Many life changing moments lead to entrepreneurship, and the Covid-19 pandemic is no exception. Businesses are being formed for a number of reasons:
- To solve a problem that has arisen as a result of this world crisis
- Covid is causing people to think about their lives and what they really want to do
- Many have lost employment and have found innovative ways to use their skills
Whether you’re thinking about starting a business or you’ve already begun to put ideas into motion, there are lots of tasks involved in making it a viable success. You might be feeling equally excited and nervous about it. We want you to feel confident you’re prioritising the right things, and doing it all by the book.
Three important considerations before we get started:
- Think carefully about ceasing to be someone else’s employee. Certainty of income, both in terms of quantity and regularity, disappears, whilst fixed outgoings, such as mortgage repayments, remain. Similarly, other benefits of employment may be lost, such as life assurance cover, a company pension, medical insurance, a company car, regular hours, and holidays.
- Think about what you want from the business – What are you enthusiastic about? We live long lives, so do something you’re happy doing! This will naturally drive your business forward faster than simply choosing something that might appear profitable.
- Consider the views of your family and friends. Their support is essential. It is important they understand that the administrative and financial requirements of running a business can be time consuming and stressful.
We’ve had plenty of years of experience supporting new fledgling businesses. Here are five of the most important steps to take when you’re starting out, and a little info on how we can help you put them into action.
1. Decide how to trade
One of the first major decisions you will have to make as you start your new business is the form of legal entity it will take. To a large degree, this decision may be dictated by the way you have organised your operations and whether you intend to work on your own or in conjunction with others.
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 – A sole proprietorship is typically a business owned and operated by one individual. A sole proprietorship is not considered to be a separate legal entity under the law, but rather is an extension of the individual who owns it.
- Partnership – In a partnership, two or more individuals join together to run the business enterprise. Each of the individual partners has ownership of partnership assets and responsibility for liabilities, as well as authority in running the business.
- Limited Liability Partnership – The Limited Liability Partnership (“LLP”) offers limited liability to its members but, like a traditional partnership, is tax transparent and offers flexibility in terms of its internal organisation.
- Limited Company – A limited company is a separate legal entity that exists under the authority granted by statute. A limited company has substantially all of the legal rights of an individual and is responsible for its own debts.
Each legal entity has its own benefits and drawbacks and is treated differently for legal and tax purposes.
To choose which entity is right for you, we’ve created a whole chapter on it in our free New Business Kit. You can find a detailed pro/con list and all the information you need about how to register once you’ve decided, along with a guide to everything else you need to start your business.
2. Create a clear business plan
Running a business without direction is like crossing your fingers and hoping for the best. Start with your goals in mind so you know where you’re headed.
We’ll work with you to agree your goals, set up realistic budgets and create a long-term strategy for success. And we’ll be there throughout the year to help measure your ongoing performance.
3. Understand the financial side of the business
Getting a full understanding of your accounts can be tricky if you’re not from an accounting or finance background. Most operators of a new and growing business have a flair for the environment in which the business operates. They may be a great salesperson, an outstanding mechanic, carpenter, solicitor, or inventor. Unfortunately, most people don’t like to keep the books.
As an owner of a business, you must remember that your company’s books and financial statements represent a score sheet which tells how you are progressing, as well as an early warning system which lets you know when and why the business may be going amiss.
We help you to become familiar with the accounting basics, and explain terms like your ‘balance sheet’ and ‘profit and loss’.You’ll understand how your numbers contribute to your success and help you make good decisions.
4. Set up your accounting system
Getting your finances in order is one the most critical parts of running a new business – it could be the difference between success and failure. Xero provides a way to have access to your numbers whenever you need them. As a certified Xero partner, we believe it’s the ideal tool for start-ups.
Remember though, There are a number of very good and easy to use accounting software systems which are commercially available, but none of them will solve the problems of inaccurate or poor-quality financial records. If you want to use a computer-based accounting package, either in your own business, with a service bureau, or through your accountant, it is imperative that you generate accurate information to be entered into the system.
The real value of accounting software becomes apparent once it is running smoothly in your business. Your accountant can then function in the capacity for which he was trained, not as a “number cruncher”, but as your business adviser, consultant, and strategist. Both of you can focus not on producing reports for various regulatory agencies but on analysing your business to make it more profitable.
5. Register for business taxes
A significant task for the new business owner is ensuring that the business is properly complying with the extensive tax and information filing requirements imposed by the various authorities. Problems and penalties could arise if the new business is not registered with the appropriate tax authorities in a timely fashion.
Whether you’re a sole trader, or a new limited company, you’re liable to pay tax on the money your business earns. We’ll help sole traders to register for self-assessment tax and limited companies to register for corporation tax and we’ll also assist with the registration of VAT, PAYE and National Insurance – where relevant.
6. Get help with your bookkeeping
Starting your own business obviously entails a multitude of decisions which can seem overwhelming without the right players on your team. To succeed, you need to equip yourself with every tool at your disposal.
One of the most cost-effective tools you can utilise is the expertise of a specialist. The right accountant and solicitor can eliminate a host of problems and potentially costly errors you might make as you build the financial foundation of your successful business.
As your business grows, so will your finance needs. We can assist with your bookkeeping so you have one less thing to worry about.With the help of Xero, we’ll be able to track your finances on a daily basis so you know exactly where you stand in terms of your numbers.
Ask yourself all the important questions first
Success in business depends on many factors; most important is the need to critically review all
aspects of the business proposition before progressing too far. How will you finance your business? How will you run it? Will you need to employ staff? These are all questions to ask yourself before taking the leap into becoming a business owner.
We hope this blog has helped to spark some of these considerations as a starting point. We’re excited about the possibilities – the world needs more innovative independent businesses. But we want to make sure you’re as equipped as you can be for success. You can continue your learning by checking out our dedicated starting a business landing page, where you can download our free business starter kit.
Remember, we’re always here for advice.