By Martin Crook, partner at Adams Moore
The current economic climate has presented many challenges for people in employment and those running businesses. With many people having lost jobs due to the recession, or had to close businesses due to tough financial times, the employment landscape has changed dramatically.
What the recession has spurred though is the creation of more start-ups, as those who have lost jobs have used the recession as their catalyst to embrace new challenges.
But starting a business isn’t always rosy and what seems like a great idea will still need to have lots of consideration given to it as to how it can work on a practical level and more importantly, be financially viable as a business. Here are some top issues that every start-up should consider.
- The Big Idea - Ensure that your business idea is going to work in today’s market. Whether it’s something related to a niche market, or a new technology - ensure you have either piloted the business, carried out market research or have signed a first customer before making an investment. A business idea is only viable if there’s a market for it.
- A robust business plan – Sounds really quite obvious, but I have seen cases time and time again where new businesses have started with no real plan at all as to how they will move the business forward and how they plan for continued growth and success. A robust plan will form your monthly target; this should include a profit and loss, balance sheet and cash flow. It will also be necessary if funds are needed at the start of the business - no bank in today’s economic climate will lend to a company without a plan.
- Sign up Your Customer - Know what you have signed up to, and get advice on any contracts signed. Know what you have to deliver and in what time, the length of contract, payment terms, their purchase order system and their invoicing system. Many businesses do not do this then wonder why they don’t get paid. If you understand a company’s payment terms and purchase order procedure, you can plan accordingly.
- Cash is King - Measure your cash daily. Do not spend on overheads unless absolutely necessary. Get quotes for all projects (for example designing your web sites) and agree payment terms with all your suppliers.
- Monthly Board Meeting - Ensure you produce monthly financial information, however simple, of the key aspects of the business. Have a Board meeting with a partner, accountant or respected mentor. This should give an unbiased view of exactly how you are doing. Ensure action points are drawn up after every meeting, and reviewed at the next.
Martin Crook is a partner at Adams Moore, a Midlands based accountancy and business adviser firm.
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