10 Simple Steps to Setting Up in Business
There have never been so many business start-ups. However, 20% fail in their first year, while only 50% make it to the fifth year of trading.
Pretty awful statistics, aren’t they?
The good news is that there is help and support out there for start-ups.
Here are my 10 simple steps to setting up in business.
1. Establish Why You Want To Do It
There are several reasons why you might want to set up in business and be your own boss, for example:
- You may have an idea of what you want to do and you think you can make money from it.
- You may want a change of lifestyle and want more flexibility or to spend more time at home.
2. Know Yourself
Over the 14 years that I’ve been trading people have said to me “You’re ok, you work for yourself.” They see the flexibility I have and think that my life is easier than someone who is employed. In some ways it is easier, but it can be more stressful.
Before taking the step towards self-employment, it’s worth asking yourself whether it will suit you. Ask yourself some searching questions:
- Will you miss the company of working with others?
- Will you be able to cope with the responsibility and with having to make all of your own decisions?
- Are you the kind of person who is happy to network and to find your own clients?
- Will you be able to cope with the lack of security of not receiving a definite amount of money each month?
It is important to be honest with yourself at this stage, as over the years, I’ve met lots of people who I feel would be happier back at work.
I would recommend keeping some employed work while you get established to give you a cushion financially.
3. Have An Idea
This is your starting point.
The aim when working for yourself, is to do what you most enjoy and make a living from it.
There may be something you’re passionate about or you may be good at a hobby that you can convert into a business.
I was always flummoxed when trying to connect my business with my passion, as I really enjoy colouring! I have always thought, “How does that work when I’m an accountant?” However, when I started writing and drawing Anna’s Simple Accounting Guides, I did this using A3 paper and felt tip pens, and I thought I’m finally using my colouring in my business!
4. Do Some Market Research
Having an idea is all well and good but you need to know that there is a gap in the market for the product or service.
The questions to ask are:
- Who is going to buy it?
- Who are they specifically? The more specific you can be, the better!
It’s possible to survey people to see if they would buy the product/service and also how much they would be prepared to pay. This survey can be done online or face to face. It’s a good idea to ask what they think of your idea; would they buy it.
5. Have A Business Plan
Now that you have your idea and have completed your market research, it’s time to prepare a business plan.
Before you start worrying about this and thinking it’s got to be very complicated – STOP!
It can be a simple document and I would recommend that you keep it simple and easy to understand, as then you’re more likely to prepare it and keep it up to date.
This plan acts as a map for you and your business and will give you focus. It can cover a 12 month, two or five-year period.
Explain what your product or service is and how it will benefit customers.
State who your ideal customers and who your competitors are. Be as specific as possible.
Indicate how you will develop your idea and get it out there to your potential customers.
Prepare a simple cash flow forecast to see if you can make a profit and also to see if you’re going to need any money to get started. You can download my easy to use template by clicking the Download button, below.
Think about all the friends, colleagues, mentors, organisations you know who can help and support you.
But a word of caution – choose them carefully as you need support and constructive advice; you don’t want them to rubbish your idea!
6. Set Up
The most important consideration here is that you must understand and like your system. The system can be manual, spreadsheets or a computerised package. The larger you expect your business to become, the easier you will find it in the long run to use a computerised package. This will definitely be the case if you expect to have debtors and creditors.
Make sure, in accordance with the system you’ve chosen, that everything is filed away. I believe that the easiest is to use lever arch files in month order or a display book. You can file everything in the Cloud if you prefer, but remember that if you have to scan information this can be time consuming.
This will depend on the system you have chosen but it needs to be kept up to date; I would recommend doing this weekly or at least monthly. If you decide to use spreadsheets – I have simple templates for income and expenditure available, which you can download by clicking the button below.
Before you start trading, you need to decide whether you are going to be a sole trader or a director of a limited company. If you have a fairly straightforward, low risk business then it’s easier to start as a sole trader. You can always incorporate later. A client I have recently taken on decided to continue as a sole trader but to set up a limited company so she keeps the name as she is likely to incorporate in the future.
Ask an accountant for advice if you get stuck.
What you need to do if trading as a soletrader?
- Tell HMRC within 3 months
- Complete a self-assessment return each year
- Pay any tax due by the 31 January following the end of the tax year.
What you need to do if trading as a director of a limited company?
- Set up a company through the Companies House website
- Tell HMRC
- File confirmation statements
- File annual accounts
- Pay any corporation tax due 9 months and one day after the year end
If your turnover is above, or soon going to be above, £85k you will need to register for VAT. You can decide to register voluntarily before you reach this figure.
If you are going to be limited and want to receive a salary you will need to set up a payroll scheme and submit real-time returns to HMRC either on or before the date you are paid; this can be weekly or monthly.
It is important to have some cards to hand out to people at networking events. Also I would recommend having your photo on them to make them more memorable. Remember to use the back – a valuable area for information!
It is worth researching to see if there are any grants, which you are entitled to.
When you first start out in business it can be difficult to appear as though you have lots of happy customers. If you don’t have any customers then a way around this is to barter your skills with someone else and then ask them for a testimonial. Then you can use these on your website.
I have found over the years that business mentoring is invaluable; this can be either on a one–to-one basis or in a group. Sometimes these are free of charge through the Chamber of Commerce, Princes Trust etc. If this doesn’t resonate with you then at least speak to successful business people and ask them for any tips.
Mentoring clients of mine have found it very valuable to have an independent person they can use as a sounding board when discussing potential business ideas.
7. Sort Out A Name
This name needs to be memorable and easy to spell. I have met up with potential clients who have had to explain why they have chosen a particular name and what the name means. If it is so confusing that it needs explaining, it won’t be attracting customers to you.
Before you decide on a final name, check that the domain name is available.
8. Start Trading
Here we go! This is the moment when all your hard work and preparation will pay off.
Your aim now will be to get sales, this can be through:
- Your website
- Social media
- Face-to-face networking
In an ideal world, you would have a go at all of these approaches, but usually there are financial and time constraints. You may have to initially concentrate your energy on one area and see how effective it is.
9. Do You Need An Accountant?
This is a personal choice as a sole trader. You can have a go at your self- assessment return yourself but I would recommend using an accountant so you can concentrate on your business.
As a limited company you will need an accountant, as there are too many pitfalls and you will need guidance.
Having an accountant you can communicate with will take your worries away.
10. Know Your Figures
In order to be successful, you need to know what your figures are and keep them up to date.
Basically, as a minimum you need to know:
- How much money you have in the bank that you can use
- What you owe
- What you are owed
- Your incomings and outgoings coming up – say in the next 3 months. I would recommend preparing a simple cash flow forecast so that you can see how much your expected income and expenditure is. I have a cash flow template you can download by clicking the button below.
According to Hitachi Capital Business Finance’s British Business Barometer one of the top 10 business issues that gives SMEs stress is managing cashflow – 20% rate this as a stress to them.
I hope you find these simple tips useful and wish you best of luck with setting up and running your business. If you have any queries then please get in touch.
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