There is never the perfect time to set up in business. An economic downturn could be as good a time as any – at least things can only get better and, when they do, you’ll be established and ready to take full advantage. If you are thinking of starting up in business read some practical advice from Sarah Parker, an experienced business adviser.
The most common business structures are a limited company, a sole trader or a partnership. It is worth taking time before you start to work out which type best suits your needs. Using a limited company can be more tax-efficient, and more importantly your personal liability is limited should anything go wrong. Operating as a sole trader generally requires less administration and the costs will be slightly lower. A partnership is similar to a sole trade but the business is owned by more than one person, with each partner being liable for the actions of the others.
Preparing a business plan may seem tedious and pointless but it will help you focus your mind on what you want the business to achieve. This should also include cash flow projections that will help you calculate your set-up costs and establish your pricing structure. A business plan is an essential requirement if you are looking for outside funding.
Start-up loans are notoriously hard to come by at the moment, unless you have a pipeline of contracted income, which is unlikely for a start-up. Most people use personal finance to set up and indeed any external funder will want to see that you have a personal commitment to making the business succeed. Grants are often only available in economically disadvantaged areas. If personal funds are limited, most people continue to work part-time while setting up. Otherwise, you could consider asking friends or family for a loan (but only what they can afford to lose) or remortgaging your home.
Finances and tax
The taxes you need to worry about depend on the structure you have adopted. The main taxes are income tax, corporation tax, VAT and national insurance. For each of these you will need to register with HMRC. You may want to pass the day-to-day financial management to an accountant, but you will need to keep an eye on the cash and profitability as this will help you plan the future of the business.
In this technological age, it is possible to reach your audience more cheaply than ever. It is important to know your customers, as this will help you establish the best way to reach them. There are many ways of marketing your business without spending a fortune. You should think about:
- speaking to everyone you know about your business; they are all potential customers or referrers.
- websites can be set up for very little cost and can act as a ‘brochure’ for your business and services.
- social media like Twitter and Facebook increase brand awareness.
- attend networking events is a relaxed way to reach potential customers.
Don’t forget to:
- Set aside money to pay your tax, VAT and suppliers.
- Be patient and stay positive; starting a business can take longer than you think.
- Look after the clients you’ve got; don’t risk losing them at the expense of new business.
- Ask for help if you need it!
For more advice on your business start up you can contact Sarah Parker via the Weaver website.
This article has been contributed by Sarah Parker, Director at Weaver Chartered Accountants.
View Sarah’s contributor profile.