In every recession or global downturn, new businesses are born.
We’re seeing more and more new business popping up now, and the common thread is that these business owners have lost their jobs or lost self employed work, and have diversified into providing new services.
If you’ve had an innovative idea, solved a problem or created an in-demand product during the course of Covid-19, you might just need some support and guidance to turn your new offering into a legitimate business.
We’re going to run through the most important actions to take when you’re getting started, but also pay attention to how things might be different in the current climate.
History shows us it’s possible
Just look at some of the successful businesses that blossomed during some of the hardest economic periods. In the depths of the Great Depression, a beloved mouse named Mickey was created to bring joy to people, kick starting the global success of Disney. When the dot-com bubble burst in 2001, Apple pivoted their offering and developed their first prototype for a personal music player that would later become the Ipod.
These business owners were successful, because they looked for opportunities in the changing landscape of the times. They adapted, and came up with products and services the world needed and wanted.
The local press tells it it’s already happening
We’ve seen some really inspiring local stories of companies starting up or diversifying during Covid-19.
We love this story that came out of our local area of Cumbria. “Paul Henson of Henson Civil Engineering Ltd, had been working on behalf of VolkerStevin as a sub agent on local flood defence schemes for the Environment Agency, but had to be let go when the outbreak struck. Left without work, the 53-year-old, of Wigton, decided to invest the extra time he had to expand his services.During lockdown he’s completed a course to become a licensed commercial drone pilot and has spent time promoting his services in aerial surveying and photography.”
Paul’s new offering could be useful to the emergency services to help with search and rescue operations, for surveying, or for tv documentaries and news reports.
Paul is a great example of history repeating itself. Making something new in a difficult situation to cater to a need or want. We’re seeing more and more people adapting skills they’re unable to use due to redundancies and business closures.
If you have an idea or solution to a current problem, start planning strategically from the get go
Before Covid, we created an extensive New Business Kit to empower new entrepreneurs to successfully handle many of the problems encountered in starting and running a business. It covers everything from selecting a legal entity and registering for tax, to financing the business and managing cash flow. This is everything we’ve learned over the years spent helping businesses like yours to flourish.
We’ve taken some key starting points from the guide to set you off on the right foot during these unprecedented circumstances. It’s important we take this knowledge and adapt it to the new needs of customers during Covid.
1. Ask yourself – what do people really need and want during this time?
Take a good long look at your industry and how it has changed during lockdown. We know people are shopping online for products and services more and more since the start of Covid. Government social guidelines have affected the way in which many businesses run their operations. There may be factors unique to your industry.
The most important starting point is to really look at the feasibility of your product or service during this time and adapt where necessary if the current market demands it.
2. Cover the start-up basics
- What will my business structure be? (Chapter 1) The form of entity you choose can have a significant impact on the way you are protected under the law and the way you are affected by taxation rules and regulations. There are four basic forms of business organisation: Sole Proprietorship, Partnership, Limited Liability Partnership and Limited Company. Each has its own benefits and drawbacks and is treated differently for legal and tax purposes.
- How will I raise finance? (Chapter 8) Generally, business financing can take two forms; debt or equity. Debt, of course, means borrowing money. The loans may come from family, friends, banks, other financial institutions, or professional investors. Equity relates to selling an ownership interest in your business – i.e admitting a partner or issuing shares to investors.
- Have I got sufficient cash flow? (Chapter 7) How much cash will you actually need to run your business? To answer this question, you will have to do some serious cash flow planning, which will require estimates of future sales, the related costs, and how quickly you must pay your suppliers.
- What insurances do I need? (Chapter 9) You must remember that sufficient insurance can be as critical to the success of your business as a good product or service. Without proper insurance you could lose all the money, time, and effort you put into your company. The types and amounts of coverage you purchase must be evaluated on a cost – benefit basis like any other commodity that you purchase.
3. Set up a good accounting system
A good accounting system is vital for any business – and online cloud based systems are now the normal. We recommend Xero to all our clients, whether they’re completely new to running a business, or they’ve been using desktop accounting software for decades.
Xero is the core foundation for all your bookkeeping, accounting, invoicing and reporting – it is the financial hub of your business. We could talk about the features till the cows come home, but what’s most important to know is:
- You can access your key numbers wherever you go on any device – meaning as long as you have a signal, you can see how your business is performing all the time. This is your biggest tool for making informed decisions and doing business fast.
- You get your numbers in real time, so you’re never looking back – Xero’s live bank feed means your transactions and bank balances are always up to date. You won’t be making decisions on old data. Plus, a good bookkeeper or accountant will want to work with you on a regular basis (not just quarterly or yearly) so you’re always in control of your cash flow and able to grow. Up to date numbers are crucial for this partnership.
- Xero integrates with tonnes of apps to help you run your business better – You name it, there’s an app for it. Productivity, employee management, inventory, sales, payments. Whatever you want to do better in your business, there’s an app to help you streamline it – and all of these apps integrate or feed directly into your accounting software. So your business processes are always tied in to the financials.
These are the main functions that make Xero such an excellent way to manage your finances in the cloud – but you can read more about why we recommend it and start getting set up here.
Get all the tax stuff sorted early
You must give HM Revenue and Customs (HMRC) specific information about your company within 3 months of starting up in business. You may get a penalty if you don’t.
- You can do this online once you have got your company’s Unique Taxpayer Reference (UTR). HMRC will use this information to work out when your company must pay Corporation Tax.
- You can also register online with HMRC to notify self-employment using form CWF1. You need to register by the 5th October following the end of the tax year you need to send a tax return for. If you’re late, you won’t get a penalty as long as you pay your Self-Assessment bill in full by the deadline.
It’s a significant task for a new business owner to make sure your business is properly complying with the extensive tax and information requirements imposed by the various authorities. There are several ways we can help you with this burden, whether you’re a sole trader or a new limited company:
- We can assist you in registering for VAT online.
- We can act as your agent and file VAT returns online with you providing us with the figures to be entered.
- We can help you implement online filing through software.
- We can provide you with accounting software with integrated online filing so you can easily calculate and file the figures.
Create a clear business plan with the support of a professional
Becoming a business owner for the first time (or creating a new business out of a bad situation) is an exciting journey, for sure. But all the newness and responsibility can also be a little scary, and a lot to take on alone.
You can use everything you learn in the New Business Kit to plan for the key areas of setting up and getting going – tax, accounting, finance, payroll, pensions, insurance.
But you want a good business plan to involve your short term and long term goals for the business, and a realistic budget for how to achieve them. We encourage you to work with an accountant who understands your vision, and will be there along the journey to help you see it through. If you’d like to talk about what that looks like, we’re always here for a chat.
Here’s a reminder of where to download your New Business Kit. We hope it gives you everything you need.