Ten things I wish I’d known when starting a business for the first time

*This content is brought to you by Sable International, specialists in financial and immigration solutions for South Africans. Sable International can help relocate yourself and your family, along with your business to the UK.

By Ashley Deakin*

More and more people are choosing to start their own business every year. It’s a dream many of us have had. The promise of being your own boss and building a legacy that could potentially last for generations are great motivators. However, before you go charging off into that boss-less future, there are some things you should consider.

1. Know what you will do

It might seem obvious, but you need to have a very clear idea of what your business will do – before you hand in your resignation.

Will you provide services? Manufacture products? Do you have the expertise and knowledge required to make a success of the business environment you’re entering?

Choose something you’re passionate about. It’s unlikely you’ll be able to sustain the drive and dedication needed to be successful if you aren’t 100% enthusiastic about your pursuit.

2. Draw up a plan

All successful businesses start with a plan. First work out how you’ll source funding. You’ll also need to do thorough research on what expenses you’re likely to incur and weigh those against any potential profits you may make.

While it’s good to be optimistic, you should never bank on the best-case scenario. Many a business has been wrecked by overly optimistic entrepreneurs.

It’s an excellent idea to enlist the services of a specialist accountant. Their experience will ensure that you stay on top of Income Tax, VAT and Corporation Tax.

3. Investigate alternative finance

Alternative finance from government grants and other support funding schemes can be a great help to your venture.

Many entrepreneurs borrow funds from their families. If you do this, you must ensure that all parties are aware of the risks involved. Always draw up a contract when it comes to these kinds of loans to avoid any potentially tricky situations later down the road.

4. Choose a company structure

There are four broad categories that you can choose from:

a) Sole trader

This is the simplest form of business structure. You can establish yourself as a sole trader with legal formality by registering with HMRC.

b) Partnership

It’s advisable to set up a partnership formally and in writing. Although this is not required, it is recommended.

Be sure that any partnership agreement you have clearly outlines what is expected from all partners.

c) Limited company

This is one of the best ways to set up your new undertaking. With a limited company the company’s business affairs are kept separate from your personal affairs.

There are other types of formation and you must decide what kind of company you’d like to set up.

This process can get complex, and it’s best to get advice from an expert. For more information on how to choose the right structure read our article on company formations.

d) Limited Liability Partnership (LLP)

Depending on your situation, you may not want to start a company but still want some of the benefits of those structures. In these cases, an LLP may serve you well. It can be thought of as a halfway point between companies and partnerships.

5. Get expert accounting advice from the get-go

Even if you are an accountant, it’s best to get an outside opinion on your new business. An objective third party will be able to ensure that your bookkeeping and financial records are kept fastidiously from the outset.

Your accountant will also make sure that you registered correctly with HMRC and that all the taxes you need to pay are correctly dealt with. Many accounting firms also offer payroll services that will help you set up a PAYE scheme for your employees.

From April 2018, companies will have to keep digital tax records. Set your records up to meet these requirements to avoid having to switch down the line.

Having an accountant take care of all this is the best way to ensure you don’t miss anything. At the early stages of your venture, you should be focussed on driving innovation and growth – let someone else worry about your bookkeeping and accounting needs.

6. Be prepared to track your budgets and forecasts

Budgeting and forecasting are two of the most important aspects of running your business successfully.

Once your business is up and running, it’s essential that you keep a tight hold on that business plan you drew up in the beginning. This will ensure that you stay on track. Assessing your budget and considering your forecasts every month will help you to augment or shift your original strategy effectively.

Most businesses fail in the first three years, so it’s vitally important to keep a strong hold on your finances in the early stages.

If you see a problem on the horizon and you feel you won’t be able to make a payment, it’s better to get ahead of it. A bank manager is far more likely to be sympathetic if you approach them before they come to collect.

7. Marketing

Ensure that you get your name out there. Take special care putting together a logo and a corporate identity for your business. Give your website and marketing materials some serious thought as these are often the first point of contact for potential clients.

Marketing can get extremely expensive, so always be aware that you will need to balance your need for exposure with your ability to pay for it. Don’t be bamboozled by flashy marketing tricks; get several quotes before choosing a marketing agency or freelancer.

8. Take advantage of your losses

Making a loss is simply part of doing business. You shouldn’t be discouraged if, in the early stages of your venture, you fail to break even.

In the UK, any losses you make in the first four years of trading can be set against your other income taxed in the previous three years. Making use of this relief can generate a substantial tax refund. It’s best to speak to your accountant about this though, as the application can be particularly complex.

9. It’s all about the money

Cash flow needs to be your top priority. The old adage “cash is king” is as valid now as ever. More companies go under because of poor cash flow than poor profitability.

Establish clear terms of business and maintain robust credit control procedures from the start, and you’ll find you’ll be well-placed to manage cash flow.

10. Be obsessive about your costs

Always be aware of how much you are paying your staff and laying out for capital expenses. Fixed costs like rent, rates and other utilities can’t be done away with, so you’ll need to reduce your expenses in other areas to ensure your business becomes or remains profitable.

Be in constant contact with your suppliers and ensure you’re getting the best deals from them. You’ll also need to be careful when purchasing or hiring business assets – don’t be dazzled by top of the range computers or the swanky office space on the high street.

Always have a clear idea of what your business needs and then take time to make sure you’re purchasing those assets in the most cost-effective manner possible.

Speak to our SME accounting team today for help running and setting up a business in the UK. Email us on [email protected] or give us a call on +44 (0) 20 7759 7553 for more information.

  • Ashley Deakin is the Chief Operating Officer of Sable International.
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