By Ade Potts, Managing Director, Experian
It’s never been easier to set up a business. All many people need is a laptop, mobile phone, access to the internet, a flexible working space and a minimal amount of financial investment to begin trading.
More than half a million businesses were created in the UK last year, up 8.9% from 2012. Within this, the number of debut directors – an individual listed as a company director for the first time – hit an all-time high, rising by 12.6% from 270,000 to 304,000 businesses.
Debut directors make up 59% of the start-up population and 96% of these begin their business with less than £1,000 in capital. Be it because they have an entrepreneurial idea, are starting up after becoming unemployed, or are looking for a lifestyle change, all business owners want to survive. The chances of success are increasing — with the proportion of start-ups still trading after two years rising from 76% in 2012 to 87% in 2013.
How can debut directors increase their chances of survival?
1) Network: A company’s reputation can be built through word of mouth, so stay well connected by joining networks and attending networking events.
2) Partner up: It may be wise to find a partnering director, especially if you are able to partner with someone who has previously experienced start-up success to act as a mentor. Businesses started by two or more people have a greater chance of survival.
3) Research your target sector: Make sure there is a demand for your service and that you have a good understanding of the risks and challenges of your target sector.
4) Investigate all finance options: Don’t just rely on overdrafts, bank loans or personal sources of cash. Investigate alternative sources of finance, such as crowd funding, angel investments, business cash advances and government grants. Take advantage of banks who offer free banking services for the first year or two of trading.
5) Learn about your legal, tax and financial responsibilities: Swot up on your accountability as a business – to Companies House, and most importantly HMRC – so you don’t break the law. Have business insurance in place to protect yourself.
6) Be credit savvy: Register your company with a business directory and approach credit reference agencies proactively to make sure your credit line is in order before you start making purchases. This will help kick-start your credit history and put you in a better position to negotiate with initial suppliers such as telephone, utilities and banking.
7) Know who you are in business with: It’s easy to get caught up in that first customer win and forget the due diligence. Be sure to check out the financial position of all your customers and suppliers, regardless of how big they are. Don’t leave it until they become insolvent and you don’t get paid.
8) Don’t stop sharing business information: The more information there is on you that is provided to credit reference agencies, the better. This way you can spot and manage any problems early on, as opposed to them taking you by surprise and scuppering critical business developments.