By Clive Lewis, Head of Enterprise, ICAEW
Whether you’re just embarking on a new business adventure or planning to give your start-up a boost, it’s important to make sure you have a plan. The key to mastering the business world is preparation, and it’s crucial to make sure you’ve thought about all sides of your business, not just the ones you find inspiring. You need to keep the bigger picture in mind.
1. If your business is new, start as a sole trader
In some circumstances it can be simpler to start trading initially as a sole trader as opposed to limited company. It’s a good option when you’re getting used to running a business and does not incur as many of the administrative burdens as running a limited company.
2. Don’t forget to claim back start-up expenses
Expenses incurred before trade commenced can be deducted from your first years profits. In order to do this, you will need records and receipts so that you can prove the expenses are valid and incurred exclusively for the purposes of the trade. A lot of different things can be expensed, including the likes of insurance, research and development, mileage and even the cost of raising finance.
3. Make sure you know your business and your market
It’s important that you’re very clear on how your business is different from others out there – what makes it special? When marketing your product, it’s best to explain how it provides the largest benefit to the customer. You need to know that people will want to buy what you’re offering, but what’s more, you need to know how your business compares with its competitors, particularly on selling prices.
4. Plan ahead
Make sure you have a business plan. A well-prepared plan can instil confidence in your stakeholders and reassure customers, suppliers, banks or investors that your business will not only survive but flourish. A good business plan includes details of the key people involved, market research and financial forecasts (with the first year in months and the second in quarters). You should update the plan regularly and compare your performance with the plan – it will help you spot potential problems to be fixed.
5. Cash is all-important
Make sure you have enough cash at the bank to continue trading until your cashflow from sales is at least sufficient to meet your expenses and your personal living expenses. Regularly update the cashflow forecast in your business plan to help monitor progress.
6. Notify the tax authorities
If self-employed you must register for self-assessment, while a limited company must register for Corporation Tax. If you have taken on staff you will need to register for PAYE and you might want to voluntarily register for VAT.
7. Choose a qualified accountant
The majority of entrepreneurs setting up start-ups will not have the high level of expertise that is needed in order to ensure that their business complies with the law. A chartered accountant can help with technical matters such as these, but also provide useful advice on business decisions and raising finance. There are several things to look for when choosing an accountant:
· A firm of a similar size to yours will be more understanding of the issues you face
· Consider their experience and reputation
· They should be members of a recognised accountancy body
· The firm you choose should also have professional indemnity insurance
Your relationship with your accountant will likely be a long-term one, so take your time and do your research.