Start-up caution urged over booming service sector
There's money to be made in the services sector but start-ups should not underestimate the challenges it presents, according to a leading tax and industry policy consultant.
Independent consultant Martin Feil says current Australian Bureau of Statistics numbers show the services sector will reap more rewards in the long-term than manufacturing, agriculture and mining.
More than 80% of Australian workers are employed in this sector, which accounts for around 73% of Australia's gross domestic product.
Earlier this year, Treasury secretary Ken Henry nominated the services sector as the country's strategic way forward, labeling the mining boom as a short-term fix.
Feil says start-ups looking to enter the services sector should take advantage of its strength, but tread lightly in order to survive.
"I really think what you've got to look at, if you're going to start smart, is to examine yourself really closely and work out what is marketable to people," Feil says.
"When you're selling a service, people are looking for value for money... and you've really got to be competitive against what exists in the market to begin with."
"You have to have some knowledge [of the market you intend to enter] - you can't tell if you've got a competitive edge unless you know what the competition is."
"Some businesses don't [do enough market research] and they're the ones that go broke."
Feil says it's not enough to provide an excellent service; start-ups need to have a good business sense if they want to last.
"You can have a terrific [business] person in terms of the quality of their work but if they've got no understanding of business practice and accounting and taxation, they can come unstuck very easily through mechanical things that have nothing to do with their quality as an operator.”