By Clive Lewis, ICAEW's Head of Enterprise
As the new season of The Apprentice grips the nation again, Clive Lewis, ICAEW’s Head of Enterprise, explains how fans of the show could be just ten steps away from becoming a successful business owner themselves.
“It can be hugely rewarding to be your own boss and to build something from scratch in the community,” says Lewis, who will join the judging panel for Santander SME (Small and medium enterprise) of the Year in 2011. “We’ve all watched Lord Sugar’s fledglings and thought “I could do that” but there’s no Merc without work”.
“One in three start-up businesses don’t last three years, and this drops to four in five by ten years. But if you believe you have a strong business plan, the necessary resources and the determination to succeed, then now is the time to encourage those stirring green shoots of enterprise.”
Clive’s ten steps to entrepreneurial success for start-ups, and a timely reminder for any small business, are as follows:
1. Research the market- Find out whether customers will buy what you are offering, and use feedback to refine your product or service.
2. Write a business plan- Describe your business, how it will operate and its finances for the first two years. Be clear on your goals and how you’ll achieve them
3. Raise finance if needed- Being under-financed often leads to poor performance at the start. Financiers will want to see that the first two steps have been done well. New legislation allows tax breaks and grants for start-ups and new Enterprise Zones may well provide purpose built premises at lower cost.
4. Build in contingencies- Setting up always takes longer than you think, especially if you need to comply with health & safety requirements, planning regulations etc. The cost of such delays, the expertise needed to correct them and the time involved all need to factor in.
5. Remember it’s all about people- Customers, staff and suppliers – never forget their value. Unless you are planning to be a one-man-band, pick the best people you can afford. They may work for less than the market rate initially if they are convinced of the potential for growth of the business.
6. Find a mentor- It is helpful to have someone to bounce ideas off and there’s no-one who can’t teach us something. Learn from customers and suppliers and ask the views of your ICAEW Chartered Accountant and other advisers who may be more aware of the wider market.
7. Make sure you have the right financial information- This is vital, not just for the taxman but for you to understand your trading performance. Set up records from the start, using software if you are comfortable with it. Employ a good book-keeper if you can afford to or talk to your ICAEW Chartered Accountant.
8. Monitor key performance indicators- Ensure that you have right data, such as turnover, gross margins, overheads, finance costs, net profit, cashflow and working capital, on a daily, monthly and annual basis. It’s amazing but many people just don’t know whether they’re making any profit.
9.Be alive to possibilities and dangers- Don’t exclude taking the business in a different direction if you see potential elsewhere or there are problems ahead. Just because you think that something is a fantastic idea or product does not mean that others do. Sometimes it is easy to carry on with a project when, in reality, it should be stopped as soon as possible.
10.Reduce the chances of failure- Do something you already know, or employ people with experience in the sector. Manage your overheads and working capital. Appoint an ICAEW Chartered Accountant with experience of start-ups before you launch your new enterprise.
A chartered accountant can help with a number of these points, particularly with writing business plans, preparing financial forecasts and accessing finance. Choose a chartered accountant whose clients include start-ups and for more information go to www.icaew.com/enterprise.
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