- Business and Employment
5 Simple Steps for Starting a New Business
Starting a new small business is an exciting time. There is no better feeling in the world of work than being your own boss. It can be tricky, however, to make sure you get everything right so that you don’t end up spending more money than you should as you get your business off the ground. We have come up with five simple steps that will help you get off to a great start.
1. What Kind of Business are you Going to Run?
There are a number of ways that you can register your business, which have slightly different tax responsibilities. The two most common business start-up businesses are sole traders and limited companies.
Firstly, sole traders are entitled to all of the money that their business makes, and pay tax on the earnings as an individual. For this you need to register with HMRC as a sole trader, which will then mean you will be expected to file your tax returns once a year.
A downside to being a sole trader is that you are personally responsible for the business’s liabilities. If, therefore, the business gets into trouble you would be at risk of losing your own money or even your personal assets.
Limited companies operate slightly differently. A limited company is a legal entity in its own right, and therefore you, as a director of the new company, would get a salary from the business. You still need to file your tax returns, but for this form of business you are paying corporation tax on the company’s profits.
The director(s) of a limited company are not personally liable for the business’s losses, and so if the business fails, the owners are more protected from creditors. But let’s stay positive and sure that your business will succeed!
2. Business Plan
Once you have decided on the most suitable business structure for your needs, you need to come up with a good, detailed business plan. In the first instance, everything hinges on your plan, from your banking to getting finance.
The Business plan should include a vision for your business – what you plan on selling, how you will sell it and how this will generate income. Make sure in this section you say what your business does and why your business fulfils a need. This will not only help to convince any prospective financers, but also focus your own mind on to what exactly your business needs. You should also think about your business goals. Have a think about how you want your business to develop in the short, medium and long terms and set out ambitious yet realistic targets.
You also need to outlay how you will market your business to your customers. Think about how you will get the word out. Will you use online media channels, newspaper ads or cold-calling? You also should write down how much you expect the marketing to cost.
At this point you can say how your business will be run. You need to illustrate the structure of the business in more detail here, so think about any staff you might have and how much they will be paid, your premises and how you will pay for it, and what equipment you will need. It would also be a good idea to outline who your suppliers will be if you need them and show that you have thought about the risks to your business. If you can offer means by which you intend to manage any risks, you’ll be on to a winner.
You also need your financial projections. Think about what your business can realistically achieve and base your financial forecasts on your expectations. You’ll need details of your start-up costs as well, which will impact on your financial expectations. So, take this forecast month by month for the first year of operation, allowing for business growth. This will show that you have detailed ideas on your business capabilities as well as giving a cash flow forecast for a whole year. You should then, more generally, illustrate how your business income will develop over the next five years.
Finally, make sure you note down in your plan where you will be looking for finance (start-up grants/loans, any investment), any risks that are specific to your company’s finances and how you will minimise the risks.
Once you have written your business plan you should feel more confident in your idea and your ability to make it succeed, and having the confidence to see your business do well is half the battle!
3. Banking and Accounts
Now you need to have a good think about your banking. First of all ask around. Go to all of the banks and ask them what they can offer for a new business. Often you will find that you can get free business banking for the first year or two, but make sure you ask how long it will take to open an account – there is nothing worse than being raring to go with your business but having to wait three weeks for your bank to show up.
Once, however, you have your account open, consider your options on accounting software. The market leader for keeping tracks on your accounts for a small business is Sage One software. You can link this directly to your bank account and to HMRC, so that you can instantly see your financial status and easily pay your taxes. The software can also produce payslips and invoices, which can be a great timesaver.
When it comes to tax return time, though it might be worth considering an accountant. This might seem like an expensive option, but it will free your time up to concentrate on your business, so that you can earn the money that will cover the accountancy fees, while not having to worry about all the taxation complexities.
People often overlook the value of having contacts in the industry. Yet, not only can you get great advice from more experienced business-people, but you can actually gain trade from other businesses. Sometimes more established companies get custom that they can’t effectively deal with. If they know you to be friendly and trustworthy they might send the custom to you, resulting in profit and free advertising for your company.
You can also have a think about getting a business mentor. Often you can contact organisations that are publicly funded, such as Business Gateway, who can offer you someone who knows your industry well to help you in guiding your business to success. Do not underestimate the knowledge that a mentor can share with you. Not only can he or she warn you of potential pitfalls, but they will also know many people that operate in similar circles to you. Think: the more people you know, the more you know!
5. Quality Control
It is very easy, in all the excitement of making your first deals, to get your products or services out as quickly as possible. Your business, however, depends entirely on its reputation. Right from the off, then, make sure you put in a strict quality control step into your business operation procedures. So, before you hand over your product or complete your service deal, factor in time to check everything that your business does to ensure you have conducted your business to the highest possible standards. Your customers will appreciate quality, and if they like what they see they will spread the word. Quality control is essential, particularly right at the beginning of your business venture, because it is very difficult to gain a good reputation, but it only takes one sub-standard product or service to develop a bad reputation.
You Can Do It!
These simple steps will help you focus on getting the most out of your new business, and prevent you from wasting valuable time and effort on making small mistakes in setting up your new venture. They are by no means an exhaustive list, but if you follow the steps you will be well on your way to developing a business that will succeed.
© 2015 Jonathan M J Henderson