27th December 2016
It’s not easy starting a business, and for many people it’s the largest gamble you’ll ever take, especially in terms of your career.
However, with many millions of businesses established over the years, it’s a process that can be researched and understood, and professionals like lawyers and accountants are there to help you along the way.
Our guide here covers some of the main things to remember when starting a business, so hopefully by the end of it, you’ll feel more confident about the things you need to prioritise, and what help you can get from accountants and lawyers.
If you’re starting a business of your own, whether through choice or necessity, it already shows a certain strength of character – so you shouldn’t feel too daunted about the level of individual responsibility involved.
Some ‘known knowns’ can be anticipated, for example by measuring the size of your potential customer base and how much of the market is already taken by competitors.
Other issues cannot be anticipated, such as economic shocks and unexpected interest rate changes, and this uncertainty increases the further you look into the future.
It’s impossible to anticipate all of the obstacles you will encounter, but there are likely to be unexpected opportunities too, so keep an open mind – and remember, while a business plan sets out the path you intend to take, it shouldn’t restrict you if new avenues open up along the way too.
Your business plan should be as comprehensive as possible – or as comprehensive as you think it should be, if you feel comfortable about what you are doing.
Start with the fundamentals of your business, including your assessment of the market size, key opposition, supply risks and so on.
Estimate your finances, including earnings and outgoings, and allow for cash flow issues such as late payment and non-payment, and money tied up in stock and other contractual costs.
You can also include more ambitious statements of your long-term goals, even if they are very unrealistic – and a growing number of businesses make a ‘BHAG’, or Big Hairy Audacious Goal, which sets out their ultimate dream outcome to create an entirely new niche, or to lead their chosen market.
A business plan is not set in stone, so don’t feel too bound by it – you can use it for inspiration but also make changes to it as you go along.
However, it does give a kind of road map to investors, who may agree to fund you based on your business plan, so if this is the case, make sure you don’t veer too far from what was agreed.
It’s hard to anticipate all of the challenges you will encounter, but there are a few things that are common to most, if not all new start-ups.
First of all, on a personal level, you are likely to feel nervous or face some doubts at some point. Make sure you have people around you to talk to about any concerns, so you can get an independent opinion as to whether or not you have anything to worry about, or just cold feet.
There are administrative hurdles to clear, so speak to a lawyer about the legal structure of your business, and an accountant about keeping accurate financial records and filing tax returns.
Beyond those basics, many of the challenges arise from third parties – non-payment or late payment by customers, suppliers who let you down with orders for stock and other goods, and competitors trying to steal your customers or under-cutting your prices and driving down the value of the local market.
Again, a comprehensive business plan should anticipate as many of these obstacles as possible, and you should be prepared to adapt that plan as you go along to tackle emerging risks and maintain your profitability.
Accounting should be a priority when starting a business – if you get it right from the beginning, you have a better overview of your cash flow and profit performance, helping you to know if you are on track compared with your business plan.
There’s no reason why you should feel comfortable with this, as most people who have never run a business of their own have never had to maintain full company or sole trader accounts either.
It’s worth enlisting the help of a qualified accountant so that you don’t miss any of the really important aspects of maintaining your accounts.
But in the meantime, make sure that you are tracking the flow of money through your business – any investment, grants and loans coming in, purchases by customers and any revenues from advertising or affiliate fees, along with outgoings on stock, staffing costs, premises, utility bills, loan repayments and so on.
Keep your receipts, organised chronologically or separated by month, and make sure that everything you put through your books has the paperwork to back it up, in case HMRC ever query your accounts.
There are many factors to consider when starting a business? We couldn’t fit it all the information into one blog, so we have split it up into different blogs. If you want to carry on reading, simply follow this link: Starting A Business Continued.
have you read our previous post?