can be distributed to letterboxes in targeted areas.
Local newspaper – delivered free, targets people in the area your business operates and is relatively inexpensive.
Product Review – Look for a journalist or blogger who is prepared to write about your product or service. This may require you to provide something for free or pay a fee.
Google AdWords – investing in keywords can drive more traffic to your website.
Google Maps – ensure you have your business listed at Google My Business so it will appear on searches (no cost).
Social Media – Facebook ads can be very targeted and also allows you to create a following for your brand. Note, most followers will not see your post unless you pay Facebook for them to be seen.

HOW do I create an Ad and get it in front of people?

Simple 10 step process to advertise:

Research who your audience is – who is most likely to buy.
Decide who you want to reach – location, demographics, interests etc.
Set a budget and a targeted outcome – if I spend this much, I hope to get this result.
Choose an advertising type – you may wish to get some advice from a marketing agency.
Develop a message to suit your target audience – resonate with the customer and show a benefit.
Design creative assets with a call to action – you want to catch people’s eye in a sea of advertisers and give them a clear next step to purchase from you.
Work out how you will measure success – yales will be your goal but consider what else you can measure.
Launch your Advertising – directly with the medium like Facebook or through a media buyer.
Track and analyse the performance – consider changing your advertising mid-way through if it is not working.
Decide if you will do it again and how you could improve your advertisement.

To learn more about design see your guide on getting graphics done.

Picking the right type of advertising will be dependant on many factors. Watch what your competitors are doing as well as what you see working for other industries. You will find that more than one type of advertising is better than just doing one thing. For example, a newspaper advertisement is well complimented by doing some Google Ad words.

As a small business, buying advertising is best done directly with the vendor. If you wanted to advertise in a local newspaper go directly to the local newspaper. In the advertising world almost everything is negotiable so don’t just accept the first price they give you. Note when buying digital advertising like Facebook or Google assets the price is based on an auction system so you will pay depending on what others are prepared to bid on the same assets.

Beyond sales, measuring results can be the number of clicks on an ad or to your website, calls received, the number of opens of an electronic direct mail, or website traffic. However, remember only sales will mean an improvement in the bottom line.

HINTS

Any advertising of your products or services should be accurate, true, and able to be substantiated. Advertising practices are governed by law and there are fines for businesses that mislead consumers, whether intentionally or not. Ensure you read our guide on Australian Competition and Consumer Law.

Be ready to respond to your advertisement. Make sure you have the product or service available. Ensure your call to action is clear and respond to enquiries quickly, for example, make sure someone can answer the phone or respond to emails. Does your website duplicate the offer and what is your plan if the advertisement goes better than expected?

Unfortunately not all advertising works. Learn from your failures and don’t make the same mistakes next time.

SUMMARY – advertising for more sales

Advertising is great when it increases your sales but finding who to advertise with and where to advertise is a trial and error approach. Newer forms of advertising like social media competes with older forms like a letterbox drop each with their advantages. Pay special attention to your creativity as it not only represents your business but also enables your advertisement to stand out from your competitors. Always measure your advertising results and adjust any future advertising based on what you have learned.

SWOT to develop your business strategy

Posted on July 14, 2020 by Angus Jones

If you want your business to grow you should ask yourself how does your business compare to the competition? What are your advantages and disadvantages? What are the threats to your success? Are there opportunities that your business has not taken advantage of? This guide will look at a SWOT analysis and show you how you can use this strategic planning technique to help your business identify Strengths, Weaknesses, Opportunities and Threats and then develop business strategies to grow your business.

A SWOT analysis or Strengths, Weaknesses, Opportunities, and Threats analysis is a study undertaken by a business to help understand business competition or help to build a project plan.

WHY should I do a SWOT?

The SWOT tool is a very simple way to develop your business strategy. It provides a framework to collect your thoughts no matter if you have been in business for years or just starting. (Also see our Marketing guide)

A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at your business.

The tool allows you to get an accurate picture of your market position and then helps you to formulate what actions you should take to improve on the current situation.

WHAT do I need to know about a SWOT?

Strengths and weaknesses are internal to your business. These are things that you have control over and can change.

Opportunities and threats are external to your business. These are things going on outside of your business, in the market place. You can take advantage of opportunities and protect against threats, but you can’t change external influences on your business.

	Helpful (for your objective)	Harmful (for your objective)
Internal (within organisation)	Strengths x x x	Weaknesses x x x
External (outside organisation)	Opportunities x x x	Threats x x x

Strengths and Opportunities are helpful to your business and can allow you to grow.

Weaknesses and threats are harmful and if left unchecked could cause your business to shrink.

HOW do I do a SWOT

Using the table above you need to fill in the bullet points for each of the four quadrants. You may add as many points as you believe are relevant. Be wary of adding a preconceived view versus the real-world reality.

When filling out a SWOT the types of information might include:
(Note points can move between left or right depending if in your circumstance they are a Positive/Helpful on left or Negative/Harmful on right)

Strengths

Business strong points
Unique selling point
Value proposition
Internal resource such as your people
Tangible assets like IP or capital
Marketing or Advertising
Business process
customers

Weaknesses

Factors increasing cost
Things your company lacks
Factors reducing profits
Where competitors are better
Resource limitations
Unclear selling proposition
Is your location ideal

Opportunities

Adapting to technology creating new demand
Being ready for the future
Untapped market
Few competitors
Press coverage of your business
Market is growing
Upcoming events

Threats

Competition activity
Changing customer attitude to your company
Government policies
Fluctuating markets
Supply constraints
New market trends

Once you have completed your SWOT it will give you a clear picture of your market position. As a result, you can create several strategies to take advantage of strengths and opportunities. Also, develop strategies to address weaknesses and threats. You can then prioritise those strategies based on what you need to do to grow your business. Lastly, you build an action list with dates to address those strategies.

HINTS

If you are starting a new business, a SWOT analysis is part of the business planning process. It will help you formulate a strategy so that you start off in the right direction.

If you are an established business can use a SWOT to assess the current situation and determine a strategy to move forward. Note that things are constantly changing and you will most likely want to reassess your strategy, with a new SWOT every 12 months.

Having an external person like a customer contribute to the SWOT process can ensure a dose of reality.

Sample Business selling pears

	Helpful (for your objective)	Harmful (for your objective)
Internal (within organisation)	Strengths Good profits Excellent staff with spare capacity	Weaknesses Prices to expensive Brand not known
External (outside organisation)	Opportunities Produce pear pies Sell to restaurants Advertise pears	Threats Oranges become more popular Supply issues

Strategy 1. Sell more pears cheaper
Strategy 2. Build pear pie business

Action 1. Reprice pears by end of the month
Action 2. assign a staff member to research pear pie’s by end of week
Action 3. Get staff to phone restaurants offering them pears by the end of next week

SUMMARY – actions to match your business strategy

A SWOT analysis is a framework allowing you to evaluate your business or business idea from a competitive position and to develop strategic planning. By reviewing strengths, weaknesses, opportunities, and threats you can gain a fresh perspective and new ideas. A SWOT can be done in as little as an hour which then can be used to develop strategies to grow your business which will be delivered by a list of action items.

Contractor – using or being one

Posted on July 14, 2020 by Angus Jones

Your small business may not be ready to take on an additional employee so a contractor may be a better solution or perhaps you would like to start your own business as a contractor. This guide will look at both sides and help you understand the implications of using or being a contractor.

A contractor or sub-contractor, freelancer or consultant is a person that provides goods or services under a written contract or a verbal agreement. Unlike employees, contractors do not work regularly for an employer but work as required. Contractors are usually paid on a freelance basis and often work for themselves using their own tools and processes.

WHY should you use or consider becoming a contractor?

By Using a contractor, you can:

Increase or decrease workers based on business needs
Get fast access to skilled workers for different tasks
End contacts quickly with no reason
Normally no payments for Superannuation, holiday or sick pay and payroll taxes
Save on liability insurance, as contractors must have their own

By Becoming a contractor, you can:

Be your own boss
Earn more money if your skills are in demand
Work the hours that suit you including part-time
Test out a company before committing to a full-time job

WHAT do you need to understand about contractors?

Contractors have workplace rights and protections but have different responsibilities relating to insurance, taxation, and superannuation. In Australia, the Independent Contractors Act 2006 in conjunction with the Fair Work Act 2009 protect the rights and entitlements of independent contractors.

Under the Fair Work Act 2009, independent contractors are protected from:

adverse action – for example, a business cannot terminate a contract with an independent contractor because they make a complaint to a regulator about their workplace rights
coercion – for example, a business cannot threaten to take action against an independent contractor to coerce them not to exercise their workplace rights
abuses of freedom of association – independent contractors are free to join, or not join, a trade union or employer group

The Independent Contractors Act 2006 allows independent contractors to ask a court to review a contract because it is ‘unfair’ or ‘harsh’. The court may consider:

the terms of the contract when it was made
the relative bargaining strengths of the contract parties and, if applicable, anyone acting on their behalf
whether there was any undue influence or pressure, or any unfair tactics used against, a party to the contract
whether the contract provides remuneration that is less than that of an employee doing similar work
any other matters the court thinks is relevant

The court may order:

the terms of the contract to be changed (for example, they may be added or removed)
the whole contract or part of the contract be ‘set aside’ (that is, have no effect)

All workers in Australia are entitled to a safe and healthy workplace. This means that employers — including self-employed contractors — must comply with the relevant state or territory’s workplace health and safety laws.

Sham contracting is illegal and is when an employer attempts to disguise an employment relationship as a contractor relationship. This is usually done to avoid responsibility for employee entitlements.

HOW do you hire a contractor or become a contractor?

In Hiring a contractor, you should be careful in checking their credentials to ensure they have the right experience, attitude and skills. You will need to carefully plan how they will integrate into your workflow and ensure you pay them promptly or they may not continue to turn up. A contractor may not be an employee but you need to treat them as part of the team to get the best result. Make sure you engage a contractor in a legally binding way in writing and consider what other documents may be required like a Non-Disclosure Agreement. Ensure you keep accurate records of their hours and or completion of set tasks.

In Becoming a contractor, you essentially start your own business. See our guide on starting a business. This process will include writing a business plan which will help you be realistic about things like future income. You will need to keep track of your business so read our guide on Record Keeping as well as considering setting up a separate bank account.
Insurance is important as you most likely will not be covered by your employer so consider taking out liability, income protection and asset (protect your tools) insurance.

If as a contractor you are paid wholly or principally for your labour your employer must pay for your superannuation, if not you should consider making voluntary personal contributions. Be sure to review our guides on Business structure and GST as you may need a separate tax file number and your services will be subject to GST if your business turnover is above $75,000. If you do not have an Australian Business Number (ABN) your hirer may legally withhold tax at the top rates.

HINTS

Unsure if someone is an employee or contractor? See the Fair Work Table here https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/independent-contractors-and-employees

If your business engages contractors, it’s a good idea to have a Contractor Agreement in place with each contractor you engage. This sets clear expectations about the scope and standard of services to be provided, fees and payment, confidentiality, IP ownership and termination processes. A lawyer can draft a contractor agreement for your business.

Keep track of your contractors’ hours and how much they’re costing you. Use your accounting software to produce reports so you can see whether you are getting value for money. Over time you will discover the right mix of employees and contractors that works for your small business.

SUMMARY – skilled supply of labour and materials

Contractors work for themselves and offer other businesses and individuals a skilled supplier of labour and possibly materials. Both the contractor and the hirer have flexibility around hours and hirers do not have to provide for holiday and sick pay or payroll taxes. Contractors have workplace rights and protections but have different responsibilities relating to insurance, taxation, and superannuation.

NDA – Non Disclosure Agreements

Posted on July 14, 2020 by Angus Jones

Shh can you keep a secret? Most people cannot. What if the success of your business depends on a 3^rd party and you need them to keep quiet about what is discussed? This is when you need to have either a lot of trust or you have them sign a non-disclosure agreement. This guide will discuss what a NDA is and how to create one.

A Non Disclosure Agreement or NDA is a contract through which the parties agree to not disclose information covered by the agreement. An NDA creates a confidential relationship between the parties, typically to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects non-public business information. Also known as a Confidentiality Contract, Confidentiality Agreement, or Gag Order.

WHY do I need a Non-Disclosure Agreement NDA?

Some of the typical needs for an NDA include:

Entering into a business relationship – If you have created a product or service and are looking to sell it to another business, you may need an NDA while you are negotiating the deal.
Getting feedback – After developing a product or service, you may wish to run beta testing (trial) and gather feedback from your network or those in your industry.
Bring on a new employee – It’s a good idea to have employees sign a document that they will not share company confidential information such as plans, business models, financial or products.
Pitching to investors – If your business is looking for investment, you will likely reveal confidential business information when pitching your company. Always insist as they could steal your idea.
Asking a competitor to help you on a project and stop them from stealing your designs and ideas and pitching independently.

WHAT would I use an NDA for?

An NDA will cover:

A description of the confidential information;
Confidential rights and obligations of the parties;
Protection of sensitive information;
Return of confidential information at the end of the agreement;
Obligations regarding the proper use of the information; and
Circumstances where disclosure is permitted.

An NDA normally protects ideas, products, app functionality, designs, source code, plans, business models, records, recipes, and any other commercially sensitive documentation.

HOW do I get an NDA created?

An NDA is a legal document but is only as good as the contents. You can get an NDA as

A free template
A purchased template
Written by a lawyer as fit for purpose

Prices increase as you go down the list as does its ability to possibly be successful if you go to court.

HINTS

Once you have an NDA template chance are you will be able to use it again for similar circumstances.

You should consider:

How long you want it to last
Is it mutual or one way (both parties or only one)
Having a specific definition (broad will result in ambiguity)
Will a court consider it reasonable
Implications if someone will not sign
What other steps you need to take to protect your secrets, for example, lock them in a safe
Locations it applies to, including overseas
All details are correct

SUMMARY – Protect Confidential Information

An NDA will help you protect the information you want to share with 3^rd parties. Templates to create one can be easily obtained but the use of a lawyer will increase your protection.

PLEASE NOTE: All information provided on this website is general in nature and may not be appropriate to your individual circumstances. It does not replace advice available from experts such as lawyers, accountants, business advisors, brokers, etc. We further recommend when using these experts you ensure they have the appropriate licenses and endorsements.

Shareholder & Partnership agreement

Posted on July 14, 2020 by Angus Jones

You are probably reading this guide because you are at the beginning of your business venture however it could be because a partnership or shareholding has gone wrong. This guide is all about helping you get that first shareholder & partnership agreement right so down the track there is a clear predetermined plan of how things should happen.

A Shareholder & Partnership Agreement is a legally binding contract between the shareholders or partners of a business. A Shareholder & Partnership Agreement covers the funding, structure, management and direction of the business. It outlines the responsibilities and obligations of the business owners.

WHY should all partners be in agreement?

In the excitement of starting a new venture, it is very easy to put this important task aside. A shareholder agreement is to protect the multiple owners’ investment in the business, to establish a fair relationship between the owners and govern how the company is run.

It is best to put a shareholder and partnership agreement in place when the business is first established. At this early stage owners should be like-minded and if this is not the case questions should be asked why you are going into business together.

WHAT is in a shareholder & partnership agreement?

The agreement should contain important, specific, and practical rules relating to the business and the relationship between the owners.

The agreement should (but not have to) include:

define who are the shareholders, in what percentage ownership over what term
define how important decisions are to be made
describe how the business is going to be run
indicate if any intellectual property is not owned by the business
set out the owners’ rights and obligations including time spent on business
agreement on accounting processes and reporting
decide how profits will be divided and income paid
regulate the sale of shares in the business including full sale and withdrawal or addition of an owner
define dispute resolution procedures – if 2 owners have equal decision making decide how will you break the stalemate
outline any additional powers of minority shareholder/s so not always overruled on key decisions
define what constitutes a breach of the agreement and what action should then take place – possibilities include termination or mediation
include restrictions to stop shareholders from starting a new business in competition
identify how an owner may exit the business
have terms around specific circumstances like:
- Hiring and firing of employees
- Who can authorise payments
- Taking on debt
- Approving expenses

If a disagreement does occur in the life of the business and there is a clear shareholder agreement it gives a clear roadmap to move forward.

A partnership or shareholders agreement can be drawn up by a lawyer and you will find several providers offer a template-based solution that can be adapted to your specific needs via the internet for minimal cost.

HOW do you deal with conflict?

Conflict will inevitably arise with shareholders at some point in the running of a business. It does not matter how well you know your fellow owners, irrespective if they are a family, friend, or business partner it is best to have a shareholders agreement in place that you can refer to when conflict arises in your business relationship.

A lot of successful small businesses have been known to have shareholders with stormy relationships. A business relationship, whether good or bad, can have a huge impact on whether a company is going to be successful or not.

Decisions should be made through discussion, compromise and ultimately deciding what is best for the business. More progress can be made on working out how to resolve conflict rather than how to win a conflict.

Being a minority shareholder and having a shareholders’ agreement that includes the requirement for all shareholders to be unanimous ensures that you have a say in the important decisions that impact the company. This could be decisions on:

Adding or removing owners
appointment or removal of staff
taking on new debt
changing business operations

However, if all decisions must be unanimous this could cause problems and ultimately prevent your company from carrying out its business.

In a scenario when two owners each own 50% each of the business it is important to have a dispute resolution provision included. Without an agreed procedure to resolve disputes no decisions can be made leaving the company unable to operate.

You can terminate a shareholder agreement in one of 3 ways:

By mutual agreement – the original shareholder agreement should have had a provision on this
Termination by a breach – unless there are clauses for mediation of a breach in the agreement can lead to termination
One owner withdraws – the shareholder agreement should have a provision that maps out this scenario

To force an unhappy shareholder to stay in a business may cause more problems than having a new shareholder who is interested in the business being successful. Shareholders’ agreements will often include rules around share sales and transfers – who shares can be transferred to, on what terms and at what price.

HINTS

Decisions can be specified to be based on equity holdings or unanimous by all owners.

Discussing the worst possible scenarios at the beginning of your business journey and having a roadmap to resolve them will save a lot of headache down the track. The more comprehensive the better.

Owners need to enter into an agreement voluntarily.

Any new shareholder must be bound by the terms of the original shareholder/partner agreement.

SUMMARY – shareholder & partnership agreement for profit

A shareholder or partner agreement is a legal document that creates a set of rules for the owners to follow when a business is first established. It helps deal with certain scenarios that may occur in the future to reduce the chance of conflict. Those rules deal with equity, decisions, obligations and the ultimate end of the agreement. A well legally written agreement can be produced inexpensively from templates or through a lawyer.

Contracts – written legally binding document

Posted on July 14, 2020 by Angus Jones

In our everyday lives, we are always making contracts, whether it be for a new mobile phone plan, to have electricity connected, or arranging for a plumber to fix a broken pipe. In this guide, we will look at what a small business needs to know about contracts and how to write or agree to one that is legally binding.

A contract is an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. Contracts are at the heart of most business dealings. The agreement may be enforced in court.

WHY should I have a written contract?

A conversation and a handshake is indeed a contract. If a tradesperson writes a price on the back of a business card and you agree to go ahead with the work then that is a contract. This is all fine until something goes wrong and a dispute arises. A handshake cannot be enforced by a court.

A written contract, on the other hand, provides certainty to both parties and should set out what has been agreed. Typical items set out in a contract would include payment, timeframes and materials.

WHAT do I need to know about contracts?

A court will not enforce a non-written contract as they will be unable to prove the existence of a contract or its terms.

Depending on the type of contract being created or agreed to it may be a good idea to have a professional such as a lawyer or business advisor review or write it.

A written contract should always be used when:

The contract price is significant enough to affect your business if you don’t get paid.
Quality requirements, specifications or specific materials that have to be used.
Doubt that the hirer may not be able to pay you.
Insurance required for the type of work you are doing.
Key terms are used, such as a critical date for the completion of the work before payment.
Information must be kept confidential. See our guide on NDA’s
Legal obligation requires to have a written contract.

Beyond written and verbal contracts other contact types include:

Standard Form Contracts – is a pre-prepared contract that has most sections already filled out and there is minimal or no negotiation between the parties. Includes employment contract or insurance agreement.

Period Contracts– is used for business engagements where work is performed from time to time. Popular in building industry for contractors.

HOW do I create a legally binding contract?

For a written contract to be legally binding it must contain four essential elements:

an offer
an acceptance
an intention to create a legal relationship
a consideration (usually money).

However, it may still be considered invalid if it:

entices someone to commit a crime, or is illegal
is entered into by someone that lacks capacity, such as a minor or bankrupt
was agreed through misleading or deceptive conduct, duress, unconscionable conduct or undue influence.

A written contract will include conditions that if not met are grounds to terminate the contract and seek compensation or damages.

When negotiating the contract terms make sure the conditions of the contract are clearly defined and agreed to by all parties.

Contracts may follow a structure that can include, but are not limited to, the following conditions:

details of the parties, including ABN’s, ACN’s and any sub-contracting arrangements
description of the goods and/or services that your business will receive or provide, including key deliverables
payment details and dates, including whether interest will be applied to late payments
duration or period
definitions of key terms
ownership of intellectual property rights.
treatment of confidential information
key dates and milestones
required insurance and indemnity provisions
exclusivity agreements and restraint of trade
damages or penalty provisions
renegotiation or renewal options
complaints and dispute resolution process
termination conditions
special conditions

HINTS

Even if a contract is a low value, if it is in writing it removes risk.

You should read every word, cross out blank spaces, negotiate if appropriate and keep a copy of the contract. When negotiating be clear and remain professional.

If you are having some design work done like a logo created, the copyright remains with the designer unless the contract specifies the copyright passes to you.

Small businesses are protected from unfair terms in a standard form contract where it is for the supply of goods or services, the sale or grant of an interest in land, at least one of the businesses employs fewer than 20 people, and the price of the contract is no more than $300,000 or $1 million if the contract is for more than 12 months. https://www.accc.gov.au/business/business-rights-protections/unfair-contract-terms

More details on how to prepare a contract can be found here https://www.business.gov.au/products-and-services/contracts-and-tenders/how-to-prepare-a-contract

SUMMARY – contracts must be accepted

A written contract is a legally binding document that can be used in a court of law. It must contain an offer, an acceptance, an intention to create a legal relationship, and a consideration (usually money). The contract will include various conditions that should clearly define the agreement between the parties so there is no confusion on what will occur. If these agreed conditions are not met it is ground for termination and possibly damages.

Register a Company

Posted on July 14, 2020 by Angus Jones

In our guide Choosing a business structure, we listed the various choices including starting a company. In this guide, we will look at the process to register a company which is more complicated than the other business structures.

A company is a legal entity with higher set-up and administration costs. Companies also have additional reporting requirements.
A company is run by its directors and owned by its shareholders.
While a company provides some asset protection, its directors can be legally liable for their actions and, in some cases, the debts of the company.
Companies are regulated by the Australian Securities & Investments Commission (ASIC).
Australian Tax Office

WHY set your business structure as a Company?

There is less personal liability to its owners.

A company is its own legal entity and as such can borrow money, take legal action, and be legally sued by someone else. As a shareholder of a company whether it be 10% or 100% you are only liable for any unpaid money on your shares. So in theory they cannot come after your house, however as a director of that company if it is found you are in breach of your legal obligations to that company you could be sued. A company is owned by its shareholders but controlled by its directors.

WHAT you need to understand to register a company

A business name is not the same as registering a company name, they indeed can be identical bar the abbreviation but don’t need to be the same. See our separate guide on Registering a Business name. However in the case of a company you must register its name as well. For example you may have a company name “Your Town Fruit Pty Ltd” trading with your registered business name called “Your Town Fruit Shop”. We recommend you go through the process to determine your company name listed on the ASIC website. https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-company/company-name-availability/. A company’s name must show its legal status and include an abbreviation at the end, for example, “Your Town Fruit Pty Ltd”. The abbreviation relates to the liability of its members.

Full Word	Abbreviation
No Liability	NL
Proprietary	Pty
Limited	Ltd

HOW to Register a Company?

At this point it is our strong recommendation that you get assistance from a professional. You can easily find them by Googling “registering a company”. For a minimal fee they will do all the hard work for you based on you answering some questions and providing information. These are usually accountants or solicitors and are known as Private Service Providers. More details can be found https://asic.gov.au/for-business/registering-a-business-name/before-you-register-a-business-name/private-service-providers/

One thing you cannot escape as a company director (assuming you make yourself a director) is your obligations to keep details up to date, maintaining records and details on a register and paying the annual fees. Australian companies also require 1 or more directors to reside in Australia depending on the structure.

HINT

The fees to register a company can be found here. https://asic.gov.au/for-business/payments-fees-and-invoices/asic-fees/fees-for-commonly-lodged-documents/starting-a-company/

If you do not go down the Private Service Provider route be prepared to understand and decide on a constitution or replaceable rules, share structures, etc.

SUMMARY – Company means less personal liability

A company structure will reduce your risk of personal liability but is more complicated to establish and maintain. Using a private service provider is an economical and pain-free way to do the setup.

Ending employment

Posted on July 14, 2020 by Angus Jones

OK, you have to fire someone, let them go, end their employment. Maybe one of your key staff has resigned. This can be an emotional exercise on both parts. In this guide we will cover ending employment, what is important for you to understand around entitlements and how to protect yourself from unfair dismissal claims.

Ending employment is an employee’s departure from a job and the end of an employee’s time with an employer. Termination may be voluntary on the employee’s part, or it may be at the hands of the employer.
Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or unreasonable manner.

WHY will someone leave your employment?

The most common reasons employment ends are:

resignation
redundancy
termination or dismissal

Resignation is when someone decides to leave on their own accord. It is their decision and you cannot reject a resignation. The most common reasons for people to leave are insufficient pay or unfair pay practices, lack of honesty/integrity/ethics, poor manager, lack of work-life balance, and unhealthy/undesirable culture.

Redundancy occurs when an employer either becomes insolvent or bankrupt or the job function is no longer needed. This is a tough decision especially if you are letting go of a hard-working and loyal employee.

Dismissal is when you let someone go for poor performance, conduct or changes to operational requirements.

WHAT is important to understand about resignation, redundancy & dismissal?

There are different rights, obligations and legislation that come as a result of ending employment.

Your obligations as an employer will depend on whether you are under the state or national industrial relations system.

Notice periods

You must provide a notice period to an employee when ending employment except for some cases of dismissal. The length of notice will vary based on their length of service, type of employment, award, agreement or employment contract, and age. You can have the choice to let the employee work their notice period or you can pay them out (known as pay in lieu of notice). If you pay them out, they must be paid the same amount as if they had worked to the end of the notice period.

During this notice period, the employee may take annual leave only if you approve it and sick leave with sufficient evidence.

Notice periods do not apply to employees who are: casuals, employed for a specific period or task, do seasonal work, fired because of serious misconduct (such as engaging in theft, fraud or assault), and daily hire working in the building and construction or the meat industry.

Employee entitlements

You must pay an employee all their entitlements when employment ends. These may include:

outstanding wages
accumulated annual leave
accrued or pro-rata long service leave
redundancy pay

Genuine Redundancy

Some businesses have wrongly used redundancy to unfairly dismiss an employee. According to Fair Work Australia:

A genuine redundancy is when:

the person’s job doesn’t need to be done by anyone
the employer followed any consultation requirements in the award, enterprise agreement or other registered agreement.

When an employee’s dismissal is a genuine redundancy the employee isn’t able to make an unfair dismissal claim.

A dismissal is not a genuine redundancy if the employer:

still needs the employee’s job to be done by someone (eg. hires someone else to do the job)
has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement or
could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.

Redundancy Pay

If someone is made redundant, they will be entitled to redundancy pay and special taxation rates will apply to those payments. https://www.fairwork.gov.au/ending-employment/redundancy/redundancy-pay-and-entitlements
https://www.ato.gov.au/Individuals/Working/Working-as-an-employee/Leaving-your-job/Redun d ancy-payments/

Unfair dismissal

You must have appropriate policies and procedures in place to manage employee performance. Terminating or dismissing an underperforming employee must be done in a manner that is fair, reasonable, and just.

HOW do you ensure you have terminated an employee correctly?

Small businesses with fewer than 15 employees have greater abilities to end employment via dismissal. The Small Business Fair Dismissal Code provides a framework for dismissal to ensure the procedure is fair. It also provides small business owners with some level of protection against unfair dismissal claims.

Under the Code an employer can dismiss an employee without notice for serious misconduct includeing theft, fraud, violence and serious breaches of occupational health and safety procedures.

In other cases, the small business employer must warn the employee a reason that he or she is at risk of being dismissed if there is no improvement. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to the Fair Work Commission, including evidence that a warning has been given. Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.

The small business employer must provide the employee with an opportunity to respond when a warning is given and allow the employee a reasonable chance to rectifying the problem. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

An employee who is on a probation period is not likely to have worked the minimum period to qualify to make an unfair dismissal claim. The Fair Work Act 2009 indicates that an employee must be employed for a minimum of six months, or 12 months if the employer is a small business with fewer than 15 employees to make an unfair dismissal claim.

More details and a checklist can be found here. https://www.fairwork.gov.au/ArticleDocuments/715/Small-Business-Fair-Dismissal-Code-2011.pdf.aspx

Those businesses with more than 15 employees’ details around unfair dismissal can be found by visiting Fair work Australia. https://www.fairwork.gov.au/ending-employment/unfair-dismissal

HINTS ending employment

You should always treat people with respect and simply put yourself in their position and treat them how you would expect yourself to be treated irrespective of the circumstances.

An exit interview can be a great way to understand more about your business. This could help you measure morale, see what needs improving, and understand how well they were managed.

If someone is leaving for a better opportunity be happy for them and thankful for how they have helped you to date. Be proud that you may have helped them to the next step.

SUMMARY – ending employment via dismissal

People who leave by their own accord or others that you must remove have certain entitlements. The Small Business Fair Dismissal Code provides a fair framework allowing greater abilities to end employment via dismissal.

It is critical you perform this process correctly and follow the rules. If you are not experienced in this area we advise speaking with an employment lawyer or at the very least visit the Fair Work website for further clarification. https://www.fairwork.gov.au/ending-employment