Starting a business? Get the basics right.
August 19, 2016
We've all had day dreams about having a brilliant idea, setting ourselves a new challenge, quitting the day job and starting our own company. As the dream continues, five years later we're sunning ourselves on a beach and living off the proceeds from the sale of our by now massively successful business. It's very easy to succumb to the Del Trotter notion that “This time next year we'll be millionaires.”
But how do you turn that dream into a reality and avoid ending up in Peckham with a yellow Reliant Robin as your company car? Luisa Grey, a Director at Eazipay Ltd, one of the UK’s largest and fastest growing Direct Debit bureaux, explains more.
Before you take even a baby step into your new career, the first question to ask yourself is - are you ready for this? Running a business takes time, graft, sweat and probably more than a few tears. While the idea of being your own boss can be attractive in theory (and also often in practice) the hours are long, the holidays are few and if you get it very badly wrong you could lose everything.
Having decided that you have the mettle and self-motivation to be your own boss … what's your idea? Whether it's simply carrying on what you're already doing, only better because you're not being held back by others, or coming up with the most useful new concept since the wheel, you need one.
And make sure it works. Preferably before you take out a 20 year lease on 10,000 feet of manufacturing space. Maybe a little testing might be in order? If it's a ‘thing’, some prototypes would be useful. If a ‘concept’, run it by some appropriate people to see if they like it. Check it doesn't already exist (or has been tried before and failed). And what's the situation with patents?
In short, is there a market for whatever it is and can you make money out of it?
Now you have the motivation and you have an idea that's been well received. Surely it's time to be bold, take up that challenge and launch yourself on the inevitable path to fame and fortune? Not so fast Dick Whittington. Before you buy that red spotted hanky you need a business plan. How are you going to pay your mortgage? Feed and clothe the kids? And you for that matter? With the best will in the world money is going to be tight for a few months, so make sure you have enough in the bank, a spouse who is willing and able to pick up the financial slack - or a talented cat.
What are your projections for growth? Where are the possible pitfalls? Many businesses need a start-up loan and banks aren't going to lend you so much as a pound if they think you're going to waste it on some magic beans. Or a struggling retailer.
Why not start small? Work evenings and weekends and see if it really is a goer. The kitchen table can be your office, although be wary of meal time spillages. Don't lash out vast sums on business cards, upmarket cars or fancy suits until you begin to become established.
This way you can keep your regular income until you're positive you can make a go of it. Then you can tell your boss you're leaving. But politely. Burning bridges is never a good thing and you might need your old employer one day.
And talking of income, how are you going to manage your income and make sure you get paid? Small businesses are notoriously vulnerable to cash flow problems, so make sure you have enough money in the bank to see you through the lean times, and operate a really efficient payment collection, and if necessary, a chasing system.
Better still; get your customers on Direct Debit from day one. That way you'll have guaranteed income and will only be kept awake by the 1,001 other issues facing a start-up. There is, by the way, a company that's very good at helping companies set up Direct Debit collections...
While you're working your way into a full time business, there are quite a few other things to think about. Firstly, don't forget to let the tax man know what you're doing. I know, it's only part time, but it's better to start as you mean to go on. If the first time you ring HMRC is from the Cayman Islands then they might just decide to delve a little deeper.
And the Revenue shouldn't be your only brush with admin. Insurance, employment regs and any legal requirements surrounding the setting up of your business and what you're producing all need to be considered.
A name might not seem the most important thing, but it can be critical. Do you want something that tells customers what you do immediately, or that doesn't mean anything in particular? Something maybe that makes you stand out? Be careful with the name, Facebook is regularly filled with wacky pictures of products that sound fine in their native language but not quite so fine in English (Barf Detergent, anyone?) so do your research first.
If your name doesn't obviously connect to your product, you might need a strap line as well. And of course you'll need a logo to go with it.
And what sort of structure do you want to operate under? There are pros and cons to being a sole trader, partnership or limited company and you need to work out which is the best way forward. Going it alone could mean you lose everything up to and including your house. And your kids might have to start going up chimneys. Equally, a limited company can be as unwieldy as an elephant on roller skates. Choose carefully.
Get yourself a good accountant. The best ones will save you a small fortune in tax and come up with ideas so ingenious, and yet so completely legal, you'll send the tax man in to a flat spin.
Starting up your own business could be the most rewarding thing you ever do. Equally it could send you in to a flat spin, never mind the tax man.
Start slowly, build gradually and follow the rules, Success can never be guaranteed but a bit of preparation won't half help your chances. Right, I'm oft to wash my clothes in Barf.
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Damion Clark at Real PR (Consultants) LLP. Tel: 01353 667934 or 07789 911314 Email: email@example.com