25 Things To Consider Before Starting Your Own Business
If you are thinking of starting a business it can feel like complete excitement but there are many pitfalls so here’s our top tips to think about before you spend a single penny of your hard earned cash or redundancy.
For many people starting a business is the one thing they dream of in life but unfortunately of the many hundreds of thousands of new startups each year and high percentage don’t make it past year 1. Here are our tips starting with those that you will having probably already heard about but worth remembering.
1: Research your market – and that means customers. It’s those people who are going to buy your products or services. Just imagine your typical customer, their age, where they are based and their income. Just why on earth will they buy from you and not one of your competitors ?
2: Location, location, location – it’s all too easy to see an empty shop in your high street and think that you can open a business there and make your fortune but many a time a business is not there for good reasons. So think real hard on your location because in reality you only get one shot at getting premises and once you have signed that 10 year contract it’s going to be hard (and expensive) to get out of it.
3: Start up costs – sometimes these can be almost zero (for example if you are going to offer consulting services and you already have some clients) but for most these are huge (if you are going to open a restaurant there are so many initial costs such as shop fitting and equipment) so make sure you account for them all so you don’t get too many nasty surprises.
4: Get a business plan sorted – many believe these are a waste of time but even if you have run successful businesses before even having a simple spreadsheet showing how the business will grow in terms of sales and all your costs coming in will show the cold light of reality and just how much money you may need to fund the initial start up phase.
5: Only trust those you trust – many a good idea has been stolen so be careful who you discuss your plans with especially if you are developing something online.
6: Discuss your ideas – but of course with only those you trust. When you are deep within your own project it can be hard to think outside of what you know and getting a friend or family member who you really can trust and who will provide honest feedback is essential. If you know someone who already has a successful business then get them to go through your ideas as there maybe something you are missing or could do better with.
7: Temper your ambitions – almost no new business becomes a big success overnight although we all think that our ideas are the best so when it comes to planning be realistic and not believe your business will keep doubling in turnover in the first 3 years. It’s unlikely and can cost your business, so:
8: Start small and grow big – some of the most profitable businesses are in small niches and are the biggest player in the niche. It’s OK to be small and earning loads of money because once you have found success you can duplicate your formula.
9: Start whilst being employed – if you can. Try not to quit your job and then work on your business. If you want to start ensure you have all your plans ready and a place in mind. Many people quit there jobs and then start to develop their plans. This can cost you about six months with no revenue because there is always something to slow you down whether it be the bank not lending to you or government red tape. If you can start earning whilst you already have a steady job then you can test your idea before losing that (almost) guaranteed income.
10: Read up on what the government and tax office need – there are so many hoops to jump through from letting the tax office know that you are now self employed and registering for VAT to setting up a limited company if you are going down that route to any health and safety certificates if you need them. So make sure you know what’s required otherwise you may find yourself with a big fine.
11: Get professional accounting advice – although you may read on some of the forums which legal company set up is right for someone else it may not be right for you because of your personal circumstances so it’s always wise to seek the advice of a qualified account as you are setting up your business. An initial 30 minute consultation can be free or certainly low cost and it can help you in the longer term.
12: Do get an accounting package – and keep all receipts as you are setting your business up because all of this can be claimed against tax at the end of your first financial year and expenses that have VAT attached to them can be reclaimed if you register for VAT.
13: Separate your personal and business bank accounts – because a) your personal bank account will not accept cheques and payments made out to your company and b) it really is a lot easier to account for everything. You can get free business banking in any case from 3 banks in the UK so it won’t cost you anything.
14: Prepare for hard work – because starting a business requires a lot of your time and if you are opening a restaurant or high street shop it’s going to be hard work so prepare for this.
15: Do outsource administration tasks – if you are going it alone running the business and carrying out all tasks such as accounting, answering the telephone and emails, marketing your business etc takes time and really you should be concentrating on what’s going to bring in the cash. So if you can outsource these to others who can take this time burden away from you.
16: Be careful with franchises – there are some really great franchise operations but there are some really bad ones around who will take your money and offer limited support. You’ll still need to promote and run the business and often this is not an instant money machine so talk with existing franchise owners if you are thinking of going down this route.
17: Set it up and they will not come – many people believe just because they develop a business then customers will be falling over themselves to buy their products but if know one knows about you then you’ll have none. If you are good at marketing then you’ll have no problems but most people don’t have these skills so get professional advice if you can or ask others how to get customers to your business.
18: How many customers do you need ? to meet your profit projections ? Once you have your business plan ready break it down so you know just how many sales you need per day to meeting your weekly, monthly or even yearly profit projections. You’ll then know instantly if you are ahead. You can easily put a spreadsheet together to add up sales and costs on a weekly basis then you can make adjustments if things are not quite going to plan.
19: Don’t bury your head – if you have started and things are slow and not up to your expectations then seek help as soon as possible. It might just be you need to make a few tweaks to your business model to get things moving again.
20: How about just do it ? Some people have an idea for a business all of their lives but don’t act upon it. Preparing a plan can be done in a weekend so if you are putting things off why not just put your plan together and see what it looks like ?
21: Spend time on your pricing– a lot of people believe that the lowest price always wins, and sometimes it can when you are selling a commodity product but with services it can be tricky. You can learn a lot from your competitors and what type of customers you are targeting. It can be difficult to increase prices once you have had low pricing for a while but easy to have sales and special offers. Higher pricing also suggests increased perceived quality so it’s not just about the actual figure but how your business is perceived in the market place that also matters. There is always room for the cheapest contender (eg: poundland) and the most expensive (eg: John Lewis) but they are targeting different products to different types of people.
22: Have an end goal in mind – whatever that may be. Is it simply to succeed with your dream so your business is in effect a hobby or will it provide for you and your family? Whatever it is keep that goal in mind and strive towards it.
23: Do something you know – if you want to start a business but have no experience in the field you are entering then you have a steep learning curve to climb. Although this can be done people with the knowledge will likely succeed more than you. If you need the knowledge then acquire it via training or get someone how has the experience to help you.
24: Do something you enjoy – as it’s no use running a business you hate.
25: The detail matters or does it ? – It can be easy to get bogged down with minute details when starting off but looking after your finances is key, however, you need to keep the bigger picture in mind and not lose sight of how and why your business will succeed.
Our additional thoughts – Many people do start successful businesses each year with careful planning and you could to. You can start at any time even in a recession as people are still eating out and still spending millions of pounds each week but not every business is a success. Just enjoy the process and let us know of your success.