Setting up your own business is easy in some ways (announce you’re in business and, well, you are) and really quite challenging in others. Finance is often seen as one of the more challenging parts of running a business, but as your business develops, you just can’t afford to be getting it wrong. But if you’re not an accountant, how do you know if what you are doing is correct?
Whether you are turning a hobby into a business or setting up an entirely new venture, Anita Brook FCCA, managing director of Accounts Assist and serial entrepreneur, highlights the top things to think about when starting a business.
Have you got enough funds?
Never underestimate the amount of cash you need. Starting a business can be expensive – not least if you’re giving up another income to start your new venture – so make sure that you’ve accounted for all feasible expenditure for your first few months of trading.
You will need to budget too. This is the most effective way of managing cashflow. Remember though, have a contingency fund, and be realistic.
Have you got time?
Starting your own business can also be hugely time consuming. To be successful, you are likely to need more than just funds – you’ll also need the support of those around you, free time to put into making it work (are you going to have a ‘day job’ too?), and a good dollop of self-belief.
Do you have a business plan?
When deciding to start your own business, it is critical that you do some business planning. This will provide you with a 360° view of your company, allowing you to think about its viability and potential for success. If you are going into business with partners, it is a useful tool to ensure that everyone is committed to a common vision, mission, values and goals.
It will also encourage you to think critically about your business and consider how it would perform alongside competitors. What will set you apart? Do you have a plan to differentiate yourself?
Typically, a business plan should include: an initial executive summary, summarisng your business proposal; a short description of the business opportunity, details about your proposed marketing and sales strategy; your management team and personnel; your operations; and financial forecasts.
Are you aware of the Health and Safety and insurance regulations?
Different industries carry different Health and Safety and insurance regulations. Make sure you’re familiar with yours and that you have all the right documents and policies in place; the last thing you want is to be closed down for breaking the law.
Have you opened a bank account for your business?
I strongly recommend that you set up a separate business bank account.
This will help you to keep your business and personal affairs separate. It will also help you identify relevant expenditure and income much easier in the long run. It also will allow your accountant or bookkeeper to confirm all the transactions in the bank account.
Do you have a licence?
Some businesses will require a licence from the local council to operate. This includes the likes of taxi firms, window cleaners, driving instructors and restaurants. Visit your local council’s website to find out more.
Have you arranged an accountant, bookkeeper, or record keeping system?
Whether you intend to keep your own books, or pay someone else to do it, it’s important that you start as you mean to go on, and keep clear records from day one. Think about how you are going to record your receipts, how you will invoice, and decide on a sensible system for keeping track of any other dealings your business has.
If you are thinking about hiring an accountant; look for one who is officially recognised – look for the words ‘chartered’ or ‘certified’ in the title. Ideally you should then arrange an interview, where you can establish qualifications, experience with small businesses and of managing investments, successes and client testimonials.
Once you’ve chosen an accountant, meet with them and stage a planning meeting. Here you can discuss your requirements in depth and what their plan will be. You could even ask them for advice or assistance at the business planning stage, before you take your business plan to the bank. This way you can see how well you will work together.
Have you registered with HMRC?
When setting up your own company or going self-employed, you need to register with HMRC as it will affect your tax and National Insurance contributions. This will need to be done within three months of starting to trade. Fines for non-registration start from £100.
Registration is simple and can easily be done at HM Revenue and Customs or over the phone. You will also need to register for Class 2 National Insurance at the same time.
Setting up a business will alter your National Insurance and tax levels. You will need to pay Class 2 National Insurance, or if depending on your profit level, Class 4 National Insurance.
You will be required to file certain forms and make certain payments throughout the year, such as tax returns, so you may prefer to engage an accountant to do all of this for you.
Have you registered with Companies House?
If you plan to trade as a Limited Company, you need to register with Companies House. You can register online or get your accountant to do it.
You’ll need to know your Company Name and Address, Officer Details (Director and Secretary), Share Capital and Shareholder Details, and make a registration payment.
You will need to fill in form IN01, as well as a Memorandum and Articles of Association for company formation. These can be downloaded form the Companies House website.
Do you need marketing materials?
You may not want to splash out on leaflets and ads from day one, but the vast majority of businesses have websites to outline what they do and showcase their services/products. You don’t have to spend a lot, but having a basic web presence is now pretty much expected of all businesses. Business cards may be another essential, especially if you intend to get out and network to win business.
Other ways to market your business on a shoestring could include: writing a press release for the local media, using social networks including Twitter and Facebook or writing blog posts to appear on industry websites.