5 things to consider when starting a business

Things to considerStarting a business is a serious investment and you want to give it every chance of success. Here are five top things to consider when starting a business from the ground up.

Building your own business from scratch can be rewarding, satisfying and empowering; however, it can also be daunting, challenging and absolutely terrifying too if you are not prepared. Before going ahead to find yourself an office and start assembling a team, let our small business accountants in London work with you through a few essential start-up issues.

1. The right business structure

Once you have decided to be your own boss, the next step is to decide how you want to structure your business.

Having the right business structure in place may not just have implications for your business, but it may even have implications on your personal life too. For example, you can easily register as a sole trader and the process is straightforward and inexpensive, but being a sole trader means you now have unlimited liability for any accrued business debt, meaning your debtors can go after your personal assets if your business owes them money.

On the other hand, a limited liability company (LLC) is costlier to set-up and maintain (in comparison to sole proprietorship), but as a shareholder of an LLC, you are not personally liable for any debt that the company accrues as long as you have acted in the best interests of the company in your role as director. In addition to that, a limited company is taxed on its profit and the corporate tax structure is rather attractive in the UK. Most directors also choose to take a low salary and use dividends to make up their income, reducing their tax obligations even further.

Every business legal structure has its own set of obligations, benefits and drawbacks. And there are some ill effects that can arise from choosing the wrong structure – particularly legal and tax consequences. This is precisely why you should approach experienced accountants – such as one of our small business accountants here at Berley – before making any final decisions surrounding the structure of your business.

2. A solid business plan

While creativity and ideas may flow in the early days of your entrepreneurial efforts, you need to ensure that these dreams can become realities. Putting together a solid business plan is the most effective way to establish structured steps to reach your short-term and long-term goals.

While there is no ‘one size fits all’ template for business plans, there are certain elements that will consistently appear in every business plan. For example, a good plan often includes an executive summary, information on the company’s goals, details on how these goals will be achieved, the company’s history, a background of directors/key figures, and marketing analysis on the relevant industry and markets. Follow the link if you want to know how to create a robust business plan.

A large misconception surrounding business plans is that, once written, they are set in stone. In reality, plans and goals can and do change. You may need to adapt your business plan to issues that arise, or you may want to grow your business and need a plan to outline how this will be achieved. In other words, a business plan is not a static document that will look the same in 10 years’ time, it will evolve with your business and its goals.

3. Available funding options

Every start-up needs cash before it can start generating revenue. Many aspiring entrepreneurs we know dip into their personal savings or borrow from friends and family members to fund the business initially.

The UK government also has a company called Start Up Loans, and as the name suggests, it aims to offer support in the form of loans (as well as mentoring) to early-stage businesses that often have not had success in securing funds from mainstream banks. This government-backed scheme offers loans from £500 up to £25,000, and you can repay the loan within 1 to 5 years at a fixed interest rate of 6% per annum.

In addition, your business can also borrow from strangers via one of the many peer-to-peer lending platforms, or even from a crowdfunding site. If you would like to know more about different funding options, follow this link to the article “What is the right source of funding for you?”.

It is worth mentioning that there are three forms of funding: debt, equity and mezzanine (a blend of debt and equity). Debt is pretty straightforward – if your business takes out a loan from a family member or a financial institution, it has debt that it needs to pay back. Equity, on the other hand, means your investors own a percentage of your company. Angel investors often fall into this category – they offer starting or growth capital to your company, in return, they own a percentage of your company (ownership equity) or debt that can be converted into equity at a later date.

4. The best talent

As any small business owner will tell you, finding the right people is challenging. The deck is even more stacked for start-ups. One wrong hire and your fledgeling business may not recover. In fact, you can do everything right to give your business the best chance of succeeding, but without the right people involved your business will struggle. From fellow directors to employees, there has to be a pool of talent that shares your vision for the business, willing to do what they can to help your project get to where it should be.

Start-ups in London do have a better chance of attracting top-tier talent. With that said, employment costs in London also prove to be more expensive as city living costs are obviously higher than start-ups based in smaller towns. To help entrepreneurs cope with various employment issues, we wrote the post “The hiring dilemma” in which we share the different employment options as well as some useful hiring tips for small business owners – give it a read if you are keen to explore this area in depth.

5. A cost-effective workspace

Start-ups offer entrepreneurs the freedom to pick a workplace that can be more creative or, crucially, cost-effective. For example, sole traders and partnerships without a permanent employee base may use their home as their workplace. They may also choose to hire hot desks in a co-working space if they do not want their personal and professional lives to mix, or look for office spaces that are serviced.

Quite a large percentage of entrepreneurs we know choose to establish from their living rooms first, before moving into an inexpensive workspace option that offers rent and utilities at decent rates. If you are expected to grow at an exceptional speed, then you may be better off to get a large office from the start, as moving can be costly and disruptive.

Berley can help you build your business

With the right advice, approach and attitude, growing your business from an idea into reality can be a positive experience that leads to growth in no time at all. At Berley, we know this because we have been there and we have done it. Over the past 30 years, we have been using our experiences and knowledge for good by helping other start-ups and small businesses across London achieve success too. During that time, we have also worked with start-ups and small businesses across many other industries, gaining even more knowledge and experience that we can continue to pass on.

Think of us as the old hero with the wisdom and knowledge, and you are the new entrepreneurial superhero – full of fresh ideas, drive and determination. Our team of chartered accountants and small business specialists will help guide you to success through a variety of services that have been tailored to suit the needs of your business.

Our accountants can help you decide on the right business legal structure, advise on business plans, discover and identify growth opportunities, perform due diligence to help you identify potential problems, choose the right tax approach, set goals that are realistic and help you track your growth as you go. In addition, we also offer all of those traditional accountancy services to ensure your business finances are kept in a good place too.

We offer all of these services because we understand what it takes to be an entrepreneur – and entrepreneurs need the right advice from the right people with the right experience. We think like you, we act like you and we are here to help you defeat the obstacles and defy the odds that stand in the way of your short-term and long-term successes and growth.

Call Berley on 020 7636 9094 to find out more about how we can help you unleash your true entrepreneurial potential today.

Berley is here for your small business.

If you liked this post, you might also like:

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.