Brilliant! You have a new business idea and want to progress this further but aren’t sure what steps should be taken. We can point you in the right direction of where to get help with essential research and turn your idea into a business.
Where do I start?
Will your idea work? As a first step figure out a rough cost of running the business compared to the money you will realistically make from sales? Will you add the cost of VAT onto your product / service prior to being VAT registered?
What will be your USP (Unique Selling Point)? Complete market research, both primary (such as questionnaires / surveys / interviews) and secondary (use of information already available), will people buy into your idea? Ask people who are able to be honest with you, would they be repeat customers? Who are your target audience?
- Where do you want your business to be in the next 5 years? Will you have room for growth? Have you considered forecasting to check the business will still be viable in the future?
- Start putting together a Business Plan this is the basic information you will need when starting conversations with banks and prospective investors.
A Business Plan is a great starting point, but make sure eventually you also have a Marketing and Communication Plan to keep you on track.
- Although you don’t need to have a new business idea it is advisable to check with the Intellectual Property Office that there are no infringements.
- Start a Business Bank Account, shop around and find the account type that will best meet your needs and a bank manager you feel confident with.
Financing your Business
By now you should have a rough idea of what costs you will incur starting up and the monthly running costs of your business, here are some bits of information that may support you when deciding how to best finance your plans:
Remember to have a number of options, as a high percentage of start-ups fail in the first year. It is important to consider this, just in case the business doesn’t succeed.
- What savings do you have that can be used to support your venture? Are you able to consider re-mortgaging? Are there any assets you are able to sell?
- Are you able to borrow money from family or friends for an initial period?
- Talk to your bank manager, are there any loans that will meet your needs or are they aware of any other financial support available in your area?
- Contact the Business Navigator Team as there may be a grant or small business loan that could be perfect for you.
ACCA – EXAMPLE OF A CASHFLOW
As well as your business plan, a set of financial statements detailing you cashflow is essential. This will provide details of actual cash required by your business on a day-to-day, month-to-month and year-to-year basis.
The needs of a business constantly change and your cashflow will highlight any shortfalls in cash that will need to be bridged. Many established, viable, and even profitable businesses fail due to cash not being available when they need it most.
Good cashflow management is critical to running a successful business. You must be able to pay your bills while you await payment from your customers. There are many well-documented cases of businesses failing not because they weren’t profitable but due to poor cashflow management.
You’re in business to make a profit. It’s a simple principle, but one that can occasionally become lost amid dreams of building multinational empires worth millions of pounds. You won’t be able to stay in business, however, unless you have cash, hence the famous adage ‘cash is king’.
There will probably be a time lag between your business providing its goods or services and getting paid. This means you have to make sure there is sufficient cash in your company’s bank account for it to pay all its bills in the meantime – whether these relate to invoices from suppliers, employees’ wages, rent, rates, tax, VAT or anything else.
Even if your business is profitable, there may be times when you are short of cash because you are awaiting payment for a large order. This is likely to be a particular problem during your first year when you are building up your business and don’t have regular cash inflows.
The general principle of cashflow management is that you should speed up your cash inflows (customer payments, interest from bank accounts etc) and slow down your cash outflows within reason (purchase of stock and equipment, loan repayments and tax charges etc) as much as possible.
It can be difficult to affect your outflows other than extending your credit terms with your suppliers, which will often occur on fixed dates in the month and your employees and suppliers might also not take too kindly to you delaying payment to them. But there is more scope for you to improve your cash inflows.
This could mean billing regularly, chasing bad debt, selling your debt to a third party (factoring), negotiating extended credit terms with suppliers, managing your stock effectively (which could entail ordering little and often) and giving your customers 30-day payment terms.
Also, as businesses naturally have peaks and troughs, it is important that you put money away during the peaks so that you can dip into it during the troughs.
It is a good idea to think about investing in some accounting software to help you manage your cashflow. There are many software providers: an internet search should reveal the most common. Most provide software that can help you with cashflow analysis and forecasting, so that your business is never caught short of cash in the bank. Your accountant should be able to help advise you on which software package to buy.
HOW TO USE THE CASHFLOW FORECAST TEMPLATE
Our cashflow template will show you how a cashflow works and should be amended to suit your own business.
All figures to be entered are actual cash. This includes bank payments and receipts, cheques, bank transfers, cash payments and receipts – all of these should be included in your opening balance.
Then complete the shaded area opening balance, which includes bank, loan and cash balances and should be put in the sheets:
- monthly cashflow forecast
- monthly actual cashflow
This provides the starting point for the rest of the cashflow. Next, input your month 1 forecast – all the sales broken down into the elements of your particular business – and do the same for expenditure. Base your figures on your own experience and what you forecast to receive or pay. The sections can be amended to reflect your business’s requirements.
Repeat this process for the actual cashflow; here the figures you input are based on actual. This should then automatically be displayed in the third sheet:
- monthly cashflow forecast/actual comparison
This is where the real analysis work is done and will determine the accuracy of your forecast figures. The forecasts sheet should be used to determine when you may have a cash shortfall before the event arises and will help determine whether you will need to obtain additional funding.
Download the cashflow template here (Excel document will be downloaded).
Where will I be based?
- Have you thought about where you would like your business to based? Can you start from home and progress into an office space? Do you want to stay close at home for your convenience or have premises where it is easier for your customers?
- If you are working from home have you looked at the different requirements, ie, business use of the property? Check with your local Council what restrictions there may be.
- So you want to be based away from home but aren’t sure about the affordability of renting an office? There are a number of Business Centres around the area that may be suited to you – check out your local centres and find one that fits your needs.
- Are you eligible for Business Rate relief? Check with your local Business Rates team at the Council to see what is currently available.
- Do you need planning permission or change of use for any works you will be completing in your new premises? Check with your local Council what procedures you might need to follow.
Having the correct support
Being able to start up a new business is a big undertaking, it is always useful to have people around you for support or that are able to offer your practical help – don’t shy away from this; being able to understand when you aren’t able to complete everything yourself is far better than becoming overwhelmed!
- Research what workshops, events and networking groups are available in your area, a number of these will be free of charge or hold a nominal fee and aside from offering useful information they are a brilliant way to network and get your business “out there”!
- Have you considered a mentor? Someone who has had experience of starting up a business to offer support and bounce ideas off.
- Family and friends. They have hidden talents and you can call on them at all hours with any type of questions.
- Each local Council has an Economic and Development Team who are only too happy to answer questions or advise you of the best place to go.
- An Accountant, take time to find one you are happy to use and feel will meet your needs best as a business owner.
- Have a chat with the Business Navigator Team, if you can’t find the correct service or are unsure what steps you should be taking they are only too happy to offer your advice over the phone or arrange a meeting.
Business legal structure
The first thing to consider is what set up is most appropriate for you? With a number of legal statues a business can consider it is important to look at each of these carefully. The legal structure can be altered at a different time but it can be costly and time consuming. The different set ups are:
- Sole Trader
- Private Limited Company
- Limited Liability Partnership
- Community Interest Company
Register with HMRC as a new company / self-employed https://www.gov.uk/topic/business-tax/self-employed and register the business on Companies House too https://www.gov.uk/topic/company-registration-filing/starting-company
Taking on your first employee
The following documents are free and are here to help you to hire staff. Please follow the links (documents will open in a new window).
- Recruiting-staff – stages of hiring a new employee up until their first day.
- Written Statement of Employment – framework for the terms and conditions of employment an employer must give an employee within two months of them starting the job.
- Outline of Pre-employment Checklist – a brief overview of basic pre-employment checks on a shortlisted job candidate or the applicant offered the post. The check on the right to work in the UK is a legal requirement.
For more information on hiring staff please follow the link to ACAS.
- Choose a company name, write down all names you think of and start shortlisting. Use Companies House to see if the name is available and what variations there are if not. Please also check the IP Office to make sure the name have not been trademarked.
- Buy your domain, start researching web developers and arrange to meet them and get your website started.
- Consider what will help your website, will you use social media, video or photo content? Do you want blogs and guest bloggers?
- Discuss SEO (Search Engine Optimisation) with your developer and how this could help you.
- Will you be using distributors and suppliers, start researching these and build up relationships with your chosen company. Don’t forget to check if they are able to work with you through growth and increased workloads.
- Make sure to have important dates diarised with enough to action any points, ie, Tax Return deadlines.
The small details
- Make sure you have set up Business Insurance and checked if you need public liability insurance.
- Do you need to have sector specific qualifications or certificates, look into these and get them completed.
- Will you be launching the business, what type of event are you after?
- Use your social media pages to drum up interest in the business.
- Network! Get your face out there and make sure you have the right marketing materials for this, even if it is only business cards. Find your local networking group here: http://www.bestgrowthhub.org.uk/networking/
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