Key Considerations When Starting Your Own Business
Now is a great time to start your own business. At the beginning of 2015, small businesses accounted for 99.3 percent of all private sector businesses, so the economic climate can be conducive to those who want to go it alone. But no one ever said running your own business would be easy.
Planning, funding and setting up a business can be a daunting task. The likelihood of a business failing is far greater if you do not get the key considerations right. The sad fact is that the majority (55 percent) of small businesses fail within the first five years, but you can give your business the very best chance of success by putting the solid foundations in place right from the start.
Here are five key considerations you must take into account when starting your own business…
1. Choosing the right structure for your business
Determining the legal structure of your business is one of your biggest decisions when starting up. The legal entity you choose – whether it’s a sole proprietorship, partnership or private limited company (ltd) – will have a significant impact on the taxes you pay and the laws you must abide by.
Many small businesses start life as sole traders as they are easier to set up. There are no formal accounting requirements and profits and losses can be submitted to HMRC via your tax return. However, as the business grows, there are significant benefits associated with a private limited company that you will need to explore.
2. Creating a business plan
Many people skip right pass this step in their excitement to set up their business, only to waste valuable time and money backtracking. Creating a cohesive plan is an essential part of setting up a successful business. It will help you think through every aspect of your business and give you the opportunity to make the necessary corrections before it’s too late. A business plan will add direction to your vision and help you consider the practicalities.
3. Buying the right insurance cover
Insurance might not be at the top of your wish list, but small business insurance is an essential consideration. If you are going to have staff then you will need employers’ liability insurance as soon as you become an employer. Public liability insurance and professional indemnity, while not legal necessities, can also offer valuable protection if something goes wrong.
4. Financing the business
How will you fund the new business? Most businesses require some capital outlay to get them up and running. Premises, office equipment, computers and software will all cost you, so it’s important you consider the best way to pay for these essential expenses. Do you have savings you can use or money you can borrow from a family member? If not, will the banks help? There is an ever-increasing range of alternative funding types available to business owners, so you will really benefit from understanding your options.
5. Cash is king
The initial set up of the business will not be your only expense. You will also need a regular flow of cash into the business to pay bills and other expenses as they arise. Maintaining a healthy level of cash-flow can be problematic for small businesses, particular in the first year when income levels are inconsistent and sometimes non-existent. Thinking carefully about where cash is going to come from and the processes you will put in place to regulate cash-flow, such as credit control and forecasting, is essential.
To find out how KPMG Small Business Accounting could help free up your time so you can concentrate on business success, request a callback for a quote today.
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