When starting a business, you need to firstly think about the industry you wish to enter, are you providing products or services, who are the end users, how will you supply them, how many times will they buy, how much will the spend etc?
To help to structure this information it's a good idea to begin a business plan. If you sign up to our mailing list we can send you a template we have designed to help you along your journey.
As part of the first milestone we recommend you carry out market research to discover if you are you providing a niche offering, or able to disrupt an existing market? Make a list of the services or products of other businesses and see how you can, through understanding your customers requirements, build a business to best serve those for a period of time and evolve your product or services to keep your customers coming back to you.
A mind map is a very useful tool to assist with thinking high level before you begin working on the operational processes / hr and finance side of the business.
Once you have a clear idea of 'what you sell' and 'whom you serve' and how big this market is, it's time to start planning the business from a financial perspective, this is where a great Accountant will help. The value an Accountant will bring here to help you understand your obligations and overheads, including any tax savings which you may overlook if you carry out this task alone.
Included in the business plan will be details of resourcing services or supply chain, suppliers, purchasing stock, (back up plans) and you may need to invest a large sum into purchasing equipment, known as capital expenditure, for which there are tax advantages.
There will also need to be details of how you plan to market and advertise your business, who are the influencers, can you get any quick wins in the early stages, and the even bigger question, have you thought through your idea enough to check you're entering at the right time with the right product. If your product is niche you can scale back the launch design and make the most of upgrades and keeping customers buying from you.
Or the flip side have you thought about your product with enough vision and initial customer feedback to see if you can enhance the offering to come up with a more robust offering now or one that will gather a greater audience when you launch. This pre launch, business planning time will pay dividends in the long term as you will be ready to sell with passion for knowing you have a solid business plan which will help you to raise investment.
So what does your start up budget look like, can you fund the start up until you breakeven or do you need an investor? There are various types of options to raise money for start up companies, I have listed a few here:
The Princes Trust
Angel Investors
Crowd Funding
Bank Loan
Sale of Shares
Government funding
The next milestone is knowing, in the first two years, 'how many units you can sell' revenue 'what you pay per unit' cost of goods sold (difference known as gross profit) and how much it costs to carry out the operations between the two, known as operating expenses. The net amount is the taxable earnings, which are charged by HMRC at 19% (2022-23) leaving the distributable profits for you and, if applicable, your investors.
Once you have carried out this exercise you can clearly see the costs and benefits relating to your business to begin forming the steps which must be taken to grow in size and maximize profit.
We would recommend setting up a trading entity before approaching investors, this comes with legal and financial obligations, and where we would be happy to help. There are some advantages setting up a holding company if property is within your business plan or owning your own offices etc.
Now think of a domain name and check that it is available, preferably something unique and memorable to attract the attention of the target audience. If the domain name has been taken there maybe an option to use a brokerage service to help them acquire it. A domain name is an intangible asset, so can sometimes be worth the investment if it's exactly what you need for the longevity of your business.
It's best to contact an Accountant to help with setting up a company, however a sole trader structure may be suitable in the first year, it really does depend on your business and growth plans, as there may be VAT registration to consider.
Each type comes with benefits / advantages and therefore it is important to research which structure is most appropriate for your business model. One example of a difference in status would be that while sole traders must register with HMRC and submit annual Self Assessment tax returns, limited companies must register with Companies House, pay corporation tax, file company tax returns, pay VAT and the directors must also submit Self Assessments.
In order to protect your business from accidents and damage, the business needs to be insured, and the best way to insure your business may vary depending on the business and therefore needs to be tailored to the needs of the business.
Once you are ready to launch, it is important to plan out how to get the business name out to the public, this means that a marketing strategy needs to be created and this can be done effectively with the help of market research and
competitor analysis and learning from how other businesses promote their products.
Lastly, you need to have a system of record keeping in place so that you can submit your taxes promptly and this means using an effective method of bookkeeping or finding an accountant that can take care of this on your behalf.
Once all these obligations are fulfilled, you can focus on growing and maintaining your business.
