5 Mins
Over the years, we’ve worked with businesses at every stage of their journey, from ambitious start-ups to well-established companies and even owners preparing to sell up and retire.
But without doubt, the most exciting stage is the beginning of a new venture. Everything feels fresh, business owners are brimming with enthusiasm, and there’s a real eagerness to get products or services out into the world. At Henderson Loggie, our goal is to help new businesses start strong, which is why we’ve pulled together some of the key considerations that are often overlooked in the early planning stages.
Many business owners look back and regret the decisions they made at the start. That’s natural; it’s all part of the learning curve of being your own boss. But if you can learn from other people’s experiences, you’ll save yourself unnecessary mistakes (and still have plenty of opportunities to make new ones of your own!).
Starting a business comes with challenges, so before investing your hard-earned savings and launching into trading, it’s essential to put a plan in place. And that begins with asking yourself some key questions about your business idea.
1. Does anyone need your product or service offering?
The very first question to ask is: does anyone actually need what you’re offering? You might have a great idea, but without a market for it, your business is unlikely to take off. Identifying your target market and making sure there’s genuine demand for your product or service should be your starting point.
2. Is your business likely to be sustainable?
Next, think about sustainability. If you want to be your own boss, will this business allow you to live off it for the next five to ten years?
- Will customers come back for repeat purchases, or is it a one-off product?
- If it’s one-off sales, do you need additional product lines to keep revenue flowing?
Repeat custom can provide stability, whereas one-off sales usually mean you’ll need a large volume of new customers every year to maintain profitability.
3. What business structure is best for you?
Once you’ve identified demand and sustainability, the next step is deciding on the right business structure. Many assume the choice is only between being a sole trader or a limited company, but in reality there are at least five options:
- Sole trader
- Partnership
- Limited liability partnership (LLP)
- Limited company
- Community interest company (CIC)
Your decision depends on more than whether you’re working alone or with others. Some customers, for example, may only work with limited companies, which could influence your choice.
If you’re going into business with family or friends, be especially careful. Relationships can change, and it’s risky to assume they won’t. Protect yourselves with clear contracts and, ideally, a partnership agreement drawn up by a solicitor.
Finally, don’t forget the practical side: you may need to register for VAT or PAYE from the outset. An accountant can guide you through these requirements. (See our article: VAT: What you need to know when running a small business)
4. How will you fund your business?
Cash is key. Many businesses with good products and strong teams fail simply because they run out of money before they get established.
Make a list of everything you need to get your business up and running, and attach realistic costs to each item. This will give you a clear picture of how much funding you need before income starts to flow.
If you can self-fund through savings, that’s ideal. If not, consider other sources such as borrowing, grants, or investment. (See our article on funding options for new businesses for more guidance.)
5. What is the value of your product or service?
Pricing is one of the hardest decisions for new businesses.
- For products, you can usually take the cost of production or purchase and add a profit margin (the cost-plus method).
- For services, pricing is more complex. You need to consider your time, expertise, and what you need to earn each month to make the business viable.
But remember, it’s not just about what you think your time or product is worth. Market research is essential. Look at what competitors charge and what customers are willing to pay. This will give you a realistic benchmark and help you position your offering correctly.
6. Knowing when to ask for help
Many new business owners try to do everything themselves. While it’s natural to wear multiple hats at the start, you should know when to bring in support.
If you’re spending too much time on admin, compliance, or tasks outside your expertise, it’s probably time to outsource. Common areas to hand over include bookkeeping, payroll, HR, diary management, and general admin.
If you want to keep control of your finances without outsourcing, cloud accounting software such as Xero can make life much easier. (Watch our video: Why you need cloud accounting to learn more.)
The key is to work smarter, not just harder. Freeing up your time allows you to focus on growing your business.
7. Paying attention to the paperwork
Finally, don’t ignore the paperwork. Keeping accurate, up-to-date financial records is vital, not only for staying compliant with HMRC, but also for making sound business decisions.
Good bookkeeping will show you:
- Where money is coming in
- Where it’s being spent
- Which areas of the business are profitable and which aren’t
Modern cloud-based systems like Xero automate much of the process, reducing errors and saving time. As Xero Gold Partners, we can help set up and manage your system, or take on as much of the bookkeeping as you’d like us to.
In summary
These are just some of the key things to think about when starting a business. Combined with our other start-up support articles, they should give you a solid foundation for building a successful, sustainable company.
If you’d like to find out how we can help support your new business, please check out our Accounting Services page, or complete the contact form below and a member of our team will be in touch.