Top tips for people starting a new business
We have recently discussed career paths in entrepreneurship and corporate business. Today we are going to look at the things that concern people starting a new business.
Imagine you are about to start a new business. What should be your main concerns?
1. Getting Customers and achieving sales.
This is undoubtedly the single biggest issue facing any business. It has been said that businesses face two problems;-
B) Everything else.
While this seems trite, it is definitely true. If the business has robust sales, then everything else can be fixed. If it doesn’t have adequate sales, then the business is in serious trouble, in fact there really isn’t a business.
So the first concern has to be attracting new customers, and retaining existing customers. Developing a “route to market”, a marketing and advertising campaign, and, probably, building a website.
The route to market that you choose will depend on your business and your target market. Consider online techniques including search engine optimization, pay per click advertising, social media marketing. Also consider offline techniques such as newspaper and magazine advertising, posters, and leaflets.
This should be clearly defined and planned in detail before you launch the business and start incurring overheads. Your business plan should be written before you do anything else, and this will address all these issues.
2. Raising capital
Almost every business will need cash to start off with, whether it is to buy stock, lease premises, or just to support the owner until a profit is made. Potential investors will want to see a business plan and cash flow forecast.
The usual routes to raise finance include using savings, or personal credit lines. Friends and family may also invest, and banks are a traditional source of funds. These days crowdfunding presents new opportunities.
There is a balancing act here – not committing yourself to too much debt, but also not under resourcing, which can restrict trading.
3. Cash flow
It is cash flow problems that spell the end for many businesses, so it is important to sort out your cash flow budgeting, planning and money management.
Almost all business need some cash to get started, so you need to consider how to raise that. Are there any loans or grants available?
Banks or investors will need to see your business plan and satisfy themselves they will get a return on their investment, so be sure you have a robust plan in place.
Getting paid is an important part of cash flow, and more difficult than it sounds, so set up a good Credit Control system.
4. Company structure and Legal Protection in the event of business failure.
The Company structure you use for your business is important. It has an effect on the Director’s personal liability, the potential to raise funding, affects tax liability and the reporting the company is expected to carry out. Assess, the advantages and disadvantages of each structure, and what will work best for you.
If you have set up as a limited company with limited liability then generally your personal assets are not at risk. But as a director you must still act within the law and run your business in a responsible manner. But if the business does fail, debts will be written off, as long as you have not personally guaranteed them.
But if you are operating as a sole trader, as you are personally responsible for any losses the business incurs. So your personal assets are at risk. This is the main reason people choose to form a limited company.
5. Accounting, Bookkeeping and Tax
The main concerns are understanding your responsibilities, knowing when to complete accounts, and planning how to record income and expenditure. Make sure you keep all your invoices and receipts. You need to either employ an accountant or use an accounting software package. Again you may need advice from an accountant about local tax issues and the most tax effective way to structure your company.
The insurance you will require depends on the type of business you have, and the legal requirements in your region.
Most businesses should have general liability insurance to cover against legal issues relating to accident, injuries and claims of negligence.
If you have employees, you may need employer’s liability insurance.
If your Business is selling products, you may need product liability insurance; if you are selling services, you may need professional liability insurance.
If the business owns property, you may need commercial property insurance.
If you work from home, you may need additional home-based business insurance if your normal home insurance policies do not cover business use.
7. Recruiting Staff
This is a big step, so be sure you really need to employ someone and that the business can support the expense of payroll, and additional responsibilities of ensuring you meet minimum wage level requirement, Employers Liability insurance, complying with current health and safety requirements in the work place , employment contracts, registering with the tax authorities as an employer….etc.
Consider hiring freelancers or agencies to do the work for you. This may look more expensive, but be less of a risk and problem, and avoids long-term commitment.
8. Business Premises
Depending on your business, you might be able to work from home, and this can be very helpful in keeping overheads low initially,
It could affect your mortgage and insurance policies, and you may need to take additional home-based business insurance.
If you need an office or business premises then consider location carefully. Think about whether you want it furnished and serviced. This will be more expensive but will leave you free to concentrate on the business.
9. Trademark Protection and intellectual rights
Registering a limited company name prevents other people being able to set up a company using the same, or similar, name. It does not give you any trademark rights on that name. A trademark is a sign that distinguishes goods or services
If you do protect your name or logo as a trademark, this will prevent anyone else from being able to use it without your permission. Registering the company name as a trademark can be a lengthy and costly process, and varies according to your region.
Intellectual property (IP) refers to something developed using human intelligence, such as inventions, literary and artistic works, designs and symbols, names and images used in commerce.
IP is protected in law by patents, copyright and trademarks. This ensure that the creator of the IP can be recognised as such, and can derive income from their inventions or creations.
Copyright describes the rights that creators have over their literary and artistic works. Works covered by copyright could include music, film, video, books, paintings, sculpture, computer programs, websites databases, advertisements.
A patent is an exclusive right granted for an invention. If a product is patented, then the patent owner has the right to decide how, or even if, the invention can be used by others, and they have the right to charge for that use.
A downside of this process is that the patent owner must make technical information about the invention publicly available in the published patent document, as they have to specify exactly what aspect of the product is protected by the patent.
This can lead to copycat versions, as the patent will only apply to a specific part of the invention or process, and variations will not be covered by the same patent. For this reason many are reluctant to use patents.
10. The Future of your business
Before starting a business, you should have investigated your business idea to ensure it is sustainable in the long-term. However market and economic conditions do change, and nothing is certain. Many businesses need to evolve to survive.
A limited company can be dealt with in your Will, allowing you to state what you would like to happen to your business when you pass away. If you are a sole trader the situation is more difficult, because there is no registered business as a legal entity to pass on to heirs. A lawyer or accountant can help you with this.