Launch a small business in 10 steps (part 1)
Every new business
start-up has its own unique set of targets, problems and needs - so no
two small businesses are alike. But there are certain golden rules
common to all start-ups that you can follow to make sure your start-up
business has the best possible chance of survival.
By Dan Matthews
1) Learn about your
market
Market research is the most fundamental thing you can do
before setting up in business, yet most businesses don't do it properly. Is
there really demand for a Quasar centre in your town, or are you
setting one up on a whim?
It doesn't matter if you're breaking into an existing market
or inventing something completely new, if it doesn't serve a purpose and
there's no demand then no one will buy from you.
Your town might be crying out for a new bakery, but you
won't know until you ask them. So ask them! Depending on your business,
research could take many forms. Check out would-be competitors: are they doing
well? Is there room for your business and could you do what they do better?
Ask potential customers what they think and demand honest
answers. There's no point ‘researching' family and close friends if they're
going to tell you just what you want to hear. Make sure the information is neutral
and unbiased.
How you conduct your research will depend on whether you plan to
trade locally (a restaurant, butcher or pub) or nationally (an ecommerce
website). It could be a door-to-door questionnaire or a poll on facebook.com, but
get the information before you act.
Read on:
Prepare for business
Market research using social networks
Is your product good enough?
2) Write a business
plan
This is particularly important if you have never started or
run a business before. If you're not looking for funding your plan doesn't have
to be huge, just a few pages of A4 explaining your business' proposition, who
you're going to sell too, how you will fund your start-up and how you plan to
grow.
Plotting your expenditure and your income is useful too. Be
honest about how much you spend and don't get cocky about your sales
expectations. Most entrepreneurs say they spent much more than they planned and
received much less back in sales - especially in the first year.
Revisit your plan occasionally and see if you're sticking to
it. Your business will evolve over time as new opportunities and threats
become clear to you, this is no bad thing, but it helps to incorporate these
changes into to your plan as you adapt and grow.
Read on:
Create and refresh your business plan
Are you ready to start a business?
Set business goals
3) Create a ‘business'
legally
Many people forget to do so early on, but you have to create
the legal entity which is ‘your business'. To do this you must register your
business at Companies House and inform HM Revenue & Customs that you no
longer receive a pay cheque.
HMRC requires you to declare yourself self-employed, which effectively
classifies you as a ‘sole trader' in the eyes of the taxman.
But you can opt for one of many business legal forms: sole
trader, partnership or limited company, for example, and how you structure your
business will dictate the laws that apply to you and the type of taxes you pay.
Instead of having your tax handled by your employer
you will be required to fill out a self-assessment tax form and declare any
money you make through your business to HMRC.
It's best to speak to an accountant before you form your
business and get advice on what is the most tax efficient way of doing it in
your case. Companies such as Quick Formations will also help you set up a
business for a nominal fee.
Read on:
Business legal structures
Set up a limited liability partnership
Starting a business checklist
4) Get proper funding
You may have heard the expression "cash-flow is the
lifeblood of business". Well it's true. Your business will churn through money
quickly and you must have enough to get you up and running before you start
earning it back in sales.
Having too little money at start-up is one of the biggest
reasons new businesses fail. It's better to have too much than too little, and
it's not greedy to ask investors (be they a bank, friends and family or a
business angel) for a lot of start-up capital if you think you really need it.
If you're looking for funding from an external source then
your business plan and your grasp of your business' figures are totally
essential. Ask for money without being able to explain your market or without understanding
how much you'll make in Year One, and you'll be laughed out of the bank
manager's office.
Remember that you can get more than one round of funding. If
you need more money, update the business plan and expect the same grilling you
got the first time around. Don't think it will be a walk in the park because you have
secured funding before.
Read on:
Finance your business idea
Fund growith: debt vs equity
Funding growth
5) Find business
premises
Business premises are more important to some businesses than
others. If you are ‘customer facing', or if your customers are expected to come
to your shop or restaurant (for example) then picking the right location is crucial.
We have heard examples of businesses struggling in one location
but thriving after they moved twenty metres up the road. Check out passing trade, what areas are busy? Don't go for a cheap
option if it'll turn your businesses into a ghost town.
Online businesses, for example, have less need for a prime
locations. Some very successful businesses (icluding most eBay shops) have
started up in people's spare bedrooms, garages or on kitchen tables.
Make sure you have the space to make your business a
success, especially if you plan to sell stock over the internet. And don't get
distracted by your television or games console. You are at work!
For other types of businesses, such as small factories, farms
and consultancies, you're location must fit your needs. Find the right space
for the right money. Make sure you have enough room, and access to your
customers and people who can help you.
All businesses must keep in mind access to local skilled
employees, as well as the various rates and taxes taken by HM Revenue and
Customs. Don't overstretch yourself here. The bills do add up.
Read on:
Get a business lease
Application service providers
Insuring your property
Leasing premises checklist
For part II in this series click here
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