Succeeding in a new business means you need to keep a tight rein on your finances from the beginning. With many ventures failing within the first year or two of business, usually because of problems with cash flow, you want to ensure you aren’t one of these statistics.
Even if you have a good idea about the business you want to start, it’s always worth looking at some other small business ideas just in case there’s something that throws new light on your concept or helps you approach it from a different angle.
Once you have created a shortlist of maybe two or three business ideas, carry out research on competition and pricing in your local area, if that is your target market, or nationally or internationally if you are going to do business largely online. All this data should form part of your business plan, something that will be a requirement if you intend to seek external funding from a bank or private investors.
If you are setting up your business as a sole trader you need to ensure you have registered for tax self-assessment with HMRC within 3 months of your inception date. As a sole trader it is wise to keep all your personal expenditure separate to that of your business, therefore set up a dedicated bank account. This makes it far easier to keep track of your incoming and outgoing payments.
The lower you can keep your outgoings in the early days of your business the better chance of success you have in the long term. Consider the savings you can make in the following areas before coming to any expensive decisions.
Many sole traders start out working from home and this can save a substantial amount of money. You can use the services of a virtual office to provide you with a professional business address and telephone number and even an occasional meeting or co-working space. Working from home means you have no outgoings in terms of rent, services and utilities and you should put off signing any long term lease until you are financially viable.
Purchase as little equipment as possible early on. If there is anything you can’t do without to run your business then consider buying second-hand or leasing. Some people buy expensive colour printers and photocopiers but you should weigh up whether it would be cheaper just to get copies run off at the local print shop. The same is true with vehicles for your business. To avoid high initial outlay costs, could you lease a car or van until you are ready to buy?
Hiring employees is a big commitment. Aside from the requirement to fund their payroll and benefits, there are also legal obligations to consider in terms of redundancy should things not go to plan. An alternative can be to outsource work to freelancers until you are ready to hire in-house staff. With the upsurge in popularity of freelancing in recent years there is now a huge pool available to meet almost any staffing requirement.
While you want to cut back on outgoings, it is unwise do so at the expense of exposing yourself to risk. Therefore always be willing to pay for expert advice for legal matters or those relating to finance or taxation. You should also not cut corners with required insurance cover for your business.
You will need a way to reach out to potential clients. Therefore getting a well-designed, professional website made is a sound investment, as this will be the shop window for your products and services. You will also need to allocate a portion of your budget for marketing and advertising, however you can also utilise free options, such as online social media and local networking.
With a sound financial structure for your business in place and a close eye kept on your expenditure and client acquisition in the early days, you should soon be on your way to running a thriving business which will be viable in the long term.