Give your business the best chance of survival
More than half of new businesses fail within the first five years. Why? Because launching a new business requires so much more than simply a USP.
Did you know that Richard Branson needed a £3000 loan to get his first magazine off the ground, while James Dyson produced 5,167 prototypes before his bagless dust-buster came to life?
These fearless entrepreneurs needed patience, dedication, hard-work and a helping hand to help them on the path to success and our team at Jacobs Allen Chartered Accountants and Chartered Tax Advisers could be the ones to give you the support you need to bring your business idea to fruition.
How can we help you? By leading you through the process; by posing questions you may not have thought of; and by offering support from day one.
Research is key
Testing your idea and getting to know your market is the logical first step, and our team advise all entrepreneurs to conduct market research.
You need to gauge interest in your product or service and get an idea of how much consumers may be willing to pay for it. You also need to identify who these customers may be.
With digital advancements this step is easier than ever – look at rivals’ websites and see how they promote their product, what their price point is and how they market it.
Use social media to identify groups that could be relevant to your business and listen in to the conversations. Meanwhile, it is advisable to seek out industry publications for useful statistics.
Depending on your finances, it may be advantageous to hire an objective market research expert who will be able give more in-depth analysis of your potential customer base and the industry you are looking into.
How will your business work?
We have debated the pros and cons of operating as a sole trader in previous blog posts, and we can offer more bespoke advice based on your individual business.
If you opt to become a sole trader, you will run your business as an individual and be entitled to keep all of the profits it makes but you are liable for any losses.
You must pay income tax and national insurance contributions (NICs) on any profits by completing an annual self-assessment tax return.
Despite the title, sole traders can employ people.
You may also need to register for VAT if your profits are likely to exceed £85,000 a year in 2018/19.
On the other hand, if you choose a general partnership or limited liability partnership the profits are shared between partners who are responsible for paying tax on them in an agreed ratio.
Partners in a general partnership can be personally responsible for a partnership’s debts and are responsible for managing the business.
In both types of partnership, the individual partners are taxed in the same way as if they were sole traders.
A partnership agreement defines the partners’ liability for debts the business accrues.
With a limited company, the finances are separate from your personal finances, so your personal assets will usually be protected if your business gets into trouble without breaking the law.
As a limited company director, you must register it with Companies House; provide statutory accounts; send Companies House a confirmation statement and complete a company tax return.
As a director or shareholder of the company, you will not be personally taxed on the profits of the company which you do not extract.
Much like a sole trader and a partnership, the company will have to register for VAT if its annual turnover exceeds the set limit.
Formalise your business plan
With your business beginning to take shape, there is a good chance you may now be seeking investment and having a formal business plan will help you gain the confidence of banks or investors.
Your business plan should include:
- Details of what your business sells or supplies, its structure, how your products will be sold and how much they will cost, short-term and long-term targets and timelines for meeting them
- An analysis of your customers and competitors. Who are they? Where are they based? How does your product differ and appeal? How do you attract these customers?
- Financial forecasts such as projected sales, cashflow, profit and loss projections and details of your contingency
What is in a name?
You need a unique name – not least because your business name cannot be the same as another registered with Companies House – so we suggest you come up with a shortlist then check the register.
Think about what terms people would search when looking for a business like yours and whether your website is likely to appear. You should also check if a relevant domain name is available.
What next?
The first 100 days of any new start up are crucial, get this right and that’s a good indication of how successful your venture will be in the long term.
We advise clients to:
- Ensure you have the right level of business insurance
- Determine a mid-term goal and set your sights on achieving this
- Use social media and other methods to focus your attention on the customer, acknowledge customer feedback and act on suggestions – your customers are your lifeline
- Keep your accounts in order – this has multiple benefits from helping you keep track of cashflow to making you aware of your future tax liabilities and helping determine if you are eligible for any reliefs of allowances
- Look at your outgoings and constantly re-evaluate these to see if you can make economies
For advice tailored to your start up, contact our team today.
