Why Start Up a Business Right Now?
Identifying goals helps to set the forecast for a new business, or new ownership of an existing business. The majority of new businesses fail in the first twelve months and the cause is usually poor preparation with no clear direction. As it is hard to know how market trends are going to swing at first, complete reliance on instincts is needed. If instincts are wrong, it can mean a change of plans. New business needs to be solid in its outlook, but still flexible enough to move with the trends. This is where a forecast comes in. Think about where you are coming from, and where you want to be.
Why do you want to set up a business, and what do you want to get from it? There is no right or wrong answer; this is about personal goals, which then become business goals. Be true to yourself and be realistic. Here are a few of the reasons people start their own business. You may identify with some, or all, and perhaps add a few personal ones. Any reason is a valid reason, and helps set the parameters for your business.
- Make more money
- Be in control
- Not have to answer to anybody
- Flexible hours
- Work from home
- Create more time for family
- Consumer demand
- Specialized skill for a niche market
- to feel validated as a person
Whatever the reasons, use them to build the direction the business will go in for and lay down a long-term plan to work towards.
The Exit Strategy
Isn't it a little defeatist to think about how to end it all before you even get started? Not at all. A positive attitude is great but to imagine that the business will never hit snags, or need to change tack, in the first twelve months is not being realistic. Being prepared for the worst is the best favor you can do yourself at start up stage. Exit strategies aren't all about the bad, if you have partners you all have a solid safety net by which to leave the business at any stage. If the business is to be sold at a future date the exit strategy will help you set goals toward this, should it ever happen.
Prepare for the hard work
No matter what the general perception is, running your own business is not easy. Be very clear about needs from the start, for instance if more time for family is what you want, it might be necessary to put more of the money into a staff member to take some of the work load. At first, nobody gets everything they want from a business and sacrifices will be needed. Work toward an ideal step by step. If growing the finance of the business is the main priority, then be prepared to do long hours for the first year, then employ some help.
Research The Market
Preparation is the key. Make a solid decision about what you want to do. If it isn't clear which path to follow, research the subject, form an idea, ask around. Never go in with the attitude finding out when you get there. There is a sound difference between being flexible and being disorganized and sloppy. Options are many, see if any existing business appeals. This can be a great way to start.
Franchise is also a good way to get your feet wet. The freedom of your own business, along with the safety of guidelines by which to run, is very attractive. At the very least, you will find out what doesn't work. If your five-year goal is to know enough to create a new business, buying into an existing one can be a part of the plan. However, choose something for which you have a passion and natural flair. For example, if dealing with people isn't your thing don't choose an accommodation house because it looks like the best money spinner. Money doesn't seem so important when miserable at work, and you have set a two year forecast before you can exit.
What is the Timeline?
As said before, lack of preparation can close a business before it even starts. Do the homework, set a realistic goal as a start time. Know exactly what is needed to start in a successful manner. There is nothing worse than walking into the brand new coffee shop opened in the area to find they were so swamped in the first two hours they have already ran out of milk.
We're very sorry, milk will be here in about ten minutes... please take a seat and it will be on the house. Lack of preparation has not only made a bad first impression, but it's costing money right off the bat.
Don't set the timeline by thinking it would be nice to open in a month, then try and cram everything in to make the deadline.
Get friendly with lists
Lists can be a lifesaver. Granted, you might cross one thing off the top and add two to the bottom but at least the progress is tangible. Write down absolutely everything that needs doing to get ready for launch. Even in an existing business, the new owner should have a list for their takeover day. Once you have a list, set a tentative start date. Then work backwards from that date to give a guide to set deadlines for each project on the list. Don't cut corners, make sure everything will be in place for staff and customers on the start date. Organization is the key to handling the pressure of a flood of customers. Prioritize what is an absolute need for start up and what to implement later.
Company Structure
There are four choices
- Sole Trader--simple to set up, less admin and you are personally responsible for any debts incurred
- Partnership--similar to sole trader but you share the responsibility with one or more partners
- Private Limited Company--registered with Companies House and record keeping is needed. Personal liability is generally limited to the equity you placed into the business
- Limited Liability Partnership--same as Limited Company with each responsible for their equity share
Community based projects are treated differently. Strict guidelines are in place to see that the community is served in the proper manner.
As a rule of thumb for private business, if goods and services are provided that could be sued over, set up a limited company. In addition, the company will be seen to be more credible with possible investors, customers and stock suppliers. It is very important to seek the advice of a qualified accountant in these matters. There is always more to the inner workings than meets the eye, and it is a professional job.
The Importance of Choosing the Right Company Name
The name can make or break the business. It needs to be memorable, catchy and fit the service provided. Getting customers is largely governed by first impressions, if the company name is tedious, unrelated or similar to others valuable custom may be lost. Nothing offensive, misleading, copycat or dull. Other than that brainstorm a little to get the perfect fit. Also, check out existing company names by using the following sites
Companies House database
123reg.co.uk
national business register
Start-Up Costs
Every business needs finances to get running. Even if it's just a new pen and ream of paper, do consider the costing carefully. Start up costs can also include cash flow amount and wages or salary until the business is self supportive.
Always figure in to pay yourself, if the business needs to be able to support its most important employee, you. Once calculated, take a look at the options for obtaining those funds. If personal savings can cover the costs, all well and good, but most would have to consider sourcing a loan.
Overdrafts and credit cards can be a quick answer but will slug the interest on. Family or friends are a good option, but do have a contract signed to protect both interests. Other options are banks and financial institutions, investors, partnership, grants, and business angels. The government has the
small firms loan guarantee scheme and for those between 18 and 30 years old try the
Prince's Trust.
To Buy, Or Not To Buy, that is the question.
A great way to cut start up costs is to lease large equipment rather than buy. Everything is available for lease these days. Office furniture, computer systems, tools, vehicles, and other machinery are only a fraction of leased items available. The benefits of leasing include the ability to be able to have the latest equipment and trade up regularly. Real savings and convenience can be had until the business is able buy the needed items.
Where to operate from
The answer to this is largely proportioned to what the business is. A writer might turn his spare bedroom into an office. A media mogul needs a huge building for all the staff. To decide the best place, consider the target market and where to find them. If you are selling cats, don't set up your store in the middle of a dog neighbourhood. It will be work hard to get customers to come to you, or try to turn dog lovers into cat lovers. It is pointless setting up a lone desk in an office block. Do consider company growth in the decision. If ten staff are forecast in a year's time, make provisions for that now. It's a lot better than moving everything to another place later.
Staffing Levels
Just because you are capable of doing everything in the business does not mean you should. Be realistic about how much any one person can do in a day, including you. Think about the individual aspects of day-to-day running and appoint staff accordingly. Think about areas the business could like to cover in the future, how much administration, phone answering or food prep might be needed. One person cannot be everywhere at once, and employing multi-skilled people is a plus.
A lot of legal requirements are attached to having employees. Again, a good accountant can help here, and if you register with Her Majesty's Revenue and Customs (HMRC, formerly Inland Revenue) you'll get the New Employees Starter Pack. Staff can be employed as permanent full time or part time, contractors, casual or freelance. Explore the options and get someone that is a good fit.
Seek professional Advice
This is another area not to cut corners in. Good advice and knowing legal requirements is imperative to a successful business. Going in blind can doom you to failure from the start. Even when it is still a notion professional advice will help tremendously. Good advice does not have to cost the earth. Ask about business mentors, speak with the tax department for advice, talk to similar business owners. The internet can be a fantastic resource for information. The
HMRC's Business Support Teams is a great place to start. Check out accountants and solicitors who offer free half hour consultations to discuss affairs of business. Skipping this step could have grave legal ramifications later.
Business Plan Time
So now all the information is at the fingertips, what do you do with it? Create the business plan you can see forming in the mind. There are a few good reasons for this. Firstly, write it down before it's forgotten. Preparation of a solid, well thought out and researched plan will go a long way in helping you secure finance, or other investors, plus it will act as a roadmap as the business builds. Goals and the steps along the way will be clear cut.
The business plan is animate; it will change and grow along with the company and personal learning. Not only will there be a clear-cut set of goals to shoot for, but also a wonderful reference to methods that did or did not work will be laid out before you.
