In the early days of starting a business there are so many important choices to make that can often be the difference between setting up for success, or struggling through those first few years.
While most decisions aren’t likely to be as straightforward as ‘make or break’ for new businesses, there are some important considerations to make that can have an impact on your ability to efficiently run the day-to-day of your business.
We’ve compiled a list of 9 important considerations that you should make when starting up your new business.
Find a Reliable Accountant
Finding a trustworthy accountant should always be a top priority for any new or existing business. When looking for an accountant, it is important that you are receiving reliable, and trustworthy information in a timely fashion.
When looking for an accountant, your first priority should be to find one that will provide proactive advice, in a timely fashion. We believe in providing a tailored service that suits the exact needs of your business that can also evolve as your new business takes off.
Decide what Legal Entity to Form
One of the first considerations is around what legal structure you should set up your business as. Depending on the entity you formulate will have a profound impact on the way you conduct certain functions within your business, not to mention having an impact on how you will be governed by law, and your requirements to stay compliant with the relevant tax legislation.
Setting yourself up as a Sole Trader can have its advantages if you want to ‘hit the ground running’ as it is often the quickest and easiest of the legal entities to establish and begin trading.
Below are some of the advantages and disadvantages of setting up as a Sole Trader:
Forming a Partnership can be a viable method of forming a business in order to bring a more diverse range of skills & ideas into the business.
Below are some of the advantages and disadvantages of setting up under a Partnership:
Setting up a limited liability company offers the most protection for the company owner but can also be the most costly & complex legal entity to set up. Along with filing a set of annual accounts, a limited company is also required to submit annual confirmation statements.
Below are some of the advantages and disadvantages of setting up a Limited Company:
While in the early days you may be more inclined to set yourself up as a sole trader for the speed, and ease at which you can set-up and start operating; it is however, important to ensure that you give appropriate consideration to all potential structures as they each have a different impact on the way your business can operate and are taxed.
The legal entity you formulate will have a profound impact on the way you conduct certain functions within your business, not to mention having an impact on how you will be governed by law, and the requirement in order to stay compliant with the relevant tax authorities.
Find bookkeeping software that works for you
Bookkeeping may seem like an option to explore as an afterthought to setting up your business but getting used to using a bookkeeping software from the very beginning to manage your records and transactions will save a lot of time in the long run when it comes to accessing your financial data or organising your records for your end of year accounts.
While most software will provide the basic necessities of being able to record & report on transactions going in and out of the business, Xero’s extensive list of features puts it far and away ahead of its rivals – in our opinion at least.
Benefits of Xero cloud accounting:
- 100% cloud based giving you access to your company’s financial information wherever you have an internet connection
- Fully personalised dashboard to display the most important information instantaneously
- Fully functioning mobile app to raise & pay invoices immediately & on-the-go
- Integrates seamlessly with banks for live finances & simple reconciliation
- Easily calculate and process payroll
- Automated reminders for payments in & out
Through our vast bookkeeping experience, setting up, and training our clients on Xero, we’ve found that the ease at which business owners can access their live financial position actively increases their efficiency when it comes to decision making based on the current circumstances.
Review your financial position
Setting up a business from the ground up can be expensive, depending on the industry and the product or service your business will be providing.
You should also consider your current financial position prior to setting up your business. For example; Will you have enough in savings to get by on working solely on the new business, or will you likely need to remain at least in part-time employment?
There are certain tasks to setting up your business that can be done while still in full time employment – i.e setting up bank accounts, finding advisors, working on your initial business plan, etc – so that when you are ready to commit more time to your business you aren’t starting from square one.
Keep your 1st year goals / targets realistic & achievable
In the UK 20% of businesses don’t make it past their first year, and a staggering 60% fail within the first 3 years of operating. One possible reason? They end up overtrading.
When you’re setting up a business it is important to temper your ambitions – it is extremely rare for a new business to become a huge success overnight, so when it comes to setting your goals be realistic and pragmatic about what is achievable.
When in the first few years it’s wise to start small and grow big gradually – It’s OK to be a ‘small player’ as you can still make money and there will be room to grow in a more organic way later down the line.
Separate personal & business finance
When it comes to accurately understanding your business’ financial position it’s important that your business finances don’t get muddled with your personal finances.
Not only will keeping your business & personal finances separate help you to identify the current financial position of your business, but it will also help you when it comes to calculating its tax liability, and can drastically cut down on the time it takes for you or your accountant to process the information.
Get good at managing your cash flow
We all know that cash flow is the lifeblood of any business, old or new. Maintaining a healthy cash flow is key to building the success of your venture, as without a healthy flow of cash in & out of the business you will likely hit roadblocks to your ability to carry out certain operations required to grow and expand.
every business’ cash flow requirements will be different depending on their industry, customer base, and existing business practices – we’ve outlined just some of the tactics you can employ for your business in order to keep your cash flow ‘in the black’ & you can find a more extensive list here https://pricedavis.co.uk/blog/7-tips-for-a-healthy-cash-flow/
Make use of grants & government funding
Researching what government grants & possible funding that is available to you can be invaluable in the early days of starting your business.
Often, depending on the industry you’re in, there will be specialised funding options that can help ease the burden of funding start-up costs yourself.
Securing external funding from government grants or other agencies can help you build your businesses without having to rely too heavily on dipping into your personal savings, which can then be kept in case of a rainy day!
Here you can find a comprehensive list of what funding may be available to you right now – https://smallbusiness.co.uk/small-business-grants-uk-2548113/
Run decisions past your accountant
Accountants are perfectly placed to help your decision making, and to advise on how you can achieve organic growth for your business as we can help you understand your business’ current financial position, as well any tax or cash flow implications that your desired course of action might have on the business.
At Price Davis, we take a proactive approach when advising our clients. Our aim is to integrate ourselves within your business, to ensure we can offer quick, and effective advice tailored specifically to your business’ particular circumstances.