Top ten considerations when starting a business
If you are thinking about starting your own business or maybe you just have, there are many things to consider. Just having a good idea or being good at what you do may not be enough to make your business successful.
Making a business successful takes hard work and a lot of time and dedication. But the rewards can exceed anything you would get as an employee.
When I started my own business, it gave me a totally different outlook on the role of the business owner – and that comes from someone who has dealt with business owners for all his working life!
So here are 10 things that new entrepreneurs should consider when making the decision to start their own business and how to give yourself the best chance of success.
1. Know your Why
Well, we all have our reasons for wanting to start our own business, but why are you in business, what is the purpose for wanting this particular business idea to succeed?
And no, the answer is not to become rich!
For example, I had a number of personal and professional reasons for starting on my own, but this is not the ‘why’ behind my business. I have always enjoyed helping people make a success of their business by offering help and guidance and using my knowledge of the numbers.
I wanted to do more of that, in my own way and with my own personality stamped on it. I can now provide that support, that guidance, that knowledge and experience to help my clients succeed and stay best friends with the taxman.
That’s what gives me the feeling of success and that is why I have my own business and operate it the way I do.
In the big corporate world, there are some grand statements of ‘why’, for example:
To empower every person and every organization on the planet to achieve more. – Microsoft
Yours does not have to be that grand but it is important to know it, and to never lose sight of it. No matter whether the business is doing well or going through a sticky patch your ‘why’ must remain at the forefront of what you do.
2. PLAN!
In brief this means knowing what you want to do, how you want to do it, and what you want to achieve.
A good business plan sets out the pathway to achieving your goals. It is also essential if you are applying for any finance to get you off the ground. Here are just a few reasons for developing a plan, there are many more:
- Provides a structured way of organising your thoughts and clarifying your idea.
- Helps you set out your goals and spot any potential problems in achieving them.
- Gives you a clear strategy to follow when things get busy.
- Is often essential for securing external finance for your business(and is required if you’re applying for a Start Up Loan).
- Allows you to measure your progress as you go along.
- Ensures all your team are working towards the same vision (your team includes your personal support system and the external people you use to help you and your business).
- Helps you plan for the future.
One of the oldest sayings in business is ‘failing to plan is planning to fail’. I don’t really like old sayings but this one is very true and whilst you cannot plan for everything, as Coronavirus proved, having that plan will help you develop a successful business.
And finally, keep the plan up to date with regular reviews. Business will change and your plans will need to adapt.
What goes into a plan? For a start, all of the following.
3. Full or Part time
Most new start-ups are by people who are currently employed. The first decision to make is whether to leave and start up full time or to begin as a side-hustle, working evenings, weekends and days off to build up the business before taking the risk of leaving your job.
There are advantages and disadvantages to both.
By going full time at your business, you give yourself the time, the dedication and the drive to make it as successful as possible. From an income point of view it is higher risk, but also offers higher rewards.
Building a business does take a lot of time, certainly in my experience more time is spent on running the business than doing the actual work that you are paid for.
A side-hustle provides that bit of security, the knowledge that you still have a wage coming in at the end of the month, and that is its biggest advantage. It can be a great starting point whilst you get to know your business and learn a bit more about whether you can make a success of it.
This works well in particular for internet-based businesses where you do not have to abide by your customers working hours and you can automate a lot of the process. It does however mean long hours, when coupled with a full-time job.
There is the argument that by starting as a side-hustle you are going at it ‘half-hearted’ and therefore will not have the drive to make it succeed. This can be true, but if you have a strong ‘why’ behind your business and you have a plan to follow then you will have that drive to turn your side-hustle into a very successful business, whether staying as a side-hustle or going full time.
4. Structure
- Sole Trader
- Partnership
- Limited Company
- How many owners are there in the business?
- Growth expectations
- Who are your customers and suppliers?
- Profit levels / Tax
- Legal protection
- External finance requirements
5. Finance
This depends upon a number of factors.
- A service business is likely to have far lower set-up costs than a product-based business.
- How quickly will the business grow?
- What are the day to day running costs?
- What income do the business owners need?
It is always best to know in advance what, if any, external finance will be needed. This gives you time to source the best type of finance to suit your needs and banks/lenders much prefer to help businesses that plan rather than run to them in a sudden crisis.
6. Know your market
Knowing your market is crucial.
Who are you targeting your service/product at, where do they live, male or female, what age, what do they want, personal or business as a few examples.
Understanding your target customer will help you market your business in the right places, at the right times and at the right price.
Pricing your service or product correctly is equally important and can often be more difficult than you think. If you are a service provider then knowing your value is key. How much is your time and expertise worth – work it out and trust in it!
For products make sure you know your costs and overheads. Know your competitors, research them and understand how they operate. Where can you make a difference?
And don’t get drawn into price wars, a race to the bottom as us accountants call it. You will not make the profit you want unless you work ridiculously long hours. Your reputation will be for cheap work and that will end up being all you get. Plus there will inevitably be bigger players in the market who can afford to price you out if they want to.
One of the most valuable lessons I was taught (yes, I am still learning) was understanding my market and my pricing structure. And remember you will spend way more time running your business than earning from sales and that must be factored in.
7. Know your product
Most new businesses start with a service or product that the owner has experience of, usually from their employment. Others start from a passion or extension of a hobby. So, you may think you know your product.
Whether you are providing a service or a physical item, always remember your customer is buying from you. They expect you to know everything, to be the expert and to help them with any questions they have.
You must know your product inside out, how it works, what it is used for, what happens if it goes wrong and what your customer can expect.
Internally, research the best source for your product, not necessarily the cheapest price. Consider delivery times, payment terms and the service quality of potential suppliers. All of this will benefit your business and your customers experience.
8. Marketing
Marketing comes in a number of different forms:
- Website
- Social media
- Brochures and leaflets
- Networking
- Press advertising
- Referrals and recommendations
- Shows and exhibitions
Where you market and how you promote yourself depend on where your target customer is likely to be looking. This all comes back to knowing your customer. There’s no point in spending money advertising on Facebook when your customers are looking at TikTok.
Developing a marketing strategy and budget is all part of the planning, it can bring great rewards if you get it right, and a lot of wasted money if you don’t.
9. Insurance
This is often overlooked. There are a number of different types of insurance that your business may need.
- Public liability insurance – recommended for any business that comes into contact with third parties. Popular with tradesmen, shops and salons.
- Professional indemnity insurance – for providers of professional services such as solicitors, accountants, architects, financial advisors.
- Tradesman insurance – for trades working in people’s homes
- Product liability insurance – for product retailers
- Business interruption insurance – mainly for businesses with warehouse or storage space, holding stock and valuable equipment
- Employers’ liability insurance – required when you take on any employed staff
I would always recommend insurance, it is generally not that expensive. Hopefully it never has to be called upon, but you never know – claims can run into large sums of money that can ruin a business.
10. Know your limitations
It is great to learn new things and you should always try, but there are some things that you just will not be good at.
Don’t worry, if that is the case don’t be afraid to ask for help. It can often be cheaper and easier to call in the experts than to waste your own time and money trying to work out what to do.
Make sure whoever you use fits in with your personality, understands who you are and what you and your business are about.
Of course, cost must be a consideration, and you will need to weigh this up against the benefits, but do not just accept the cheapest option, there is usually a reason why it is the cheapest. Like everything, do your research and ask around.
11. Things will go wrong
As you start your business you will make mistakes, even with the best planning in the world. I made some, we all make some. A bad decision, some wasted money, taking on the wrong customer, you name it we’ve all done it.
There are 3 important things to remember when (not if) you make a mistake:
- Learn from it.
- Try not to repeat it.
- Don’t beat yourself up about it – the most successful entrepreneurs around have made some terrible decisions in their business lives – you will be amongst great company.
Whilst it looks like a lot of work – and it is – that should not put you off. In the early days it is likely that you will not have enough work to keep you busy all the time.
Use that time as a great opportunity to put your plan into action, learn what you need to, set up time saving systems. Get the right people on board and keep on top of the administration. Put as much as you can in place so that when work increases you are not stuck under a mountain of paperwork.
Most of all, enjoy it! You will be doing what you want, in the way you want to do it. You will have your own business – you will be an entrepreneur! Now doesn’t that sound good.
I have helped many businesses move from an idea to success, including my own! I offer a complimentary, no obligation introductory call to discuss your business idea and see how we can work together to make it the success you deserve.
https://calendly.com/guida-acc/30-minute-introductory-meeting
John Lawrence FCA
Guida Accountancy