You are using an outdated browser. Please upgrade your browser to improve your experience and security.
Understanding Your Business
“A thousand miles starts with a single step” – Chinese proverb
Setting out on the journey of starting a new business can certainly be daunting. An endless list of things to think (and worry) about; from logistical items such as possible business names, business premises, generating marketing material, deciding which business structure to go with, to ongoing issues such as managing customer service, deciding where sales will come from, managing cashflow and your team, and dealing with admin and paperwork. It can feel overwhelming.
We’ve put together some top tips for start-up businesses to help get things on the right foot from day one:
- If you’re thinking of breaking out of the employment merry-go-round or are looking to test the water with a new part-time venture, you’ve most probably got an idea or product which you have faith in and feel will be successful. Whilst the temptation will be to be a master of all, from the cleaning to the invoicing, to dealing with customers and suppliers – the fact is that your time is always best spent doing what you’re good at. Anything which detracts you from driving the business forward, stops you making new sales, securing a new product or customer, negotiating rates with a supplier, and is penny-wise and pound foolish. Stick to what you know and delegate anything that isn’t in your core skillset to others who have the experience (and time) to do a better job than you, leaving you to concentrate the extra time on being more profitable. Work smarter not harder from the off.
- Get early advice. No one is asking you to be a solicitor or accountant and no one expects you to know how to set things up properly from the beginning. Your key skill lies in the product or service you’re going to sell. A chat with a good professional advisor should give you all the advice to decide whether a sole trader or limited company setup is better, if you need staff from day one and how to manage PAYE, pensions etc., how to manage VAT, forecast your cashflow, deal with your accounts and admin efficiently as well as identifying tax planning opportunities early. Waiting until tax returns and accounts are due means many of these opportunities are missed and you’re on the back foot from the very start. Hindsight, they say, is always a wonderful thing!
- Get organised with your accounts. Use your shoebox to store shoes not invoices and utilise low-cost, easy to use software such as Xero to get your paperwork organised and headache free. Xero allows you to see how you’re performing on a day to day basis which helps you to maximise performance, rectify mistakes early on and plan more effectively for the future. Seeing how you’re doing not only gives you back control but can provide a welcome morale boost which at times you’ll be sure to need.
- Cash is king and keep the faith. Mention to people that you’re starting out in business, and undoubtedly, you’ll be quoted that 8 out of 10 businesses fail in the first year (although we’d argue that it’s much lower than that!). It’s not necessarily a poor idea or product which leads to this but instead, in our opinion, it is two main factors that cause new businesses to fall short.
- Firstly, cash – the king indeed. Having a great product or service which is selling well is pointless if the business’ costs are out of control. Xero will help to manage profit on a live basis, so you can make it faster than you spend it. It also gives your advisor access to this information at all times, and a good advisor will use this to help you steer and grow your business. Your advisor will also be able to help you prepare cashflow forecasts to get the business on course from day one.
- Secondly, keep the faith. You never know how close you are to truly breaking through, especially in the first 12 months. It takes time for hard work and persistence to reap rewards, but in the meantime, it is human nature for doubts and panic to set in. This can set off a negative spiral of worry which impacts on your customers (who then have doubts as to whether to return), your suppliers (who get concerned that you might not pay and reduce payment terms) and your team (who start to look for other jobs). Keep the rot at bay – you’ll be closer to cracking it than you think.
Work smart, keep positive and before long your only regret will be that you didn’t take the plunge sooner!
If you’d like any advice, or just a point of view, feel free to get in touch.