How do you start your own business? Easy! Just do it. However, if you want your business to do well, you can dramatically raise the chances of success by following a few simple but time-honoured tips.

Before you start

Why do you want to start a business?

Think about what you really want – not just out of the business, but also out of life.

If you are serious about running a business accept that, for better or for worse, it will make a big difference to your life. Even a part-time business will involve time, money and stress – usually more than you imagine – with no guarantee of success.

Most people go into business for motives beyond cash – a fascination with producing or doing a particular thing, a desire for independence or to be their own boss. Whatever your reason, know why you want to start a business rather than work for someone else.

What are your strengths?

List all of your strengths and weaknesses. Be realistic and also get the views of a partner or friend. What does the list suggest to you? Aim to find something that works to your strengths and eliminates your weaknesses. For example, if the idea of bookkeeping turns you cold, you might decide to hire a freelance bookkeeper to handle that aspect of the business for you.

Find the market

Most people start in business by thinking about what they would like to create and then trying to make it. Only afterwards do they think about who might buy their products or services, and why! Wise people starting in business find out what people want first, albeit within their particular field, and then find a way to deliver those solutions in a unique way.

How do you find what people need? Do some preliminary market research. For example, a painter and decorator could start by carrying out a survey among local householders on what they want from a decorator and what they would pay for. It may be that most people hate painting their window frames and so he or she could make this their speciality and the basis of a positive reputation.

Plan

When you have decided what you want to do in general terms, you need to work out in more detail how to get there. This, essentially, is what a business plan is.
A proper plan is essential to:

• Get everything straight in your own mind.
  
• Show others, especially potential investors, what you are doing.
  
• Act as a map to keep you on track.

The essence of a business plan is to prove the viability of your business and highlight the strengths and weaknesses of your idea. Identifying issues such as seasonal cashflow will help you be more successful.

Preparing a business plan is not as complicated as it sounds – it simply involves identifying:

• Where you are now.
  
• Where you want to be in 12 months.
  
• What broad actions need to be taken to get you there.
  
• Who will do what – by when – to move you towards your goal.

Business plans are important – you may become very busy later on and, without a plan, you might lose your sense of direction in all the day-to-day confusion of running the business. Don’t be put off if you don’t know all the answers or details to begin with – most people don’t.

Market research

Central to your plan is knowledge of the market. Many businesses fail to do as well as they could because they are focused on making a particular product and give no thought at all to selling it. Instead, look at things the other way round. Consider what the market wants, and perhaps is not getting now, then look at what you can do to meet that demand.

Positioning

From your research you will be able to decide what your USP – Unique Selling Proposition – will be. What makes your product or service better, faster and more cost-effective than its competitors? It may be something as simple as offering next-day delivery in a field in which other companies take 28 days, or it may be that you work in the evening when most normal offices are closed.

Finance
Issues to consider here include:

• What will your initial and ongoing costs be?
  
• How much money must you make each week and month to cover your personal and business expenses? Use this figure to help you set your targets and work out what you should charge for your product or service. Are the numbers realistic? Can you physically do that much or sell at that price?
  
• How much does your cash forecast suggest you will need? Where will you get it? Can you afford to invest this? Can you borrow it?
  
• Are you prepared to put your house on the line if required?

Get your finance in place before you start because it is far more difficult to raise finance later on when your personal resources are drained. Asking for it sooner rather than later implies that you have thought things through and increases your chances of raising the money you need. Assume a worst-case scenario – costs are often higher, and sales lower, than you might expect. This may mean borrowing, or taking on a partner.

Premises

For most new businesses, finding the perfect premises is not a big priority. There are obvious exceptions – most notably retailing businesses, for which the most important factor is position.

However, many new businesses invest in fancy premises out of all proportion to their early needs. In fact, you may be able to run a new business perfectly well out of your home. This will save time and money in the early days.
You do not usually require planning permission to work from home if:

• The character of your home is not materially altered.
  
• You use it for a purpose incidental to the enjoyment of the property as a dwelling.
  
• You do not inconvenience the neighbours.

So a small private office at home is not usually a problem, but a noisy or smelly workshop is bound to attract attention. And turning your front room into a shop would require planning permission, as this would have materially altered your home. Similarly, generating a lot of traffic will cause problems.

If you cannot work from home, be cautious about renting a big property and entering long-term agreements. Stay small and flexible to start with.

Alternatively, consider serviced offices which are comparatively expensive but offer greater flexibility, particularly in the early days of a business.

Who do you have to inform?

You do not have to register as a business unless you decide to trade as a limited company. In practice, however, there are several people you should inform when you start up.

Your bank

No matter how you are trading, keep your personal and business finances apart. You will need a separate business account; you may need several if, for example, you are in a business where you find yourself holding money on behalf of others. You may also need special banking arrangements.

It is a good idea to meet your bank’s business adviser long before you actually set up the business, even if you do not intend to borrow money from them, because:

• It is important to develop a good working relationship with your bank.
  
• The bank may be able to offer you advice and services you may not know about.

Companies House

It is up to you to decide whether you want to set up as a sole trader, partnership or limited company. If you do establish a limited company, you must register it by sending the necessary forms to Companies House, together with the Memorandum and Articles of Association (the “constitution” of the company) and a small fee. You must also register a limited liability partnership (LLP) with Companies House.

You can get the forms from Companies House or from most legal stationers, which can also provide a draft Memorandum and Articles to fill in. The forms require no more than details of the first directors, secretary, registered office, and name of the company – all of which can be changed later – and a declaration that you are setting up as a company. A solicitor must witness this declaration – some do this for free.

You can buy a company ”off the shelf” from a company formation agent if you want one in a hurry, but it is usually cheaper to do it yourself.

HM Revenue & Customs

Even if you are only running a part-time business in your free time, you must inform HM Revenue & Customs that you are setting up. Their helpline will lead you through the procedure.

Registering for VAT

Generally, you don’t have to register for VAT unless your taxable turnover reaches or is likely to reach the VAT registration threshold.

Once you have registered, you can reclaim the VAT on business expenses, with some exceptions. You also have to charge VAT on sales. Obviously, if you sell goods that are exempt or zero-rated for tax purposes, it may well be to your advantage to register voluntarily, even if you trade below the threshold.

If you have any dealings with imports and exports, contact HM Revenue & Customs at once.

Your insurers

If you work from home, tell your domestic insurers of your plans or you could invalidate your entire domestic policy. Check that your life insurance policy is unaffected by your new status.

You may need additional business insurance. By law, you will require employers’ liability insurance if you employ anyone else, even part-time. However, there are many other useful policies. For example, anyone offering professional advice should protect themselves with professional indemnity insurance. You may need insurance against public or product liability. Some occupations have their own specialist insurance.

Other public authorities

If you are going into a specialist business, you should already have some knowledge of the specialist legislation under which you might be required to register, for example, registration under the Food and Drugs Act, or the Licensing Act. If in doubt, ask your local Business Link or national equivalent for advice.

If you keep data on individual people, you may also have to notify the Information Commissioner.

Making your mark

Launch

A small launch party is often a good idea. Get potential suppliers, customers, or retailers along. It need not be big or expensive. People may like being invited to a small, intimate occasion – it gives a sense of intimacy and provides good networking opportunities.

If you can, get in the local and trade press. Tell people you’re in business.

On the other hand, it is usually not a good idea for a new business to spend lots of money trying to make a big splash in the marketplace, with big advertising campaigns. To do that successfully generally requires more money than is often available to a new business.

Image

Your business’s image is a vital part of your marketing. It need not be expensive, but it should be professional and consistent. This includes your logo, signage, stationery, décor, packaging and so on. It is worth getting a graphic designer to create a simple look for you. Make sure that it also works well in black and white when printed on a laser printer or through a fax, and that you own the copyright of anything created for you.

Invest in quality headed notepaper, business cards, and, possibly, compliments slips. These are often the first point of contact people will have with your business – and first impressions last.

Communication

A telephone is essential. If you are working from home, a separate business line adds to your credibility. If you do not have a secretary, an answering service is essential. Better still, you could use a remote answering service.

In many businesses, fax machines have been supplanted by email and an email address is essential. However, a fax machine can add to your credibility, especially if it has a dedicated line.

Networking

The three commodities in short supply when you start up are usually clients, help and money for promotion. Fortunately, there is one route that can help you overcome these – networking. This simply means getting yourself around and telling as many people as possible what you are doing now. It can be done formally, at your local Business Club or Chamber of Commerce for example, or informally, at the pub, club or garage. Don’t be shy, and always carry a good supply of business cards with you. It works both ways:

• To find clients you ask, ‘Do you know anyone who needs a good…?’
  
• To find help you ask, ‘Do you know of a good…?’

It is amazing how effective word-of-mouth can be to open doors you never even knew were there.

Paperwork

Be organised from day one. This applies to every aspect of your business: from keeping your receipts to preparing invoices for customers.

Invest in a filing cabinet and some drop files, then design a filing system that suits you. Be disciplined about returning everything to its proper file at the end of every business day.

Be careful about keeping paperwork too. To be on the safe side, anything that might have legal and financial significance should be kept for at least seven years. This includes contracts, letters, invoices, and all account books.
Invest in a simple bookkeeping system, either on paper or on computer. The latter will make keeping your books simple and quick and will automatically produce profit and loss statements, a balance sheet, and reports of payments owed by and to you. This will help you stay in control of your finances better. If you are disorganised you may find yourself liable to fines for late submission of tax returns, for example.

Keep all receipts that might relate to the business, even those relating to what you spent before the business officially started. It may be that your accountant, if you have one, will say some of these cannot be set off against tax, but it is better to give them everything so that you can claim as much as possible.

Set up systems

The secret to success in business is planning. The more detailed this is, the better. Planning involves thinking through many issues and setting out how you will handle them. For example, a sale is not a sale until the money is in the bank, yet there are some simple strategies to ensure you are paid on time.

The more you systematise your business, and make certain processes automatic, the freer you are to direct where your business will go, rather than always finding yourself reacting to situations as they arise from day to day. The latter is a recipe for long hours and high stress. Setting up systems is the start of freeing yourself from the tyranny of your business so that you don’t have to work 24 hours a day.

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