Conducting a business that operates interstate is an exciting time for a business owner. I’m sure that you are going to face a few challenges as a lot of hard work goes into this business development process but the rewards are worth the effort! Especially as it means your company is growing.
As Richard Branson said (I guess he needs no introduction but just in case you do not remember who he is – he’s the gentleman who founded the Virgin Group), “you never know with these things… when you’re trying something new what can happen – this is all experimental”. In other words, running a business is all about small experiments and taking a business interstate is one of these experiments. And, success is not guaranteed. But don’t get discouraged: if you apply the right business strategy your company has a high probability of success (I will do my best to teach you more about how to expand your business effectively into another state).
Before we start, let’s clarify some terms: “Interstate business” is a business that you conduct between states. For example, if your company in state A (eg, New South Wales) provides a product or service in state B (eg, Victoria), you are conducting an interstate business. But if you change one vowel in this word so that it becomes “intrastate business” it means that you conduct business within a specific state, meaning that your company and customers are in the same state. However, it is highly likely that you already knew that. I didn’t give you this simple explanation because I’m a smart Alec. I just like my business lessons to be systematic (just to prove to you that I am not a smart Alec, I confess that I have no idea where the phrase “smart Alec” comes from – I guess I’ll have to google it later… anyway, let’s continue).
Table of contents:
- How do you know when it’s time to expand your business interstate?
- 3 key considerations to make when expanding your business interstate
Unfortunately, there is no clear indicator that you’re ready to take your business interstate. No metric that tells you that is the right moment for you to grow your business beyond state lines.
I can only give you some suggestions that can help you identify the right moment to move on to a new phase of your business’ development. What I outline won’t be a detailed guide as to when the best time for your company to enter a new market (go interstate) is, as the choice is ultimately up to you. But I will use stories from our customers to help you assess your situation.
So if you are looking at going interstate with your business, you can evaluate if both of the following two situations are applicable to your business (or, at least, the second one):
- You have no longer growth opportunities in your state
I guess you were not expecting to read this as many articles available on the Internet say that you should expand “when your business starts growing”. That’s a brilliant idea but I guess that’s an obvious observation and you probably already knew that. Anyway, when I say that “you have no more growth opportunities in your state” I mean that your market is saturated. For example, imagine that you sell coffee to the coffee shops and cafes in your state. Even if you grow so much that you can sell coffee to all the coffee shops and cafes available in your state, they will always buy a specific quantity of coffee that they need at a specific time interval. This means that it might be the right moment for you to take your business into a different state.
- Your cash-flow is steady and positive
You can use the money you earn with your business to expand interstate instead of transferring them into your personal bank account (and keep them there or use them to invest into other assets). Or, in other words, you can take your company interstate when you are looking to grow and the business funds itself throughout the move to a new phase of its development. Or, you can rely on a low-cost business loan but please don’t risk it all to end up buried in debts. This loan should only be seen as leverage (a concept that refers to how a business acquires new assets for startup or expansion). Leverage can be beneficial, especially if the business doesn’t take on too much debt and is unable to pay it all back. However, I do not want to digress from the topic by sharing too much information concerning leverage. Forbes can help you learn more about this topic. What I am trying to tell you is that, if your cash-flow is steady enough to support your growth initiatives, you can consider expanding interstate.
Of course, other signs can show you that business expansion interstate is a good idea but they are more obvious and you are probably aware of them. For example, you can take your business interstate if your business was profitable for a specific period (usually, a couple of years at least), you see a demand for related products or services in that location, or the marketing conditions are favourable. But I know that you are smart enough and you do not plan to sell coffee 6 months after starting up in a state where there are only a few coffee shops, with mostly breweries, and the state government requires companies to pay high taxes.
When it comes to the products or services that your company is offering, there are two ways you can expand your business interstate:
- Expanding your current product or service
- Offering new products or services
There is no rule saying that you cannot offer new products or services in a different location. But consider the following scenario: you sell coffee (I always choose coffee as an example because I’m caffeine-addicted) and you find out that in a specific state there was a baby boom. Selling baby bottles in that location rather than coffee might be tempting but are you sure that you can become an expert on baby bottles overnight without having experience in the industry before? Personally, I would not do this and it is not what most businesses I interact with do.
Mostly, you should consider a product adaptation strategy (according to BBC, product adaptation is the process of changing an existing product or service so that it is suitable for different customers. This can often be seen as a less risky business option than launching a brand new product). For example, if the customers in the state where you plan to expand are more interested in cinnamon flavoured coffee (which is awful but there’s no accounting for taste) you may consider adapting the coffee you sell to the needs of the consumers in that specific state (obviously while also looking to sell your current product).
Once you decide that it is the right time to take your business into a different state you should take into consideration the 3 key elements below (assuming that you have already decided on your expansion model – According to the type of business you conduct, you can employ more people and open new stores, set up a franchise, open a branch office, license third-party contractors to expand the business, etc.)
A brief mention – The considerations below are more related to the differences between state and territory laws that could affect your business rather than to your business plan.
1. Decide whether you keep your business registered address or register your business to a new address
Sometimes, business owners decide to register their businesses to a new address (in the state where they plan to expand their businesses) because the tax regimes (such as state based payroll tax, Work Health and Safety regulators, etc) in that state are lower – noting that for these to be lower, your employees would need to change working locations, not just the businesses registration address.
Remember that a registered address is not the same as a business address. If you decide to expand your business you can have multiple business addresses in multiple cities while the registered address is the place where you receive statutory mail, such as official documents and notifications. However, if you decide to change your registered address you must notify ASIC of the changes within 14 days (if you have business partners, you must gain shareholder approval that usually requires a 75% majority). On the ASIC‘s official website you can find more relevant information concerning the steps you must follow in order to change your registered address. Also, you must gain approval from the relevant minister of the state or territory where your company is registered.
2. Choose the type of business premises
Selecting the premises in the state where you plan to expand your business is a critical decision. For example, you can lease an office or a store, use a co-working space, or a serviced office. Or, you can choose a virtual office. Personally, I would recommend you rent a virtual office for some good reasons: it is extremely affordable, it allows you to expand without taking on too many expenses too quickly and it gives your business a professional appearance without you being physically present in that specific location. Moreover, it is the best choice for companies that want to test the waters and try new markets (as it takes more time and effort to break into a new state than it does to move to a different address within the same state, so by getting a virtual office first, you can easily move later).
Another reason why I believe that a virtual office is the best choice if you plan to expand your business is that you avoid dealing with leasing legislation that can vary by state and territory. This is because a virtual office provides you with a professional virtual address so that your clients and suppliers believe that you are operating from a physical office located in the state where you plan to expand. Virtual addresses are legal for a business to use (and you can click here to learn more about this topic) and it means that you can hire employees remotely anywhere in the world (meaning that you will avoid dealing with different requirements in each state and territory in relation to their employees).
3. Consider the legislation of the state where you plan to expand your business
Being aware of the legislation of the state where you want to expand your business means taking into consideration:
- The States Consumer Law – Even though the Australian Consumer Law is valid nationwide, different consumer protection agencies enforce in each state and territory and handle consumer complaints. For example, in Victoria, the consumer complaint body is CAV (Consumer Affairs Victoria) and in South Australia is Consumer and Business Services.
- State Tribunals and Courts – Each state and territory has different tribunals and courts. However, you may deal or not with tribunals and courts according to the type of business you conduct (for example, if you work in the construction industry you will have to work with them. But if you sell coffee, dealing with them won’t be necessary).
- Employees – As I told you previously when I was talking about the advantages of a virtual office, each state has different requirements when it comes to employees (for example, long service leave entitlements, work, health and safety requirements, and workers’ compensation requirements).
- Licences – Some industries, such as food industries, travel agents, or conveyancing, may require a specific licence that varies in each state and territory.
To sum up, taking your company interstate can generate a positive return on investment or it could become a liability. However, if you choose the right moment to move interstate to push your business development to a new level, choose the most suitable type of office for your business, and consider all the legal requirements of the state where you plan to expand you are on the road to success.
Once you successfully expand your company interstate, be sure to let me know, so that I can help you prepare your business for overseas expansion.
In case you are in a state other than Victoria, consider your interstate expansion by the use of a virtual office or a virtual address in Melbourne as it can boost your businesses growth and perception – not to mention that B2B HQ‘s team would be glad to help you expand your company.