The power of startup metrics for founders

As a startup founder, you’ve got big ideas, and the resolve to make them a reality. But it’s not all about the concept – behind the scenes you need some solid planning and tracking. And that’s where startup metrics become important.

In this article we’ll do a brief dive into what they are, why they are important, and when to track them. Then we’ve got loads of other resources for you to keep the momentum up and learn more. Let’s go!

1. What are startup metrics?

You’ll always need the traditional profit & loss and balance sheet financials to run your business, but startup metrics highlight any problems and opportunities early enough to do something about them. Here are a few key ones you’ll want to be aware of from the start:

Startup financials: cash burn, cash runway, recurring revenue
Customer success: churn, customer acquisition cost (CAC)
Growth & expansion: customer lifetime value (LTV)
Saas metrics: leads, lead velocity rate, conversion rate, velocity

2. Why are metrics important?

Metrics help you see any potential issues before they happen, so you can use them to update drivers in your forecast assumptions, and to communicate to investors. In most cases investors will expect you to have a good grasp on your startup’s key metrics, so even if this is all new to you, it’s an essential aspect of planning. Get onto it from the start and make life a lot easier as you start growing!

3. How do you know which metrics to use, and when?

This depends on what stage you’re at! You won’t need to look at the cost and efficiency of securing customers, when you’ve only just landed your very first one, so when you’re just starting out, it’s as simple as the absolute number of customers you have, and any revenue and profit. Once you’ve got some customers onboard, you’ll need to be on top of how much they cost you to obtain (yes…this happens!), and how much they’ll be worth to you in the long term. It’s so important to know which ones to track and when – and we can make sure you are on top of this.

4. What happens next?

You might be at the beginning of your startup metrics journey, or part way through, and the great news is: we can help at any stage. And don’t forget, we are also experts in assisting SaaS startups with the more specific metrics they need to succeed. We will go over all the ways to calculate what you need to know and when, in a simple and easy to follow way.

Join us on the 11th April 2024 for our online event: ‘SaaS Startup metrics & dashboards’ to gain that extra insight you need, and if you’re ready to get stuck in further, BOOK A CALL with us for a chat, and get investors excited about your startups future.

Events coming up

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Major changes: Australian export grants upgraded for global edge

Austrade aims to enhance the Export Market Development Grants program to boost Australia's competitive export sector.

Navigating overseas growth: Top 10 international tax considerations

Expanding your business abroad? Read about the top 10 international tax considerations for Aussie businesses.

Thinking of doing R&D in Australia? Here’s what you need to know.

A massive drawcard for doing business in Australia is the R&D Tax Incentive. Read this article to get the low-down.

We’re here while you build your dream

And for everything in between

Major changes: Australian export grants upgraded for global edge

This article originally appeared on Avant Group’s website.

In a significant overhaul aimed at enhancing the effectiveness of the Export Market Development Grants (EMDG) program, Austrade is setting its sights on fostering a more competitive and prepared Australian export sector.

Key changes will commence for grant agreements issued after July 2024 and include:

Eligibility changes including a requirement for a minimum trading history of 2 years and $100K revenue in the previous FY prior to applying.
Ability to demonstrate capacity to spend $20K on eligible export promotional expenditure
A more complex upfront grant application and assessment process
A need for export training or an export readiness test to be completed
More powers for the Austrade CEO, including discretion to nominate countries for eligible expenditure
A use it or lose it model – if you have an agreement in place and don’t claim, then you lose a year of funding (noting a company is entitled to a maximum of 8 claims)

The EMDG program has historically played a pivotal role in supporting Australian SMEs to venture into or expand within international markets. However, the grant’s impact diluted following the 2021 modification, which led to a notable decline in grant values due to an inflated pool of eligible applicants.

The latest reforms, include implementing “stronger eligibility requirements” to temper demand and enhance grant effectiveness. These requirements encompass rigorous “export readiness testing and training” and stipulate a minimum annual turnover to curtail the number of lesser-sized firms benefiting, addressing Austrade’s concerns over underspend among smaller entities.

The forthcoming changes, heralded by a shift to a “first-in, first-served” distribution model, are designed so that only the most export-ready small to medium-sized enterprises (SMEs) benefit from the government’s matched funding initiative. This pivot comes in response to the challenges and opportunities presented by the global trade landscape, aiming to uplift the value of individual grants and, by extension, Australia’s export prowess.

These changes are all driven due to a sever underfunding of the program, which will see the funding pool decrease yet again, from $154M down to $110M in the next cycle.

Central to these reforms is the alignment of the tier three EMDG grants with the federal government’s trade diversification strategy. By focusing on priority countries, the program aims to support more mature SME exporters in making a significant impact on selected markets, although the priority regions remain undecided pending Trade Minister Don Farrell’s approval.

Critics of the EMDG’s previous iteration pointed to the loosened eligibility criteria that allowed underprepared businesses to qualify for grants, an issue that Austrade deputy chief executive for policy and programs, Philippa King, and general manager for visitor economy and client programs, Samantha Palmer, highlighted. The move towards a “first-in, first-served” model is intended to reward companies with viable export strategies and the potential for success on the international stage.

The revision to the EMDG, marked by the EMDG Amendment Rules 2024, introduces an entitlement-based framework that demands applicants to demonstrate a minimum annual turnover of $100,000 and the capacity to invest $20,000 in eligible marketing activities. This adjustment, coupled with the Austrade chief executive’s enhanced discretionary powers to modify eligibility criteria and target funding more precisely, is set to usher in a new era of strategic export support.

By raising the bar for eligibility and focusing on export readiness, Austrade aims to cultivate a cohort of SMEs that are not only prepared to navigate the complexities of international markets but are also positioned to contribute meaningfully to Australia’s economic growth and diversification efforts.

As the program anticipates its next application round in late 2024 or early 2025 and recipients will be eligible to receive a two-year funding agreement.

The EMDG program is aimed at empowering Australian exporters with the tools, resources, and support necessary to achieve sustainable success on the global stage, marking a significant step forward in the country’s trade and export strategy.

Avant Group is a key supporter of the initiative, having worked with the program for over 10 years and continues to lobby for increased funding behind the initiative given these changes, whilst a positive step in ensuring eligibility is adhered to, will obviously result in even less companies receiving support.

Take off with R&D tax and the EMDG

Looking to fund your business? The R&D Tax Incentive, R&D Finance and the EMDG could be the funding you’re looking for. Join our free online seminar and learn about these popular Government supports available for startups and scale ups. Three industry experts will be available to answer your questions, too.

Events coming up

We're not running any events at the moment.

The power of startup metrics for founders

Startup metrics are vital for founders, offering early insights into problems, shaping forecasts, and communicating effectively with investors.

Navigating overseas growth: Top 10 international tax considerations

Expanding your business abroad? Read about the top 10 international tax considerations for Aussie businesses.

Thinking of doing R&D in Australia? Here’s what you need to know.

A massive drawcard for doing business in Australia is the R&D Tax Incentive. Read this article to get the low-down.

We’re here while you build your dream

And for everything in between

Navigating overseas growth: Top 10 international tax considerations for Aussie businesses

Expanding your business overseas can be a strategic and exciting move to tap into new markets and unlock growth opportunities. But before you book those tickets, there are some complex international tax issues to think about.

From structuring your overseas presence to managing cross-border transactions, careful planning is critical to ensure compliance and optimise tax outcomes.

In this article we’ll explore the top 10 tax considerations that Australian businesses should keep in mind when venturing beyond home shores.

1. Structuring the expansion: Foreign branch, subsidiary, or holding company

You’ll need to decide how to structure your overseas presence, get it right at the start and you won’t have to deal with headaches later on! Our advice is to keep things as simple as possible, because you’ll have enough going on without worrying about complex business structures and international agreements.

So will it be a foreign branch, subsidiary, or a foreign holding company? Each option has distinct tax implications, and understanding the nuances is crucial for making informed decisions. To help make this decision ask yourself the following questions:

Why are we expanding overseas?
What are the tax obligations of each structure?
How will we get funds back to Australia, and what are the tax implications?

Learn more about the different business structures with our free Expanding to the UK guide.

2. Capital gains tax: rollover relief

If opting for a foreign holding company, you should explore the availability of CGT rollover relief. CGT is the tax on the profit made from selling/disposing of assets (shares, property, valuable items etc). Determining whether the foreign holding company will be deemed an Australian tax resident company is vital for compliance so is up the top of our list of tax issues to investigate.

3. Australian tax residency

A foreign subsidiary will be considered an Australian tax resident company, and you will have to lodge a company tax return. Keep in mind there will be increased compliance obligations to go along with this.

4. Understanding the impact on Aussie shareholders

Controlled foreign corporation (CFC) rules are part of the tax system to prevent delaying tax payments by using low-taxed entities abroad. These rules apply when the income of an entity isn’t currently taxed for its owners. If a foreign company isn’t considered an Australian tax resident, you’ll need to figure out whether its income is ‘passive’ or ‘tainted’. Assessing whether controlled foreign company rules apply helps in managing potential tax liabilities.

5. Taxation of profits when coming back to Australia

When bringing profits back to Australia you’ll need to understand how tax jurisdictions handle double taxation. Many countries aim to prevent double taxation by either exempting dividends already taxed elsewhere, or providing a tax credit for foreign taxes paid. While most tax policies aim to avoid double taxation practical challenges may arise. An example is that Australia’s franking regime presents scenarios where offshore profits – taxed abroad – might face additional taxation for Australian shareholders, without comprehensive double tax relief. Understanding these nuances is essential for effective cross-border financial management and optimising the cash flow. But there are alternative solutions to avoid this international tax burden so let us know the situation and we can help.

6. Taxation of gains on disposal: asset sale vs share sale

Considering the method of disposal, whether through an underlying asset sale or a share sale, is crucial for understanding how gains will be taxed in the long run. Assets like shares or property are treated on capital account where you avail yourself of CGT discount, while sales of income or derivations of income (like dividends, consulting, earnings) are treated on revenue account and taxed at higher marginal tax rates.

7. Effective tax rate on foreign profits/gains to shareholders

Understanding the effective tax rate on foreign profits and gains flowing up to the ultimate shareholders is essential for evaluating the overall financial impact of the expansion.

8. Intragroup transactions and transfer pricing

International transactions must adhere to rules that include transfer pricing, and follow the ‘arm’s length’ principle. This means they must behave as if they were dealing with each other at arm’s length and not related, to guarantee fair market conditions.

9. Foreign withholding taxes on intragroup transactions

Certain intragroup transactions may trigger foreign withholding taxes, such as royalty withholding taxes. Identifying and managing these obligations is crucial for a smooth international expansion. Look into where a foreign tax credit is available so there is no additional tax on top.

10. Employee Share Schemes (ESS) and Employee Share Ownership Plans (ESOPs)

If your employees have shares, you’ll likely already have an ESS in place. If they have share options, you’ll have an ESOP in place.
For Australian companies with existing ESS or ESOPs, moving them up to the foreign group parent company requires meticulous planning to avoid triggering adverse tax consequences for participants. Learn more about ESS and ESOPs and why share options might be the better choice in this article.

International tax summary

Jet-setting into international territories unleashes a rollercoaster of tax considerations that need savvy navigation. Being proactive to ensure compliance and minimise tax liabilities will mean positioning yourself for success in the global marketplace. Aussie founders relocating for business expansion also need to look at personal tax residency issues, and we’re here to help with every step, be it business or personal. You can find us here.

Events coming up

We're not running any events at the moment.

The power of startup metrics for founders

Startup metrics are vital for founders, offering early insights into problems, shaping forecasts, and communicating effectively with investors.

Major changes: Australian export grants upgraded for global edge

Austrade aims to enhance the Export Market Development Grants program to boost Australia's competitive export sector.

Thinking of doing R&D in Australia? Here’s what you need to know.

A massive drawcard for doing business in Australia is the R&D Tax Incentive. Read this article to get the low-down.

We’re here while you build your dream

And for everything in between

Thinking of doing R&D in Australia?

Here’s what you need to know.

With your startup growing you’ll naturally start to consider doing business overseas. There’s a lot to think about around this (we can help with all of it!), but in particular there is one area that we think is a massive drawcard for doing business in Australia – the R&D Tax Incentive.

Fortunately, we have an actual expert in this field working here at Standard Ledger – John Nixon. John has guided hundreds of tech startups (such as Smart Paddock and Gaia Project Australia) through the R&D tax claim process with over $20m in tax offsets realised for our clients (and counting!).

With an attractive R&D tax offset rate and environment here in Australia, now is a great time to make the decision to do some of your R&D here.

Here’s how you can get started.

What is R&D

You’ve likely looked into the R&D incentives in the country you are already based in, so let’s have a quick review of how it looks in Australia.

The R&D Tax Incentive (RDTI) is a major source of funding for startups and SMEs. It’s an Australian Government program that in the last full financial year provided nearly $5 billion of support to over 12,000 companies for their R&D activities. Each year, startups and scale-ups across Australia use the RDTI to build and grow, without giving up equity.

Why do R&D in Australia?

Great question. You might have briefly considered this, then thought it would be simpler to have your R&D close to home. So let’s have a look at why it would be worth bringing some of your R&D down under.

Quick facts:

The RDTI program allows companies to receive a tax rebate of up to 43.5% on eligible R&D costs
The program offers companies the opportunity to significantly reduce costs, lower risk and accelerate time to market

“R&D tax is an annual critical source of funding for us and we’ve used Standard Ledger since the beginning. It’s also been crucial to have the R&D finance option to get us through until we could get some more funding.”

– Darren Wolchyn, CEO and Founder, Smart Paddock.

With the world better connected than ever, the expansion of startups to other countries is more and more tempting, and as a startup we know the global appeal of expansion (we’ve done it ourselves!). We can make it simple for you to set up and operate a subsidiary company in AU thanks to our handy guide recently produced on how to do business in Australia.

We’ve already supported startups expanding globally between Australia, UK, US, Canada and NZ, and understand the complexities in doing so. So let’s help you keep it simple, and also affordable with our unique set pricing, so you’ll know the cost upfront with no unwanted surprises!

What are the main considerations?

The key points to consider:

In order to claim the RDTI you need to do your R&D through an AU entity, and can only claim R&D that is performed “in country” in AU
The program is run by the Australian Taxation Office (ATO) and AusIndustry. It’s based on self-assessment, which means you need to decide if you’re eligible before applying
Generally, you must claim at least $20,000 of eligible annual expenses, and there is currently a $150 million cap on claims
It’s important that the problem you’re trying to solve through R&D is technical, not commercial, in nature (usually, R&D is required for testing if something is even possible, rather than simply testing if your customers would use it)

Consider applying for the RDTI if you:

Are a company developing (or planning to develop) a unique, non-trivial software, hardware, engineered or manufactured product, process or service
Can describe these developments as a series of experiments with unknown outcomes from which you have learned along the way
Have spent at least $20,000 on eligible R&D expenses in the last financial year, or have: made a monetary contribution to a CRC under the Cooperative Research Centres (CRC) Program; or engaged a registered Research Service Provider (RSP) to do R&D on your behalf

How does it work

It can be complex and time sapping. Eek. That’s why we handle it for you with a simple process and uniquely simple fees where you’ll know what it’ll cost, from the outset. Hurray!

Basically, your company needs to be eligible (detailed below) and so do your project activities and their costs.

As for the logistics of it all, we’ll craft the narrative that supports your claim. If you need us to prepare this technical description, we might need to charge extra but we’ll discuss it first. We’ll also calculate the expenses you can claim (up to a 43.5% tax offset on eligible expenditure in the prior financial year).

We’ll then bring it all together in your AusIndustry application. AusIndustry will register your application – registration deadline is 30 April for the previous financial year ending 30 June. We’ll also prepare the tax schedule that needs to be lodged alongside your company tax return with the ATO. Remember, this is an annual opportunity!

What you receive as a tax benefit depends on turnover and profitability. If you’re profitable, your company tax will be reduced by 18.5% of eligible expenses. If you have enough tax losses, you’ll receive 43.5% of your eligible expenses back as cash.

“John and the team have really understood our R&D story from day one, and have always had a plan for it, Were in the third year of working together now, and it’s been really great”

– Nadun Hennayaka, CEO and Founder, Gaia Project Australia

Am I eligible

There are two sides to this question, and to put it very simply, to be eligible:

YOU

Must be a company that is developing (or planning) a unique, non-trivial software, hardware, engineered or manufactured product, process or service
Need to be able to describe these developments as a series of experiments with unknown outcomes from which you’ve learned along the way

YOUR COSTS

Generally must total at least $20,000 on eligible R&D expenses in the last financial year

Can include remuneration of employees and Australian contractors
Can also include equipment, rent and other R&D related overheads

Help is available

We love to help and we know exactly what you are going through! We are in a unique place as an actual startup to really understand what you need and want. With hundreds of tech and startup clients, R&D complexity is our bread and butter, so we’re not afraid of complex claims, in fact we enjoy it!

You can find out more about our R&D support, and also how to go about doing business in Australia here.

It’s always good to talk too, so please reach out if you’re looking into this. We’re here to chat – just choose a time that works for you. We’re looking forward to learning about your business and helping you with R&D in Australia.

Events coming up

We're not running any events at the moment.

The power of startup metrics for founders

Startup metrics are vital for founders, offering early insights into problems, shaping forecasts, and communicating effectively with investors.

Major changes: Australian export grants upgraded for global edge

Austrade aims to enhance the Export Market Development Grants program to boost Australia's competitive export sector.

Navigating overseas growth: Top 10 international tax considerations

Expanding your business abroad? Read about the top 10 international tax considerations for Aussie businesses.

We’re here while you build your dream

And for everything in between

Founder story: Iggy Jovanovic from Gerford AI

The Gerford AI founder story

Meet Iggy Jovanovic, a sports enthusiast who truly believes in the power of small improvements, even just 1%, for athletes. Through his company, Gerford AI, he’s doing his part to make a difference in the world of sports.

We recently supported Founder, Iggy Jovanovic, with financial modelling to help identify growth opportunities and allocate resources accordingly. We’re happy to share his journey with you here. Plus, there are some useful insights for new entrepreneurs in his story!

What is Gerford AI?

Gerford AI’s software employs computer vision to track athletes and provides player and match analytics post-game.

We currently specialise in table tennis and mogul skiing, but the AI algorithm can be adapted for other sports.

Wow okay! So… what problem are you solving?

The big guys like IBM and Oracle cover the Tier 1 sports, but Tier 2 and 3 sports (not table tennis), not at all.

We jumped into that gap about two and a half years ago. So we are automating performance analysis for athletes in sports that may not have received attention. We are doing that by taking a close look at relevant gold medal winners and opponents of our clients and providing them with specific advice on how to beat them.

What was your light bulb moment?

We started out relying on visual data from fixed cameras, so COVID with its travel restrictions hit us hard. Our light bulb moment came from figuring out a way to remotely analyse games using broadcast feeds or streams. No one was doing that at the time, and it opened up a whole new world for us.

The Tokyo Olympics in 2021 came just in time – barely anybody was allowed on-site, which meant that our freshly developed analysis via stream was just perfect. This product adaptation opened up new possibilities and laid the foundation for our current growth.

What stage are you at now?

We’re coming to the end of our third year and the business is about to grow a lot. Currently, we have four full-time team members and 15 contractors and we’ll soon be hiring more people.

We’re also entering the world of esports. After analysing it thoroughly in 2023, we saw some great opportunities.

We’re also expanding into other sports markets, like swimming in U.S. colleges. There are a number of colleges with competitive swimming as a program that are looking for a solution, which we have. So, in a nutshell, we’re gearing up for more sports, more staff, and exciting times ahead!

What’s the biggest lesson you’ve learned so far?

A lot of people talk about “follow your passion” but not everybody has a passion, right? What I figured out when looking at my employees was that instead, you should just follow your curiosity. It is ok to not have a passion – follow your curiosity and eventually it will lead you down the path that stimulates you, and then you will also be successful.

For founders specifically: I think business is tougher and more competitive than it’s ever been. The funding market has settled down quite a bit throughout the last year or two, which is weeding out a lot of people who just want to start a business for fun. You will have to put in a lot of time and energy to succeed and be willing to move.

That’s the learning I want to share – to be successful, you need to be nimble and agile to change. Be prepared to adjust.

How have we helped?

Standard Ledger came into the picture early this year when we were gearing up for growth opportunities and planning ahead for the year 2024. I needed someone to help me review and model our financial projections, and your help with this has been incredibly valuable. We made significant changes and conducted various financial modelling exercises, especially focusing on specific sports and markets. This helped us reshape our strategy, identify areas for growth, and optimise resource allocation. As a result, we are now strategically positioned to expand our reach and impact.

What personal sacrifices have you made?

Running Gerford AI has meant giving up a lot on the personal front. I’ve been working seven days a week, and that’s already a pretty big sacrifice. Family time has taken a hit; I’ve got two teenage sons who don’t get to hang out with me as much as they’d probably like. It’s a bummer. And then there’s the social stuff – hanging out with friends, catching movies, enjoying a good meal at a restaurant – all things I love but can’t really do right now.

I know it won’t be like this forever, though. At some point, I’ll have the opportunity to get back to these activities. In the meantime, my days are pretty much all about work. I try to squeeze in some exercise whenever I can, just to keep things sane. Oh, and family dinners during lockdown – that’s a non-negotiable to keep us all connected.

Events coming up

We're not running any events at the moment.

The power of startup metrics for founders

Startup metrics are vital for founders, offering early insights into problems, shaping forecasts, and communicating effectively with investors.

Major changes: Australian export grants upgraded for global edge

Austrade aims to enhance the Export Market Development Grants program to boost Australia's competitive export sector.

Navigating overseas growth: Top 10 international tax considerations

Expanding your business abroad? Read about the top 10 international tax considerations for Aussie businesses.

We’re here while you build your dream

And for everything in between

Expanding to the UK: Set up checklist

Thinking of expanding from AU to the UK?

Great idea! Speaking from experience, the UK is a great place to be in business. It’s big, brimming with opportunity and very well mannered 😄 .

But with expansion come all the niggly details of setting up in another country. It’s easy to be overwhelmed, so we’ve put together a checklist to help you focus and attack that expansion to-do list. Tally ho, let’s go!

Just a reminder that this checklist is general in nature. Please don’t take it as personal tax, financial or other advice (you need to speak to us for that).

1. Choose your business structure

In most cases, a wholly owned subsidiary is the best option. A subsidiary is an incorporated body (a company) and a separate legal entity from the Australian parent company. If you grow significantly in the UK, you’ll almost always end up with this structure.

Benefits:

Easier to engage with the local market because customers/investors usually prefer dealing with a local entity
Simpler to repatriate funds back to Australia
AU taxpayers can typically claim a tax offset for the tax paid by the UK company (called ‘double taxation relief’)
Can access UK R&D Tax Credits, grants and investor tax relief schemes (if eligible)

Note:

Profits of UK activities will be taxed in the UK at lower rates, but you can’t offset any AU tax losses

Watch out for: IP. Make sure your IP is sitting in the right place (AU or UK). Check with a startup friendly lawyer (like our friends at Sprintlaw).

2. Register with Companies House

All UK companies need to register with Companies House (it’s similar to ASIC in Australia).

You’ll need:

Company name
Directors details (you don’t need a local director but it can make things easier)
Registered address (for official mail – there are services for this if you don’t have anyone in-country)
Articles of association (similar to a company constitution in Australia)

Once you’re registered with Companies House, there are annual requirements including annual confirmation statements and accounts.

Eyes glazing over? Skip down to point 8 below 👇 .

3. Register with HMRC

HMRC (HM Revenue & Customs) is similar to the Australian Tax Office (ATO).

This is where you need to register for:

Corporation tax (mandatory)
VAT (like GST, but 20% once you reach the company income threshold)
PAYE (like PAYG)

4. Key considerations for UK employees

If you’re employing people in the UK, you (or your payroll provider) will need to manage:

Pension (like superannuation in Australia)
- Employees are ‘auto-enrolled’ but can opt out (completely)
- Contribution rate is set in employment agreements
National Insurance Contributions NIC (like Workcover in Australia)
All pay-as-you-go tax through payroll

For other key considerations for international expansion, Think and Grow has put together their top 10 tips.

5. What to consider if you’re moving to the UK

If you or a co-founder/team member are planning to move from Australia to the UK to support your expansion, you’ll need to:

Apply for a Visa if you’re staying for more than 6 months (check the Startup, Innovator, Skilled worker and Global talent visas)
Consider capital gains tax implications: If you own shares in your startup, the Australian tax system will likely want to take your capital gain before you permanently leave (and your other assets too) so this is where professional tax advice is important (our tax guru is happy to help)

6. Banking

Traditional bank accounts can be difficult to open in the UK because you need a local address and director.

Online banks are usually much easier to set up and more flexible because your customers can pay into a local online account, plus you can also set up company and employee cards. We typically use Airwallex and Wise for online banking.

Then, once you’ve got a local presence in the UK, it’s usually worth opening a traditional bank account as a back up and because this (and a local director) are often required for some capital raising requirements in the UK.

7. Want an Expanding to the UK Guide?

No problem! Here’s one we prepared earlier. It covers all the points in this checklist in more detail, and also looks at funding support, such as the Export Market Development Grant, R&D tax relief and UK startup concessions.

8. Where to get affordable help

If you’d like to outsource the more niggly (and boring!) side of setting up in the UK, we have a service exactly for that. As with all our services, we’ve listed our prices online as much as possible to help make things as clear and transparent as we can.

We also have ongoing UK services to handle your core accounting needs in the UK (bookkeeping, tax, payroll, Companies House compliance) as well as growth services such as financial modelling, valuations and fractional CFO support.

We’re also happy to share our own UK expansion experience, and connect you with other AU-UK founders and key UK connections where we can. Simply connect with us via one of our services, or choose a time for a chat.

Events coming up

We're not running any events at the moment.

The power of startup metrics for founders

Startup metrics are vital for founders, offering early insights into problems, shaping forecasts, and communicating effectively with investors.

Major changes: Australian export grants upgraded for global edge

Austrade aims to enhance the Export Market Development Grants program to boost Australia's competitive export sector.

Navigating overseas growth: Top 10 international tax considerations

Expanding your business abroad? Read about the top 10 international tax considerations for Aussie businesses.

We’re here while you build your dream

And for everything in between

Selling a business? 8 key steps for startup founders

When you’re running a business, especially in the fast-moving startup world, you should regularly think about whether to:

Raise more funding to reach profitability
Hold onto a profitable business and keep growing
Sell your business and pivot into something else

Your answer will depend on many variables unique to you, your situation and your business.

If you decide to go ahead with option 3 and sell your startup, you’ll want to be as prepared as possible to extract the maximum value for your hard work.

Through our CFO work with founders and business owners, I know selling a business can be a very emotional process so it helps to have clear guidelines and choose experienced advisers. Here are 8 key questions to help steer you in the right direction.

1. Why are you selling?

Like all business decisions, it’s good to start with asking yourself “why”. Why are you selling your startup? Here are the main reasons we commonly see.

You need to sell for financial reasons (known as a ‘distressed sale’).
You’re emotionally spent. Your business might be profitable, or approaching it, but you don’t have the energy to keep driving it forward. In this case, you might want to sell your business outright or stay involved as part of a bigger company. This is unlikely to be a huge exit for you, but it might be the mix of immediate reward and ongoing involvement you’re looking for.
You’ve been working towards this since founding your startup. You’ve built a highly profitable business fast, and now you (and your investors if you have them) are ready for a profitable exit.

Understanding why you want to sell your business will help you focus your energy on attracting the right type of buyers.

2. Why would someone buy your business?

You also need to be clear on why someone would want to buy your business. Often, it comes down to one or more of these things.

They want your team – if this is the case, you need to make sure all your employment contracts are robustly in place.
They want your tech – this means you need to own it as much as possible (rather than having parts of your product rely on licensed tech). If you need to build out more of your tech to ensure an unbroken chain of ownership, it’s often worth it because buyers tend to look at what they might have to fix/build themselves, and discount their offer accordingly.
They want your website traffic – if this is the case, potential buyers will look at where your traffic comes from and any costs associated with it, such as advertising or partnership agreements that might need to be renegotiated beyond the business sale.
They want your intellectual property (IP) – this is quite common with earlier stage startups but it’s not always about patents. Worldwide patents take years to achieve and can be notoriously difficult to defend. Often the IP that buyers want involves whatever patents you do have but more importantly, the shortcut that your dev work gives them to a profitable product.

Buying a business is a big deal (obviously!) so expect potential buyers to go deep in your business, looking behind every door to see what they’re actually buying, what it will cost them to continue and what they can use as leverage to negotiate a cheaper price.

In my experience, considering the due diligence involved at this early stage – before you approach potential buyers – leads to a much smoother sale process and ultimately, a better price for you.

3. Who are your potential buyers?

Now it’s time to consider who your potential buyers are and how to connect with them.

Depending on your answer to question 2 above, you might consider focusing on:

Larger companies in your sector or industry that could see your business as a strategic purchase
Private equity firms that could consider your business attractive for their portfolios

It’s also worth speaking to a broker or M&A adviser to connect with potential buyers. At this point though, you need to be ready for ‘go time’. That means having your financials and due diligence documentation in good shape in case they request it, and being ready to dedicate the hours of time it takes to negotiate a successful sale.

4. What type of sale are you aiming for?

Broadly speaking, there are two main types of business sales – assets and shares.

An asset sale means you/your investors retain shares in your company but sell its assets, such as your technology stack or intellectual property. An asset sale is usually simpler from a tax perspective because any sale profits go to existing company owners, who are still shareholders. However, when you/your investors do sell your shares, you won’t be able to access the ESIC capital gains tax concessions that might have otherwise been available (if your company previously qualified as an ESIC).

A share sale means you’re selling your business “warts and all” so the buyer takes on any outstanding tax issues, and team or investor disputes (not that you should aim to sell it with these as it can lower your sale price!). You will need to sign personal indemnities and warranties, which can make you liable for any unforeseen tax liabilities. On the plus side, if your company qualifies as an ESIC, your investors should be able to access attractive capital gains tax concessions.

5. What sort of valuation do you need?

A high one! Jokes aside, there are different business valuation methods and it’s worth having a general understanding of them. They include:

Strategic value – a value that potential buyers will arrive at, based on the synergies they see between their business and yours in terms of tech, IP, team, website traffic or your customer base
Net present value – assessing your cashflow (if you have any) over a 5 year period, taking into consideration the cost of capital and your growth rate, viewed against a risk–free asset (e.g. the value of a treasury bond)
Price-to-earnings (PE) ratio – your current share price relative to earnings per share on a backward or forward-looking basis (you might also hear this called a ‘price multiple’ or ‘earnings multiple’)

Valuations are not set in stone and, startup valuations in particular, are not an exact science. It’s more about having a valuation range to confidently negotiate from. This is definitely an area to seek expert advice on because after all, it’s your future we’re talking about.

6. What if you need to raise funds while selling a business?

This can make things more complicated but it does happen. If you need to do this, it’s important to be transparent about it with potential investors and buyers.

In this situation, you might be best to use a convertible note as the investment instrument. This means if you sell your business at a higher valuation, the note converts to equity for your investors at that higher valuation.

Sometimes the founders are unsure of the valuation and structure of the deal as a safe note. Typically this means that investors get an advantage of a discount of around 20% on the next raise where the valuation must meet a hurdle before the next funding round.

On the other side of the equation, buyers might want to go with a sale price that involves a mix of cash and an ‘earn-out fee’, which you can achieve depending on how your business performs over a period of time, such as the next 12 months.

7. How and when do you tell your team?

It’s usually best to prepare your team early for a potential sale for many reasons, including that the buyer might want your team (and possibly you and any co-founders) to stay on.

If your team has shares or share options in your company, make sure they understand the potential upside for them and have time to set up their own trusts or make other financial decisions, should they want to.

It’s also important to understand that if your team has share options (instead of shares), it means they will automatically vest (convert to shares) when your company is sold. In theory, this means they can cash out and leave in the same way that they could if they’d held shares (instead of share options).

8. What are the main tax considerations?

As you’d expect, there are many tax considerations with a business sale. After all the hard work of developing a product and founding a business, you don’t want to lose too much of your profit in tax – at least no more than what’s absolutely necessary.

When working with your tax adviser on this (well before you sell up), they’ll talk you through:

The option of setting up a family trust for more flexibility
The rules around ESIC status, if your company qualifies for it, including the 3-year minimum requirement to access capital gains and other tax deductions
The possibility of deferring capital gains tax by exchanging shares for scrip (aka new shares in the company you’ve sold)

Help is available

Selling a business is a big decision with the potential to have a big impact on your life. Having experienced advisers in your corner can make all the difference. We’re here to help at every step, from making sure your accounts are in order to prepare financial models and startup valuations, helping you find the right buyers and acting as your CFO in negotiations.

For now, if you simply want to talk through your options, we’re happy to do that too. You can find us here.

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Giving away shares in your startup?

Why it might not be the best idea and what to consider instead

If you’re considering giving shares to an incoming co-founder or startup team member, you’re definitely not alone.

As accountants and CFOs for startups, we’ve helped clients with employee equity plans for years. However, they are on the rise and we’re often asked questions about the tax implications of different equity options.

Here, I’m sharing general information to help you understand the difference between shares and share options from a tax perspective because there is a big difference, and it’s well worth understanding for you and your team’s sake.

But first, please remember this is not personal advice for your situation (you need to speak to us for that 🙂 ).

Why does it matter?

Especially in the early stages of a startup company, it’s tempting to think it doesn’t matter if you give co-founders/team members shares or share options. What’s the difference, if the company is valued at nothing or very little?

Even at later stages, many founders and operators don’t understand the difference and want to either give away shares for free or at a discounted price. Here’s why you need to think twice about that.

Tax implications of giving away shares

If you give someone free shares, particularly if they’re an employee, they have to pay income tax on them every year they own them.

If your company is already of significant value, that means employees will be paying a significant amount of income tax on shares each year, even though they won’t see any value from those shares for quite a while (assuming they want to hold them while your startup increases its value even more).

If you try to get around this by structuring the gift as a loan to fund the shares you’re giving away, the ATO’s Division 7A regulations can kick in. This can get complex but in short, it generally means the loan will be treated as a dividend – subject to income tax – unless its paid back within the same financial year.

Even if your company isn’t worth much just yet, shares involve more paperwork than share options. So if your employees have shares, you need to do filings with ASIC to satisfy its annual compliance requirements.

Tax implications of giving shares at a discount

If you make shares available to team members at a discounted price, the ATO’s Division 83A can apply. This means any discount of more than 15% of the shares’ market value is treated as assessable income upfront, making it subject to personal income tax.

Many of our clients include share options as part of a remuneration package. Often, that includes a salary component and share options at a discounted rate (to make it attractive to the incoming team member) and subject to vesting conditions (to incentivise them to stay). Here’s an example.

You want to hire Sal, a software developer, so you offer her a base salary and share options in your company at a discount of 15%, on the provision that she’s with you for at least 3 years.

After that time, if Sal decides to convert her share options to shares, and then sell them, she’ll be taxed on the gain calculated by the market value minus the discounted share option value.

So if the market value of the shares was $10,000 originally, she bought them for $8,500 (with her 15% discount). If she sells them 3 years later for $50,000, her profit of $41,500 will be taxed ($50,000 – $8,500). This is not a deterrent for Sal (when considered against the tax implications of other options) – it’s just something to be aware of.

More info

Offering equity in your startup to other people is a big deal (pun intended). It’s well worth taking the time to get it right, for everyone.

There are a lot of other resources out there to help with this, including this thorough compilation. We are also happy to help so please do reach out if you’d like to chat.

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Navigating overseas growth: Top 10 international tax considerations

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Founder story: Nadun Hennayaka from Gaia Project

The Gaia Project founder story

Nadun Hennayaka was once a corporate IT professional. Now, he’s leading an agtech startup with a big vision for humanity, and a recent NASA award under its belt.

We’re fortunate to work with Nadun through our R&D Tax Incentive service. And we’re glad to bring you his story so far – a classic entrepreneurial tale of dedication and determination.

What is the Gaia Project?

Gaia is an old Greek word for ‘Earth’ so our project is the ‘Earth Project’. Our vision is to bring the relationship between humans and the biosphere back into balance.

Wow okay! So… what problem are you solving?

Ultimately: World food security.

The world’s population is increasing and traditional agriculture can’t keep up because it requires an unlimited amount of land, water, nutrients for fertiliser and so on.

Controlled environment agriculture – such as large-scale commercial greenhouses – goes some way to solving the problem but it requires a lot of energy (e.g. for artificial lighting) and water, too.

So we’re coming up with ways to minimise these inputs while maximising outputs.

Our main tech at the moment is a channel system that works inside commercial horticulture systems. Our tech enables more plants to grow in these systems, because the channels automatically expand/contract by length and width as the plants need them to without the need for expensive robotics or labour to move plants around.

What was your light bulb moment?

I’ve always wanted to make a difference in the world. My background is in corporate IT but I’ve always had a passion for engineering. I was working in renewable energy in South East Asia when I stumbled across the concept of vertical farming.

Then one day, I was using an old telescope – I’m an amateur star gazer – and I thought: Why can’t we use that principle in farming?

What happened next?

I quit my corporate IT job, cleaned up the house and built an indoor farm in it for testing. It was in Brunswick, Melbourne, and it was during COVID so luckily there weren’t any rental inspections!

My house was my workshop for two years. I came up with a new design and did R&D and patents.

What stage are you at now?

We’re all in! So far, it’s been going really well.

We bootstrapped for a while and have angel investors, and are currently raising seed funding to build the tech for our pipeline of global customers.

We’ve also built tech for NASA and were recently selected as one of three international teams to go through to the third and final round of NASA’s Deep Space Food Challenge.

How have we helped?

Standard Ledger has helped with a critical source of funding for us – the R&D Tax Incentive, which gives us a few months of runway every year.

John and the team have really understood our R&D story from day one, and have always had a plan for it. We’re in the third year of working together now, and it’s been really great.

What personal sacrifices have you made?

I’ve sacrificed a reliable salary and part of my soul 🙂 . I work on Gaia Project seven days a week.

I don’t know if I could do it again but I definitely have no regrets. It’s fine tuned now because we had to work on a really small budget. I’m happy with how everything is working out.

There’s always a price to pay – you can’t ask for fire without putting the wood in. For me, the corporate world was great but unless you really love your job, it’s hard to do for 30-40 years.

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The power of startup metrics for founders

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Major changes: Australian export grants upgraded for global edge

Austrade aims to enhance the Export Market Development Grants program to boost Australia's competitive export sector.

Navigating overseas growth: Top 10 international tax considerations

Expanding your business abroad? Read about the top 10 international tax considerations for Aussie businesses.

We’re here while you build your dream

And for everything in between

Tax planning (yep, it's a thing)

Starting now – before 30 June

We get it. Tax planning doesn’t sound like the most appealing way to spend your time.

But how does saving money for your business sound? Chances are, you can with our 9 quick points below. Which ones can your business action?

Starting… now. Because a little tax planning now should be well worth it come 30 June. So don’t look away! Look down.

🖥️ 1. Claim immediate deductions if purchasing assets
As long as your turnover is under $5 billion (!), you can likely claim an immediate tax deduction on business plant/equipment installed and ready to use by 30 June 2023. Think tech or vehicle purchases for example (note that deductions on cars are capped at $60,733), but only if you actually need them.

⏳ 2. Pay super guarantee obligations on time

If you want to claim deductions on super contributions come 30 June, make sure you’ve paid them by then (simple but often overlooked).

💳 3. Prepay FY24 expenses by 30 June

Businesses with less than $50 million turnover can claim deductions on prepaid expenses due within the next 12 months. So if your cashflow permits, consider paying FY24 expenses like rent, utility bills and subscriptions before 30 June 2023.

⛔ 4. Write off bad debts

It can be hard to call it but it pays to write off bad debts sooner rather than later. So take a look at any payments outstanding to you and if they can’t be recouped, write them off before 30 June so you can claim a tax deduction on them.

📉 5. Consider revaluing trading stock

If you have stock on hand, is its value below what it cost to make/acquire? If so, consider revaluing it to its net realisable value so you can claim a tax deduction come 30 June (net realisable value = what you could sell an asset for minus a reasonable estimate of any costs associated with sale/disposal).

🔍 6. Take a look at dates on your invoices

It’s not always a good idea to issue invoices for work that’s not completed before 30 June. If they’re disputed, they might need to be refunded in part/full, which means they might not be able to go in your tax return.

🚐 7. Consider scrapping old plant/equipment

If you have any plant or equipment (e.g. technology, vehicles and machinery) that won’t be installed or needed by 30 June, consider scrapping it before then so you can claim a deduction on it.

👩‍💼 8. Make a binding resolution about bonuses

If you have staff bonuses in the 2023 financial year, make a binding resolution to pay them by 30 June. Then, even if you don’t pay them until later, they can still be deductible in the 2023 financial year.

🔃 9. All is not lost if you make a loss

If a company makes a tax loss, you can use that to offset tax paid in the previous three financial years (2022, 2021 and 2020). That means you could wind up with a tax refund to inject into your business.

Too much?

We hear you. And we’re here to help. Because not everyone cares about tax as much as we do (although it does pay to 🙂 ).

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As with all our articles, please don’t take this as personal tax, financial or other advice (you need to speak to us for that).

Thanks to J Cruz from Pexels for the middle photo and Jen Theodore on Unsplash for the photo at top.

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The power of startup metrics for founders

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1. What are startup metrics?

2. Why are metrics important?

3. How do you know which metrics to use, and when?

4. What happens next?

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Key changes will commence for grant agreements issued after July 2024 and include:

As the program anticipates its next application round in late 2024 or early 2025 and recipients will be eligible to receive a two-year funding agreement.

Take off with R&D tax and the EMDG

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Navigating overseas growth: Top 10 international tax considerations for Aussie businesses

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1. Structuring the expansion: Foreign branch, subsidiary, or holding company

2. Capital gains tax: rollover relief

3. Australian tax residency

4. Understanding the impact on Aussie shareholders

5. Taxation of profits when coming back to Australia

6. Taxation of gains on disposal: asset sale vs share sale

7. Effective tax rate on foreign profits/gains to shareholders

8. Intragroup transactions and transfer pricing

9. Foreign withholding taxes on intragroup transactions

10. Employee Share Schemes (ESS) and Employee Share Ownership Plans (ESOPs)

International tax summary

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Thinking of doing R&D in Australia?

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Here’s what you need to know.

What is R&D

Why do R&D in Australia?

What are the main considerations?

How does it work

Am I eligible

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Founder story: Iggy Jovanovic from Gerford AI

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The Gerford AI founder story

What is Gerford AI?

Wow okay! So… what problem are you solving?

What was your light bulb moment?

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What’s the biggest lesson you’ve learned so far?

How have we helped?

What personal sacrifices have you made?

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Expanding to the UK: Set up checklist

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1. Choose your business structure

2. Register with Companies House

3. Register with HMRC

4. Key considerations for UK employees

5. What to consider if you’re moving to the UK

6. Banking

7. Want an Expanding to the UK Guide?

8. Where to get affordable help

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Selling a business? 8 key steps for startup founders

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1. Why are you selling?

2. Why would someone buy your business?

3. Who are your potential buyers?

4. What type of sale are you aiming for?

5. What sort of valuation do you need?

6. What if you need to raise funds while selling a business?