Things to consider when starting in business
With the UK economy still struggling to fully revive itself, we have noticed more and more people looking to ‘go it alone’ and start their own business.
As chartered accountants, we offer all types of financial and business advice. We enjoy nothing more than meeting a prospective client, with a great idea, who is full of enthusiasm and passion, and can’t wait to get going.
Here are our 10 top considerations when starting in business:
Knowledge of Product or Service
Most people will go into business for one of the following reasons; i) they hold a recognised qualification relevant to their business idea, ii) they have previously gained years of experience of working in a particular field as an employee or iii) they are passionate about a hobby or interest and want it to be their main source of income.
Whatever your reason, being able to demonstrate a skill / passion / competency in your chosen field will inspire confidence in your ability to deliver when meeting potential customers.
Carry out research to assess whether there is a market for your chosen business. If no one else is doing what you are doing, ask yourself is there a reason for this? If there are many companies doing it, is the market saturated and is there room for one more? If you believe there is room, what will you do that makes customers choose you over the established competition? Having, and being able to communicate a Unique Selling Point (USP), could be the key to your success.
Having researched the market, add some financial targets and a pricing structure. Be realistic and thorough when estimating your revenue, cost of sales and overheads, and aim to form a relationship between the three, for instance, knowing what your break even point is, and If an overhead increases, how much additional revenue would be required (at your current gross margin) to retain the same level of profit.
Form a clear picture of where you require your business to be in 3 months, 6 months, 1 year and so on. Put in place systems which allow you to monitor your performance going forward against these targets, and also to enable you to amend your targets for unforeseen circumstances.
Engage the services of a local accountant, they will be able to advise on the best legal structure for your business, be it as a sole trader, a partnership or incorporating as a limited company. Most offer a free initial consultation, and will help register your business with HM Revenue and Customs, and if necessary, Companies House. They can advise on what taxes are applicable and when they fall due, and will advise on the most tax efficient method of profit extraction.
Arrange a meeting with a Business Manager at several local high street banks. Understanding what business banking arrangements each have is important, e.g. charges, online banking, overdraft facilities etc, but often the key is how good the Relationship Manager is and the level of service they are prepared to offer their clients.
Ascertain what you will need in order to trade, be it a PC and printer, a van, an office with furnishings, tools, software, to be name a few. Consider how you will acquire them, and at what cost. Ensure that you have sufficient start-up capital in order to commence trading from day one.
Understand fully the level of compliance that is required to run your business in your chosen industry. Make contact with the regulatory bodies, and assess whether you are likely to meet the minimum requirements, and whether there are any registration and annual fees involved.
Be sure to investigate what types of insurances are applicable to your business; public liability, professional indemnity, premises insurance, employers insurance being the main insurances. If you plan to work from home, do not forget to check with your home insurers to assess whether your cover is suitable.
Work out a strategy for your advertising campaign. Initially most budgets will be tight, so it’s important to stretch that budget as far as it can go, but it’s equally important that it is spent on the advertising medium that will reach the most potential customers for your business.
Adwords, direct mailing, adverts in local press, door to door leaflet drops, social media are all valid and common ways of advertising your business, but will vary in price, and also vary in impact. Carefully consider what the best approach is for your business.
Business Networking Groups
Becoming a member of a business networking group is an excellent and relatively inexpensive way of raising your company’s local profile, and benefiting from the experiences of like-minded business people in your area. In return for setting up leads for other group members, it is fair to expect good quality introductions from fellow members, to help grow your business. Make contact with your local Chamber of Commerce to establish how the group operates, most will allow attendance to some initial meetings on a guest basis, which enables you to assess whether the set up could suit you.