If you are thinking of starting in business, then there are a few things that you must do, and some that you could do. The must do stuff is not optional, well it is kind of optional but then you stand a slightly greater chance of falling into the 4 out of every 5 new businesses fail category if you do. With that crazy statistic in mind here’s my top tips for making sure you take some great steps to being the 1 in 5 that succeeds.
Prepare a budget
Yes, I know you don’t know what your revenues and costs are likely to be – no-one does. But the point is you make an estimate and work from there. Say, for example you had to drive from Falmouth to Gatwick to catch a plane to go on holiday. You’ve never driven it before but you know it’s roughly the same distance as London, say, 250 miles. So if you allowed 3 hours you’d have to average just under 85 mph. That ain’t ever going to happen, well not unless you are Jeremy Clarkson and you have the whole of the Grand Tour budget behind you! So you would revise your estimate, allow some, and that would be your budget. Moreover, you would make rough estimates of what time you need to be there by and take action (drive faster or slower) depending on the what results you are getting. So it’s just the same for a budget. Of course, my example doesn’t really work today as the majority of people use a GPS to work out where they are going and how long it would take. But all the same rules apply;
- – Set waypoints so you know where you need to be by when.
- – Regularly measure and update the information.
- – Be prepared to act upon the information you receive.
- – And probably most importantly, know when to throw in the towel. This last point is so important and so overlooked. It’s vital that you put in waypoints to measure your success and pat yourself on the back when you have done well. But it is also vital that you put in some markers that tell you when it’s all going a bit pear-shaped and it’s time to throw in the towel. Most businesses that fail, fail spectacularly because they don’t know when to stop.
Last point on budgets – it is difficult to get a business off the ground and it’s so important that you know where you are. Making a budget ensures that you have ‘no surprises’ – so if you wake up one morning and find yourself £20k overdrawn then that’s coo…just so long as you planned to be £20k overdrawn.
What is measured is managed. So, just like in the budgeting process you will need to measure things. And that is not just financial things, but non-financial too. So maybe you need to measure the number of leads you get, or the number of new business meetings, or how many of your new business meetings turn into new business. But the thing here is, if it’s important then measure it, and measure it regularly – maybe weekly or monthly, and from your results manage your outcomes.
Trade in the right structure
Most ‘tax experts’ who sit upon bar stools think that starting a new business as a limited company is the only way. Possibly, but there is absolutely no hard and fast rule (and quite frankly I could drool on for weeks on this topic, but on this occasion I will spare you.) But here are just 2 things to bear in mind;
- – Limited company does not always mean limited liability. If, as is often the case for a start up, you have given a personal guarantee then guess what? Yep, your neck is on the line. The ‘Limited Liability’company counts for diddly.
- – Losses in a company (that often occur in the first couple of years of commencing trade) are NOT allowable against other income, including income earned in the previous year. So there could easily be a big fat tax refund waiting for you if you trade as a sole trader when you start up.
But – every case is different; there are no hard and fast rules. Talk to your accountant.
Work regularly in each of the following sections of your business:
- – Marketing (and sales) – driving people into your business
- – Operations – what you do when they turn up
- – Finance – recording how well you have done the above
People often start businesses because they are really passionate about something. Do you know what? I really love making faux snakeskin slippers. I really do. It’s the best thing I’ve every done. I love it…
Good, because that really helps. You’ll need something to keep the fires burning whilst you struggle through the lean times. But I’m afraid, equally as importantly, you must never let go of the other (vitally) important areas in your business – marketing (and sales) and finance. In fact, sales are probably your number one priority. Nailing new business is always going to be more important than designing a new range, however much you love doing it. After all, that’s why you set up in business in the first place. But you must, must, must spend time in each of the other areas.
Harness technology to gain leverage in your business
OK, here’s a fact – all businesses are limited by resources. Resources are largely;
- – Time
- – Money
- – People
- – Space
And as your business grows you will butt up against one or other of those resources. As a start up you will struggle with;
- – Having enough time
- – Shortage of money
- – Someone to give baton’s to in order to get stuff done
Technology is not the ‘b’ all and end all, but it can help massively. In accounts, for example, we have seen the most exciting technological changes and here’s just a couple:
- – Xero accounting software – it’s not only intuitive (that means it learns from what you have done previously and shortcuts the entry in anticipation) but it also talks directly to your bank. So that means even before you have got out of bed it has started posting transactions right into your bookkeeping. It matches transactions in your bank account with stuff that is happening in your accounts. It’s brilliant.
- – Optical Character Reading apps (jeez, that’s a mouthful, but I’m talking about apps such as Datamolino and Receipt Bank) – so, it’s really simple, you simply take a photo of an invoice on the app on your phone, press ‘use’ and that’s it. The OCR reads all the data and automatically posts it into your Xero account. Really simple and no more paper.
So, technology can give you time and save you money – use it.
Please feel free to call in for a free one hour consultancy and we can talk through how all this can be implemented in your business. Call us on 01362 66 00 22 or email firstname.lastname@example.org