How to start a business: Top tips for success
Starting a business may sound intimidating, especially to those who have no knowledge or prior experience, but it’s actually a relatively straightforward process. In fact, many business owners will admit the hard work isn’t getting started, but maintaining things once they’re up and running.
Essentially, starting your own business is more accessible than many of us are lead to believe, and you don’t need piles of money to do it. Take this recent Yell Business report, for instance, which states that almost a third of small businesses in the UK are started with less than £250. Even more surprising, it found 15% of UK businesses got up and running on nothing at all. That said, while your savings (or lack thereof) shouldn’t hold you back from starting your own empire, there are some key tasks to tick off before you get the ball rolling.
How to start a business:
While it might not seem like a priority when starting a business, it’s important for startups to consider where they’re going to be working. Starting up from your home might be sustainable for the short term, but this won’t be the case as your company grows in size.
“If you begin to find home-working is becoming unproductive, or you want to add a more professional edge to proceedings, then looking for your first office space could well be a worthwhile activity,” explains Peter Ames, product manager at OfficeGenie.co.uk. “Traditional rentals are often cheapest but involve a lot of management and there is rarely suitable space for the smallest of business. Such options also tend to come on long-term leases, which can be a gamble when you’re starting up.”
You may also want to consider all-inclusive options such as serviced offices, cheaper alternatives such as a shared office (renting spare space in another company’s office), or a co-working hub. All of these options are more flexible than a traditional lease, although they do generally work out more expensive on a purely per-square-foot basis.
“Alternatively, if you are happy working from home for the foreseeable you could consider getting a virtual office address. You can pay for a premium, postcode for a fraction of the price of a full rental,” Ames adds. “This ensures you give an ultra-professional impression, and perhaps even gives you access to features such as meeting rooms and call handling.”
As mentioned, you don’t necessarily need a suitcase of cash to start a business, but if you are in need of some financial stability or a lump sum to get your product out there, there are multiple sources of funding available across different stages of a startup’s lifecycle. These range from government-backed loans, to venture capital (VC) and research grants to help you get started.
Angel investors or friends and family are a great source of capital to test an initial hypothesis. From there, if you have large-scale ambitions and want to scale quickly, VC funding is an attractive option to consider. A good VC will offer long-term support with the resources needed to grow and scale a business quickly.
One key difference is that VCs are typically looking for a set return on their investment as well as an exit strategy in a set time frame. They’re also, usually, investing someone else’s money. Angel investors, by contrast, tend to invest their own money, and less of it, but will offer support in other ways and stay with companies longer. There are, of course, exceptions to this rule.
Check your credit score
Once the investment has been secured, as the owner of a new business you should be aware of your company’s credit score. Ben Buckton, business expert at Experian’s SME business, says monitoring, nurturing and improving it is important in helping you progress.
“It’s hard to build a profile of a business that has not submitted many accounts, or applied for or repaid past credit,” explains Buckton. “That’s why start-ups tend to be credit scored lower – it’s because they represent a theoretical higher risk. Other businesses and credit lenders like banks want to know that the businesses they lend to are reliable, and therefore that they will repay the credit extended to them – or to pay business debts on time.”
A low score can put a business at risk of not being able to access the credit it needs when it wants to grow. To avoid this, you should manage a business credit score the same way you manage your personal one, such as paying firms on time and always paying at least the minimum required by the agreed terms and conditions.
“The business credit score is made up of publicly accessible data such as Companies House records; information on County Court Judgments; information from current account providers, credit card companies and other trade credit providers; and the businesses’ payment performance to other companies,” adds Buckton.
At its most basic level, cash flow management is essential when setting up a business, but it doesn’t have to be complex. It’s simply understanding what money you have flowing into your business (via sales and investments) and what money you have flowing out of your business (via bills, rent, and other expenditure).
A simple spreadsheet showing cash in versus cash out will suffice but it is important to have a record of this for your business so you can keep track. The tax inspector, your investor or new business partner will want to see this as a record of the management of the business.
If, longer term, you have plans to sell the company, or simply want to start as you mean to go on, investing in accountancy software is the way to go.
QuickBooks is a popular option. The accounting software for businesses tracks your income and expenses and imports financial information from spreadsheet software such as Excel. You can also import bank information, prepare invoices, purchase orders, manage and pay bills, and track inventory and employee time. You can even organise your tax information; it’s basically a one-stop shop for all your accountancy needs. Prices start at £6 a month for the self-employed, increasing to £25 a month for all the works.
Alternatively, Sage offers a range of accountancy options based on the size of your business from £3 a month if you’re a sole trader or £10 a month if you have up to 20 employees. There is a third tier, called Sage Live, but the pricing depends on the size of your business and what tools you require.
The benefit of choosing Sage’s services is that you can get access to its Pegg business chatbot. Pegg is a smart assistant that uses artificial intelligence to recognise your working style and help you stay on top of your expenses and invoices for example.
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It might sound obvious but businesses can fail to get off the ground simply because the concept of their new venture isn’t solving an issue within its industry. When starting a business, you should first ensure whatever it is you’re selling is truly unique and, by doing so, ask yourself what would make customers come to you and not your competitors.
If you run a business along more ‘intellectual’ lines, such as selling photography or producing literature, you’re automatically protected by copyright. However, if your idea is based on an invention, you should think about protecting it through patenting. It might not be cheap – but it’ll be worth it.
Once you’ve established that your idea is completely original (otherwise you won’t be granted a patent), it’s important to keep your plans under wraps until a patent application has been filed. This can be done either on the Intellectual Property Office website or at a public library with a patent department.
Application fees cost somewhere between £230 and £280 from the initial filing to the patent being granted, if you do it yourself. The experts at ThisIsMoney recommend going through a patent agent (the Chartered Institute of Patent Attorneys can put you in touch with one) to avoid any hassle. However, this ramps the cost up to the region of £3,000 to £4,000.
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The initial patent application process takes on average a whopping 33 months unless you opt for the fast track system, which cuts the process down to a year. Once approved, your patent typically lasts one year. Extending this can be pricey, so try to find a company to buy or license your invention in the first year to save money.
When small business owners start out they often only invest in the technologies they need “right now”. In fact, many start out with online or basic Office. As these companies grow, they soon reach a point where the technology no longer meets their needs. This means additional resource needs to be spent in purchasing new IT equipment and software – plus valuable time and resource needs to be spent on transitioning to new tools.
Sanj Bhayro, from cloud computing firm salesforce, believes this pain point can be avoided if small business owners invest in technology for the future, not just the here and now.
“Doing this successfully means making sure the technology you adopt aligns with the long-term goals of the company and your objectives for growth,” says Bhayro. “My advice to small business owners is to invest in a platform that allows you to achieve a 360-degree view of your customers so you can provide the right service and experience when and where the customer wants – even as you scale.”