If we look at Australian startups the vast majority of those are in the software/IT industry. However, there is much smaller number of life sciences startups because they often have even higher risk of failure and require much larger upfront investment than their software-based counterparts. IT startups in Australia can leverage funding opportunities through crowdsourcing and angel investors. But majority of life science startups are deprived from these funding schemes. Except for several success stories such as CSL, Resmed and Cochlear, Australia does not have global pharma or medical device companies making partnering activities for local startups more challenging. Also, our domestic market for life science innovation is very small compared to the US and Europian markets.

In spite of significant obstacles there are opportunities, including government grants, available for Australian life science startups.

ATP Innovations has recently launched a medical device accelerator providing seed funding for small business as well as extensive networking and mentoring opportunities to tech entrepreneurs. The ATP Innovations also houses many startups in life sciences providing important entrepreneurial support network.

If you plan launching a biotech or a medical device startup, consider establishing business partnerships with Australian universities, hospital networks or medical research institutes. They generate high quality medical innovation, possess significant research capabilities and have preclinical & clinical facilities. There are also government grant opportunities available to startups that establish a partnership with an Australian academic institution; your company may be eligible for the NHMRC partnerships and ARC Linkage government grants that can fund both preclinical and clinical development. Both of these government grant schemes are competitive but can significantly leverage your startup’s financial resources.

Australian startups that commercialise intellectual property assets can be eligible for Commercialisation Australia (CA) government grants. CA grants start from $50,000 but can be as high as $2 millions. Additionally, the NSW government grant provides over $5 million in each round of funding to support eligible medical device startups. Finally, there are international funding opportunities that Australian life science companies can leverage.

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Once you estimated both components of your costs calculate your break-even point, the sales level at which your business has neither a profit nor a loss. The break-even analysis can also be used to evaluate a business expansion and provide a rough idea of whether your business is financially feasible.

In addition to expenses that must be invested to launch your startup, you also to account for operating cash to support the business until it begins to generate sufficient cash to meet continuing costs. Remember, in a start-up environment, it may take a long time for customers to find out about your business, compare your products or services with alternatives and decide to make a purchase. The amount of time required to begin generating a positive cash flow varies due to many factors including the type of business and payment terms that you offer to customers and suppliers offer to you. Several studies show that on average it takes three years for a new small business to break even.

Poor cash planning is one of the biggest causes of business failure.
There are multiple benefits in forecasting your cash flow. It can help you manage your cash, develop a schedule of cash receipts  and priorities for payment of accounts, a measure how unexpected changes can impact your business, help estimate the amount of money that you need to borrow and demonstrate to your lender that you have enough cash to make you loan payment on time.

Small businesses with double digit revenue growth often experience significant cash flow problems, inability to meet payroll, sloppy production and service. This can happen when your profit margins are low and you do not generate enough income from sales to maintain the necessary inventory to support quickly growing sales. As a business owner you should carefully manage growth of your startup. Grow slowly, or make sure that you can secure adequate finance for growth so that your business is not damaged.

Several studies have suggested that three out of five small businesses fail within the first year. One of the reasons for business failure is insufficient financial planning. As part of financial plan for your startup it is beneficial to prepare projected sales revenue, projected costs of goods sold, projected operating and labor expenses and projected profit or loss.

There are different approaches used to estimate your sales. One approach is to gather data from professional associations representing your industry and then extrapolate “industry average” to your target geography. Alternatively, you can estimate sales from expected market share for your product or service. If you will be operating a retail shop, a restaurant or other type of a local business, one of the most reliable ways is to analyze sales performance of similar enterprises in similar location. It is almost impossible to get things right the first time. In all business planning, but especially in the financial section, it is important to try different scenarios.

When assessing financial feasibility for your business idea one needs to be conservative. It is better to underestimate your potential sales because it is more straightforward to adjust your costs for a higher-than-anticipated sales than to control your costs when your sales estimate is too ambitious.

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On the other hand, you will need to pay franchising fees and royalties, will have to adhere to a restricted sales territory and will likely experience less freedom in your pricing strategy. As with any opportunity, both advantages and disadvantages must be examined before a decision to invest into a franchise is made.

Once you completed commercial due diligence of the franchise and you remain happy with selected franchise opportunity contact a solicitor specialising in franchising to help you review and negotiate the agreements that will enable your franchise to grow now and in the future. Similarly, if you are attracting a loan the best tool to communicate your proposal to a financial institution is by writing of a business plan that discloses all the changes you will be making in developing your new franchise. Additionally, benchmarking actual performance of your franchise against objectives in your business plan helps you understand how well you are doing.

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You should also perform own due diligence as many business owners want to sell their business because they anticipate unfavorable conditions in the future or because there are some fundamental issues with the business. Make sure that you fully investigate the business and assess its future potential.

When making due diligence ask a lot of questions regarding various aspects of an existing business. Some basic questions may include: Why is the business for sale? What is the business model? What kind of reputation does the business have currently and what is the business’ client base. You will need to carefully review all financial records and understand existing contractual obligations. Using services of a solicitor and an accountant can be helpful in finalizing your evaluation and purchase of the business.

Our company can provide independent review of a business that you consider for investment. We will assess products or services, market, competition, operations and can survey existing customer base.

It is likely that you’ll be making certain changes to the business after acquisition. In case if you are looking to secure a loan or other form of investment it is advisable that at least some sections of a business plan, if not an entire plan, are prepared. Include the business plan with your loan proposal based on what you expect the business will accomplish under your ownership.  As part of your business planning, you may decide to change business’ specific mission and objectives, sales focus, management team, financial forecasts.  Your banker will want to know that you have a viable business plan for operating the business that you are acquiring. For example, if you will be changing the financial structure of the business, this can have major impact on your company. That is why the financial plan is especially important.  Your lender will want to know that the business can be profitable under your financial proposal.

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