Starting out in business is an exciting prospect. Being your own boss, making your own decisions, working in a field you like and enjoying the fruits of your own hard work can be an enticing thought. Yet some 50% of new businesses fail within the first year and over 90% in just five years. Why is that?
The answers are many and varied but a large proportion fail because of a basic failure to plan properly in the earliest stages, to seek professional advice where needed and to market themselves effectively.
Here are a few tips for a successful start-up.
• Understand that setting up and running a business takes a lot of time and commitment. The rewards can be great but you have to know why you are starting your own business, be clear about your objectives and understand what you are getting into.
• Accept that it almost always takes more time than you think to get that first customer so you'll need a lot of personal resilience when you start out.
• Ensure you have funds to support yourself and your family for six months to a year while the business gains transaction and accept that you may need to skip luxuries like holidays for a while.
• Identify your strengths and especially your weaknesses. Identify areas where you need to get advice and engage professional support such as accountants. You would not pull your own teeth after all!
• Research your market to ensure there is a demand for the product or service you are offering, you know who will buy it and the price it will command (and, for the avoidance of doubt, the price of a product should not be related to what it costs to make).
• Investigate the competition. Think about how they will react to your presence in the market. Keep an eye on them and what they are doing now and in the future.
• Think how you will differentiate your product or service from others in the market – what will drive people to buy from you?
• Choose a name for the business. Ideally this should be unique, pertinent and memorable and for which you can acquire the domain names (especially.co.uk and.com).
• Decide on your legal business structure. There are a number of choices but the most commons are to do business as a sole trader, form a partnership or limited liability partnership or create a limited company. They all offer different advantages and obligations and you should seek advice on which one is best for you.
• Register your business with Companies House if appropriate. You can do this yourself but for peace of mind most accountants can arrange this for you, sort out the legal documentation and provide you with a formal registered company address for a modest fee.
• Write a business plan before you start and ask for help and criticism. It will make you think hard about the shape of the business, its vitality and the resources required at the outside. A well written business plan will determine the robustness of your idea at the earliest stage, providing clear direction and helps maintain focus.
• Include a financial forecast in your business plan so that you know what funding you are likely to need. Overestimate the cash you will need and underestimate the income. Then reduce the income again!
• Prepare your marketing plan. Just because you have a good product or service does not mean you will sell anything. Launching a website is not enough and advertising is expensive. There are lots of cost effective marketing tools available but time is important too so be creative, target your market carefully. And do maximize all PR opportunities.
• Decide on what staff you are likely to need and what skills they need to have. You will have to operate PAYE for any employees you have despite your accountant can help with this. Do not forget you'll need to acquaint yourself with employment law and the rules on health and safety.
• Design your business stationery. It needs to convey the right image and the messages you want to send. It must also provide the information required by law. Perfectly good letterheads can be formatted in 'MS Office' and printed on demand in the office. Business cards should be of high quality, say what your business does and people must be able to write on them so have these professionally printed on good quality card.
• Think about a logo at this stage. A professional graphic designer is worth engaging at a reasonable rate to work up a design and provide the files in the right format for a printer to use.
• Decide how you are going to keep your accounts. There are many HMRC compatible packages available but these can be expensive and if you have an accountant submitting data for you, an 'Excel' spreadsheet is often fit-for-purpose.
• Make sure you register with all the relevant authorities including HMRC and decide if you need to register for VAT by law or because you wish to. The 'flat rate' VAT scheme makes sense for many early stage businesses but only once the VAT on start up costs has been reclaimed.
• Consider all the insurances you will need either by law or because your clients will demand them. These will include public liability, professional indemnity, employer's liability but do not forget to insure your car for business use and of course your contracts, assets, stock and so forth.
• Use trusted advisors such as accountants and solicitors for advice. Getting the wrong guidance can be costly. Try to find local people by referral – ask local businesses who they'd recommend and then compare fees.
