Starting a Small Business in Australia: A Step-by-Step Guide

Every great enterprise starts the same way: with a spark of inspiration.

And, if you’ve been dreaming about becoming your own boss by starting your own business, you’re in good company. In June 2025, small businesses accounted for a whopping 97.3% of all businesses in Australia¹ – that’s a lot of Aussies who’ve struck out on their own.

But between that initial “lightbulb” moment and making your first dollar of profit, there’s a mountain of groundwork to cover. From calculating up-front costs and forecasting cash flow to registering for taxes and navigating the world of business insurance, the administrative reality of starting a small business in Australia can feel overwhelming.

That’s why we’ve put together this roadmap to help guide you through the steps typically involved in getting a new venture up and running. ​​We’ve also included some useful links to government tools and resources so that you can explore any of these steps in more detail, depending on which stage of your small business journey you’re at. From small business tips and finding funding to managing your business risk, here’s how to start a small business in Australia.

What to do before starting your own business

Before you get too caught up obsessing over the perfect name or logo for your new enterprise, it can be important to know what’s involved.² To gauge whether you’re ready for the hard work and commitment that lie ahead, you might wish to ask yourself the following questions:²

• Do you have a solid business idea?
• Are you good at planning, time management and problem-solving?
• Do you have enough savings or an alternative income to use while you’re building your business?
• Do you have the necessary business skills, such as financial management, sales and marketing?²

Explore more: Improve your business skills

Here are some other recommended steps to consider before starting a small business, whether you already have a clear vision or are still brainstorming small business ideas.

Identify your target market

Your “target market” is the people you want to sell your product or service to, and knowing who they are can help you reach them more effectively.³

When thinking about your target market, you might want to consider:³

• Where your customers are
• Their purchasing habits
• Their problems or “pain points”
• How best to reach them.³

Explore more: Identify your target market

Calculate up-front costs

Calculating your startup costs is key to getting off on the right foot and making sure you have enough money to cover expenses.⁴

So, how much does it cost to start a small business?

Business startup costs vary a lot depending on business type.⁴

It stands to reason, for example, that if you’re a freelance sole trader who works from home, your startup costs might be relatively low compared to someone starting a cafe, who needs to pay for premises, kitchen equipment and staff.

Some common business startup costs can include:⁴

• Tenancy fees and bonds
• Fixtures, fittings and equipment
• Inventory
• Website development
• ​​Small business insurance
• Licences and permits
• Wages.⁴

Explore more: Startup cost calculator

Research funding options

When it comes to businesses, there are two types of funding you can explore:⁵

• Debt finance – When you borrow money, such as a ​​small business loan from a lender.
• Equity finance – Where you get financial support in exchange for part-ownership, such as selling shares to investors.⁵

Outside of these channels, there are a number of government-run grants and programs that could help you fund your small business.⁶

You may want to do some research to find out which grants you might be eligible for. Bear in mind that once you move ahead and actually apply for finance, you’ll likely need to have settled on a formal business structure for your venture.⁷ We’ll go into that next.

Explore more: Search for small business grants and programs

Define your business

Once you’ve figured out the basics, you can start getting into the specifics.

One important thing to determine when starting a small business in Australia is whether the Australian Taxation Office (ATO) will consider your activities to be a business or a hobby.⁸

The line between them isn’t always clear, especially when you’re just starting out. But it’s important to know the characteristics of each classification as businesses and hobbies have different legal, insurance and tax obligations.⁷

Explore more: Hobby or business?

Decide on a business structure

Your business structure will determine how you operate and will affect who can make decisions, how profits and losses are shared, and what your tax and legal obligations are.⁹

Some common business structures in Australia include:¹⁰

• Sole trader – A business owned and operated by one person
• Partnership – A business of two or more people who share decisions, income and losses
• Company – An independent legal entity with directors and shareholders
• Trust – A legal relationship between two or more people, with a trustee who’s responsible for all business operations.
• Not-for-profit or association – An organisation run to benefit a community or group.¹⁰

Explore more: Work out your business structure

Choose a business name

When you start a small business, choosing a name might be one of the more enjoyable jobs on your to-do list, but there are some things you may wish to consider before you settle on your final pick.

Generally speaking, good business names are:¹¹

• Easy to remember
• Short and simple
• Descriptive
• Distinctive.¹¹

You may not need to register a business name in some situations – for example, if you are sole trader and trade under your own name or if your partnership trades under the partners’ names.¹¹

You can check availability and register your business name on the ASIC website.¹²

Choose a location

You might already have some idea of where you want to run your small business from. However, location is a core decision that can impact your business success, so it could still be worthwhile to take some time to ask yourself some strategic questions, including:¹³

• Do you need physical premises such as a warehouse or shop, or will you run your business from home?
• Do you need an online store?
• Is the physical location accessible to your customers?
• Are there any risks associated with running your business from this location?
• Are there any zoning, development or council regulations you may need to comply with?¹³

Explore more: Business premises checklist

Business planning

As the saying goes, those who fail to plan, plan to fail. Here are some steps you might want to consider while planning your business.

Research your market

Market research can be a valuable tool when starting a new business, arming you with insights into your customers and competitors and helping you to identify ways to stand out or improve your offering.¹⁴

If you don’t have the budget for market research, you might be able to unearth useful information about your chosen market or industry from sources such as:¹⁴

• Government data
• Market and industry reports
• News articles
• Industry or trade associations.¹⁴

Explore more: Guide to market research

Develop your business plan

Even if you have a really straightforward small business idea, putting together a business plan could help you to clarify your goals, objectives and risks.¹⁵

You may also need a business plan in order to get funding or startup business loans from banks or other investors.¹⁵

Explore more: Business plan tool

Plan your staffing needs

Starting a small business that will need staff? Before you hire an employee, the Fair Work Ombudsman recommends that you know:¹⁶

• Whether they’ll be full time, part time or casual
• Which award will apply
• The minimum wage for their role.¹⁶

Explore more:

• Guide to hiring employees
• Employment contract tool

Register your business

So, you have a solid plan in place, you’ve chosen your business structure and picked the perfect name. Now it’s time to find out the actual logistics of how to start up your small business.

How you register your business and which licences and permits you’ll need can vary a lot. It’s a good idea to do your research, so you know exactly what you need to do to get started.

For example, your small business may need:¹⁷

• An Australian Business Number (ABN)
• A registered business name
• A tax file number (TFN)
• Permits or licences
• A domain name for your business website or email address
• A trade mark
• An Australian Company Number (ACN), if you register a company
• To register for tax.¹⁷

Explore more: Explore legal, operational and business requirements by industry

Organise your finances

When it comes to setting up some systems to keep on top of your small business finances, you may wish to consider:

• A budget¹⁸
• A business bank account¹⁸
• A bookkeeping or accounting system to manage your cash flow¹⁸
• Merchant services – services that allow you to take payments from customers, such as EFTPOS machines and online payment gateways.¹⁹

Financial management and reporting are essential parts of small business management. But you don’t have to do it all on your own. You could consider hiring a professional, such as an accountant, a bookkeeper or a tax agent.²⁰

Explore more:

• Setting up your finances checklist
• Business budget template
• Key financial terms

Plan how you’ll manage risks

In business terms, a risk is anything that has the potential to harm or damage your business.²¹

As a business owner, it’s important to know and understand the unique risks associated with your individual business. Unfortunately, inadequate risk management is a common mistake Aussie business owners make, but taking some time to consider potential threats can help you create an effective plan to manage them.²¹

Identify main risks

Each business has its own set of risks. These might include:²¹

• Financial risks, such as having limited cash flow or a loan with a high interest rate
• Legal risks, such as not having the business licences you need
• Operational risks, such as not having business insurance in place to cover for loss or damage to stock in trade
• Human resource risks, such as improperly trained staff
• Privacy risks, such as not having antivirus software installed on computers to protect data from cyber attacks.²¹

Explore more: Risk management resources

Set up business insurance

Business insurance is one important way you can reduce your business risk.²²

“​While some types of business insurance aren’t compulsory, businesses might be legally required to carry specific coverages,” says Mervyn Hartley, Youi’s Head of Product – Home and Small Business.

“For example, in some states and territories, ​public liability insurance is mandatory for businesses in certain occupations. And, if you employ staff, you’ll need to get workers compensation insurance that complies with your state or territory regulator. So, it’s a good idea to check which regulations may apply to you.”

There are multiple ​types of business insurance to consider, all designed to cover specific risks. Ranging from customer and staff injury to property damage and lost income, typical types of business insurance are:²²

• Workers compensation insurance
• Personal or loss of income insurance
• Stock, products and asset insurance – including business car insurance
• Technology and cyber insurance
• ​​Public liability insurance
• Professional indemnity insurance.²²

Different insurance products are designed to cover different risks, and not all cover types are available from all insurers, it may be best to check with individual insurers what is and isn’t covered.

Explore more: Types of business insurance

Insurance implications of running a business from home

Exploring how to start a small business at home? You might be wondering where your home insurance fits into the picture.

“​​Many home insurance policies do not provide comprehensive cover for business activities, although some insurers offer optional cover or extensions that may be suitable for certain home-based businesses,” explains Hartley.

“​For example, Youi’s home and car insurance policies offer optional cover for business items, which you can choose to add for an additional cost. This could be useful if you keep tools or equipment at your home or in the car.”^23,24

In any case, it’s a good idea to let your home insurer know if you start a business at home, as you may be required to declare business activities as a part of your policy.²⁵

How Youi Small Business Insurance could cover your new venture

At Youi, we want to help make starting your own business simpler.

“​​One way we do this is by including Public and Products liability insurance as standard with all our small business policies,” says Hartley.²⁶

“In addition, our business insurance product offers a range of cover options for different small business needs, whether you’re a tradie, sole trader or​ ​hospitality business owner.

“Depending on the type of business you have, you can also choose to add optional cover for things that may be important to your venture, such as business property damage, professional indemnity or business interruption cover, for an additional cost.”²⁷

“And, once you’ve settled on the right balance of coverage for your situation, you should review your business insurance regularly, to make sure it’s still keeping up with your business’s needs as they grow or change,” says Hartley.

So, there you have it: A step-by-step guide on how to start a small business in Australia. If you’re thinking about setting up shop on your own, you can check out our Small Business Insurance options or start a quote today to find out if Youi is the right fit for you.

This article contains general information only and does not constitute financial, taxation, business or legal advice.

¹Source: Australian Government Australian Small Business and Family Enterprise Ombudsman – Number of small businesses in Australia, n.d.
²Source: Australian Government – Are you ready to start a business?, n.d.
³Source: Australian Government – Identify your target market, n.d.
⁴Source: Qld Government – Costs to start and run your business, January 2025
⁵Source: Australian Government – Choose your funding, n.d.
⁶Source: Australian Government – Grants and programs finder, n.d.
⁷Source: Australian Government – Set up your business bank account, n.d.
⁸Source: Australian Taxation Office – Hobby or business?, June 2025
⁹Source: Business Victoria – Choose the right business structure, September 2022
¹⁰Source: Qld Government – Choosing a business structure, March 2026
¹¹Source: Australian Government – Choose a business name, n.d.
¹²Source: ASIC – Business names, n.d.
¹³Source: Qld Government – Choosing the right business location, March 2024
¹⁴Source: Australian Government – Do market research, n.d.
¹⁵Source: Australian Government– Develop your business plan, n.d.
¹⁶Source: Fair Work Ombudsman – Hiring employees, n.d.
¹⁷Source: Australian Government – Guide to starting a business, n.d.
¹⁸Source: Australian Government – Setting up your finances checklist, n.d.
¹⁹Source: Canstar – Merchant services: What are the options?, October 2021
²⁰Source: Australian Government – Get help with your finances, n.d.
²¹Source: Qld Government – Managing risk when starting up, November 2022
²²Source: Australian Government – Types of business insurance, n.d.
²³This is an optional cover and may be purchased at an additional cost. Available with Comprehensive and Third Party Fire & Theft Car Insurance policies only. Limits and exclusions apply. For full details, see the Car Insurance PDS.
²⁴Business Items Optional cover available with Home Contents policies only. Additional costs, limits, conditions and exclusions apply. For more details, see the Home Insurance PDS.
²⁵Source: Qld Government – Business insurance, September 2024
²⁶Public and Products Liability cover automatically included in Small Business Insurance policies. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
²⁷An additional cost applies for optional covers. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.