Starting a business can be both exciting and intimidating, especially if its the first time you have done so. We will assume that you have your business idea and a already started on a lot of the other fun stuff, like choosing your name and possibly even registering your domain name for a website.
This guide will focus on the practical advice that we get clients coming to us for all the time. This includes questions such as: “Do I need a Limited Company”, “Do I need an accountant?” (to which the answer is “Usually, yes”, we are accountants after all), “How do I actually get trading?” “What do I need to get going?” or “What have I missed?”. These and various similar questions are all very common and for most people the answers tend to be similar. So we have attempted to break down the most important things when you are starting a company.
A deceptively simple question. Again assuming that you have the very basics figured out (like what you are going to do) and we’re also going to assume that you have done your research on your industry, competitor analysis etc (if you have not yet done this then we’ll be writing a helper article on this later) and jump straight in to the practicalities.
Choosing a Company Structure
Firstly you need to make sure that you have the right company structure, decide if you want to be a:
- Sole Trader
- Limited Liability Company
- Limited Liability Partnership
- Something else – and if you are looking for another company structure, then you definitely need professional advice
This decision will affect most others you make and it is advisable to decide on this sooner rather than later. You can start as a Sole Trader then change later, relatively simply, however, going the other way can be a little more complex, as once you set up one of the other company types, your legal obligations increase.
What structure is best depends on you and your business partners (if any). If you want to know more about the various benefits and drawbacks of each company type, we summarise that in this article here. If you’re having trouble deciding which is best for you, please contact us and we can try to help.
Once you have decided upon the best company structure, then you need to ensure you are aware of your legal liabilities and have a plan to manage these. A checklist is below:
- Register your company if appropriate
- Notify HMRC – e.g. to let them know you are self-employed
- Accounting tasks:
- Get an accountant! – We know a good one 😉
- Personal Tax Returns
- Annual Return – required for Ltd’s and LLP’s
- Financial accounts – required for Ltd’s and LLP’s, helpful and advisable for other company types
- Insurance – Find a good broker to find out what insurance you need and what is not necessary but advisable
- Open a Business Bank account – Required for Ltd’s and LLP’s, not necessary for Sole Traders and Partnerships but still generally advisable
- Employment regulations – If you employ staff there are many laws and regulations that you have to follow, including payroll, pensions, Health and Safety etc.
- Licensing – Some industries require permits or licenses and you will need to make sure you have those in place before you start
- Trademarks, copyrights or patents – You may want to secure your brand or idea. You also need to check that you are not infringing someone else’s Patent or Trademark. Research is required and it’s better to do this before you start trading, rather than risk lengthy and expensive legal action in the future
- Data Protection – Even if you do not think you will manage much data, you should get a Data Protection policy in place and if you are likely to handle personal data, this is required
This seems like a lot, but there is a lot of help out there. The government has a very good website with tools and advice here: http://www.greatbusiness.gov.uk/regulation/
Write a Business Plan
You will see this on almost every advice article and for good reason. It may sound a bit like homework and you might wonder if you really need to do this, as after all you know what you are going to do, but frankly, this process is invaluable. We’ve put together a template which should help you ask the right questions and as each company is different and this cannot cover everyone, you may also find our guide to putting your own business plan together helpful.
A good business plan should be treated as a guide to your first 1-3 years, not so much a roadmap, as much as set of destinations and waypoints. The purpose is to highlight potential issues before you encounter them and to confirm your strengths. A well written business plan can also help you get access to funding, which can often be a large barrier to success.
Money, Money, Money
This is normally what you are in business for, to earn money, so it makes sense that your primary focus should always be your cash position. You can be an expert in your field, the finest craftsman ever, loved by every single customer you have, but if you don’t have enough money, you won’t be able to operate.
Therefore you need to manage your cashflow. Before you even begin, plan out your costs, from trade supplies to wages, remember you need to eat. You should have an outline of this in your business plan, but once you start trading, you will find lots of other things that you may not have expected or thought of first, so keep you cash flow forecast updated. If numbers are not your personal strongpoint, get an accountant (hi again!) to help you with this and ask them to explain it so you can keep a handle on things; their job is to help you after all.
You should also try to keep your costs as low as possible, even if you expect to make a huge profit in a very short time. Once the company is established, then you can consider the large offices and fancy company car or van, but the most successful businesses keep a rein on costs at all times. If you think you need a loan or finance, look at you options, don’t just go to the first bank you see, often there are better options available, for example the government backed Start Up Loans company, PayPal cash advances or sites such as Go Fund Me. This is not to say a bank loan is not your best option, it depends on your circumstances, you just need to shop around.
Everything so far has been admin and planning, the last steps are putting your business into action. What do you need to operate? An office, van, tools, PC, laptop or tablet, dedicated telephone? Have you set up your marketing? Do you need staff?
It all depends on your business but normally the below are fairly common:
- Office/workspace – Even if you work at your clients’, you may still need a space to handle your admin. If you can avoid spending out on a shop or office at first, it all helps with cash flow. Do you need furniture? Desks and chairs can be quite dear, look around and see if you can get some second hand equipment, unless you need to present a particular image. If you are opening a shop or office, then there is a whole new set of questions you need to consider on the location and premises.
- Transport – Do you need a car, van or larger to operate, could you use your personal vehicle? There are tax implications to funding a vehicle through your business, so you may want advice.
- Tools & Equipment – Whether you are a graphic designer or a plumber, you may well need equipment or tools, It is probably that you have some if not all of this already, however, if you do need new equipment, only get in what you need, not for every possibility. Also, keep those receipts, if it’s solely for work, those are business expenses.
- IT and Telecomms – Do you need a dedicated telephone? Landline numbers look more professional, but mobiles are more convenient. You can get a landline number for your mobilenow, or look into VOIP (voice over IP) services to potentially keep costs down. You will almost certainly need internet access (if you don’t have this already, how are you reading this?) and with tax submission going digital, a cloud based accounts package is a great idea. What other software or IT equipment do you need? Be very strict at first, do you really need that shiny new Surface Pro, or will your current laptop/tablet do?
- Website & email – Linked to the above. As we said at the start we’re assuming you may have already done this or are going to soon, as an online presence has moved from being nice to have, to almost necessary. Even if you don’t think you need a website, it is a good idea to register a domain name and reserve it, as you may want it in the future. Also, this means you can get a professional looking email address, as, let’s be honest, running off of your outlook or gmail account just does not look as reassuring as [email protected]
- Your image – No matter what you do, a good brand identity will help you gain business and separate you from the crowd. If you are also setting up a website as recommended above, then it’s worth getting a logo designed. You don’t have to break the bank to do so, in fact a quick online search will bring up several free logo design sites, although these services will not replace the vision and creativeness of a good designer. Take the time to get a consistent brand on your communication and stationery, e.g. uploading your logo into your accounts package for billing or creating an email signature.
- Stock – If you’re selling something, then this is obvious. But before you rush out and fill up your warehouse, shed or back bedroom, go back to your business plan and cashflow forecast and figure out how much you expect to sell and what is the expected stock turnover rate, so you know how much stockholding you need. This is an article (and science) in itself, but many small businesses fall over because they buy too much stock, or too little and cannot meet demand. Every industry has a rough guideline on how much stock they should hold based on expected sales and if you have not had direct experience of this, it’s a really good idea to ask some people in your industry who have.
- Staff – Employing people for the first time can be daunting. There is a tonne of legislation, you have to keep good records and manage them and of course, you have to pay them too. There are resources to help9e.g. https://www.gov.uk/employing-staff) and you can outsource a lot of the admin such as payroll.Remember, it’s not just the wages (plus tax &NI) that you have to budget for, but associated costs such as insurance, pensions and admin.
Even if you’re not a retailer, you still have to be a salesperson; some people really love this, other’s prefer to focus on other things. If you have the resources, you can always outsource your marketing or employ someone, however, regardless of size, if you are the business owner, it’s worth investing some time in learning how to present yourself and your firm. Again there are many resources, articles, books and course available, however some core principles are:
- Listen – the number one mistake many people make is overwhelming the potential customer with information, not letting them tell you what they want. It comes across as either uncaring or nervous. Take a step back, pause before you speak and make sure you hear what your potential customer is saying, often they will tell you waht you need to know to close a deal.
- Expect Rejection – You will hear no, a lot. That’s fien, find out why. and move on. It’s better than…
- People wasting your time – This is ironically because people don’t wish to be rude or unhelpful, so they will let you deliver your full spiel even if they have no intention of buying or coming on board. Learn to keep your pitches short and direct, if people are interested they will ask questions, if not, you’ll find oyt sooner. When you run your own business, your time is the most valuable thing you have.
- Close the sale – If the customer is interested, do not be afraid to ask; “Would you like to sign up?”, “How many would you like?” etc, etc. If the customer does want more time, make sure you follow up promptly and when you say you will.
- Work at it – Customers do not magically appear. You have to work at it and make it a priority, even when you have a good customer or client base, things can always change. Set a marketing budget and strategy, have a plan if you want to ramp it up or scale it down. Basically, make sure you make time for this, even when the day to day seems to consume everything, as without revenue, you have no business.
Last but not least…
Enjoy it! The above may seem daunting, but with a practical outlook, good planning and the right help, you can set a good foundation for your company and concentrate on what you are good at. The first few years of running a company are exciting and should be fun, hard work yes, but fun.