For many people the idea of starting a business is a constant obsession, but often in a practical sense it can be almost debilitating not knowing where to start.
In this blog we wanted to discuss the key practical points to get your new business off to the best start!
1: Have a plan (with numbers)
Surprise, surprise! A blog written by business accountants referring to the need to have a business plan involving numbers!
Joking aside, it is so important to understand your business model.
After you’ve done your research on the service or product you are going to sell, you need to make a plan.
It’s time to grab a spreadsheet (and a coffee), or even just a pad and pen, and take time to look at these key questions:
- Does this business make money?
- What are my costs aside from what it takes to make the product/deliver the service?
- How many products or services do I need to sell in a month to cover these other costs?
- What cash am I going to need get this rolling, and keep it rolling?
- If I am leaving my job, does this really work? Can I survive and how long for?
To answer these questions, you may need to do some research, both on the web and with other business owners or professionals.
To help you do the numbers aspect, a good start will be to read our blog on cashflow basics. There’s a free spreadsheet to download too.
Stats showing only around half of businesses make it to the 5-year point. In our experience, having a good knowledge of your numbers can really make the difference!
2: Define your business offering
Have you ever had a chat with someone and ask what they do? Then you hear the words they say but still don’t really understand their job? (This is pretty common at business networking events in our experience!)
It’s key when you start a new business that you can clearly explain:
- Who you work with
- The benefits of your service/product – what they will get out of working with you
You should be able to do this so-called “elevator pitch” easily in under 60 seconds. Some networking events restrict you to only 30 seconds to introduce yourself and your business.
You also need a clear understanding of your product and service lines, and what they would cost to a prospective customer/client.
3: Decide ‘how’ you will trade
One key decision needed right at the beginning of starting your new business is choosing what legal form your business will take.
You have three main choices:
- Limited company
- Sole trader
- Partnership
We’ve done plenty of content around helping decide which might be right for you, but a word of warning. Before deciding a limited company is the way forward, please remember the downside.
A limited company comes with a cost.
It’s almost certain you will need an accountant to help file your accounts and taxes. Whether you’ve sold £500 or £50,000, the cost is likely to be similar.
As a result, if your business really is a side hustle or slow burner, sole trader is often the best route for its flexibility, simplicity and effective low cost.
That said, sometimes your hand could be forced into a limited company due to:
- The need or strong desire to have the protection a company offers (‘limited liability’) from your personal assets
- Your main client insists you need to be a limited company.
4: Work out how to get paid!
So this one is kinda important! You need to figure out early how you will be paid and the practical mechanics that need to take place.
- Will you need a Paypal account?
- Will that need linking to a bank account?
- Do you need a new bank account?
- Do you need to issue invoices or receipts?
- What tech/software will you need to do the above?
- How will a customer/client be able to pay you?
From a record keeping point of view, a ‘clean’ business-transactions-only bank account is the best way forward. If you do decide to have a limited company, you will need a new account in the company’s name anyway.
5: Decide how you will keep your records
From a tax and accounts point of view, keeping good records is essential. We would strongly encourage the use of either Xero or QuickBooks as ‘the best’ method of doing this for most businesses.
The tax world is increasingly moving towards regular digital submissions, and for some taxes this is already a requirement.
If you are becoming a sole trader, digital reporting through software will be mandatory from April 2024 under the ‘Making Tax Digital for Income Tax’ initiative.
With this is mind, getting familiar with using accounting software now is crucial.
Even if you decide to not use accounting software, keeping records on a regularly-updated spreadsheet is key to being able to comply with your tax reporting requirements later (more on this below).
6: Check what you need to register for tax
New business owners often worry about getting this part wrong, so let’s explain a few key things:
- If you are becoming a sole trader (or partnership), you should register for tax as soon as possible after you start trading.
- If you are going to be a limited company, the HMRC are usually advised and you become auto-registered for Corporation Tax. (Just to say, they may get the dates of your first return wrong).
- You don’t HAVE to register for VAT from day one (most people won’t).
You can read more on whether you should be VAT registered in our blog on this subject.
Aside from VAT and any payroll scheme for staff you may take on, currently at the time of writing, your tax reporting is done after your first year end.
This means you just need to keep your records, then get your tax return(s) completed after your year end.
For sole trader/self-employed owners we cover this in more detail in this blog on paying your personal tax bill.
If you are looking for help from an accountant, it is best to seek this out as early as possible in your business life. It’s not advisable to wait until your first year-end is up to look for help with tax returns, as you may have missed out on significant tax saving opportunities.
7: Get going!
One of the biggest hurdles for many budding owners is actually getting going!
Don’t wait for it to be perfect before your launch; it will never be. Your product or service will forever be a ‘work in progress’ that will adapt and evolve with the market, and as you learn more about your business.
As a side note, some owners worry about the ‘best’ (or worst) times to start a business. We cover some tips in our blog on the subject, but ultimately there is nothing stopping you.
Just. Get. Going.
Create a basic website up, print a simple business card, and get out there and tell people about your business!
Finding the right accountant for you
If you don’t have an accountant for your business yet, we’d love to talk about how we can help. No obligation, no pressure, just us and you chatting .
Sounds good?