Are you starting a business? Essential advice before you begin...
You might remember that in my previous blog post, I mentioned that seeing a qualified accountant before you start your new business is excellent advice!
All too often however, it’s advice many people don’t take, and so I was particularly impressed with a potential client I met with recently. He had done his research and arrived at our meeting fully informed about the benefits of seeing a qualified accountant before embarking on a potentially life-changing journey.
In my fifteen years as an accountant, this was the first time anybody had opened a meeting with me in this educated way. Generally, people will begin by talking excitedly about their business idea and everything they’re planning to do with it, before asking for tax and accounting assistance almost as an aside.
Starting a new business is an exhilarating experience, so it’s not surprising that people can get carried away with their ideas! However, it’s usually at this point that I lead them back to the beginning, talking them through some of the most fundamental aspects for any new business to consider:
Begin with the end in sight
Looking to the future, where do you imagine you and your business will be? Are you simply looking for a regular income, would you like a family member to take over one day, or would you prefer to develop and expand the business in order to sell it?
Defining this goal right from the outset will ensure your planning is targeted to achieve it. After all, the structure and approach needed for a business you plan to run yourself for the next thirty years will be very different from one you want to eventually sell.
Ensure your idea is financially viable
I’m an accountant, so you may well have been expecting me to give this advice! I do so because running a business can be extremely challenging at the best of times, and as you trade, you’ll need to ensure that you can meet your personal income needs as well as making sure your venture is profitable.
I recommend starting by preparing a forecast for the first two years of your business at the very least, budgeting realistically for your personal income requirements.
Lay down the right foundations
Your business structure is the key to its future success. Will you be operating as a sole trader, partnership or limited company? To make the most appropriate decision, begin by returning to your end goal and profitability forecasting.
People often ask me if changing their business structure further down the line is possible. It is, but doing so will add yet another distraction from the actual running of your business, as well as possibly adding unwanted tax consequences.
Be ready to trade
As I’ve mentioned, it’s so easy to get carried away with a business idea, and all too often I’ve witnessed new companies create unnecessary problems from being too eager to start trading before they’re ready.
At the very least, make sure you have a business bank account, as well as savings accounts for tax payments. PAYE and VAT are of course essential trading requirements, so ensure registration and systems for these are also in place if they’re applicable.
There’s no need to scribble everything down in dusty old notebooks, either – online accounting packages are very efficient and can do a lot of the work for you. I wholeheartedly recommend implementing such a system for your business, to keep your financial records easily maintained and to stop you from falling into bad habits right from the start.
If you’ve found this initial advice helpful, remember that the Rickard Luckin Small Business Unit has been developed to provide dedicated support to start-ups and SMEs, so there’s absolutely no need to go it alone as you begin your exciting new venture.
Simply get in contact with me directly, or one of our friendly team (here) to help set you on the right track to a successful and profitable business!
You can read more blogs from the Rickard Luckin Small Business Unit here