Essential Advice on Starting a New Business

You don’t have to have a degree to start your own business. In fact, according to a recent survey by Barclays, less than half of business bosses have a degree, following in the famous footsteps of Gordon Ramsay, Simon Cowell, Dame Anita Roddick, Jacqueline Gold and Richard Branson. And only 11 per cent of business owners believe that having a good education is crucial to being a success in business.

What you do need to succeed is savvy and know how. Follow our essential beginner’s guide to starting out in business for yourself.

Starting a New Business: Before You Start

You need to make sure you have the will and the determination to stay in it for the long haul – it’s not going to be easy. There will be long hours and frustrating moments, and you have to be sure you have the will-power to carry on. Take note of why you are starting the business and what your strengths and weaknesses are likely to be – you’ll need to be driven, competitive and creative to make it work. You’ll also need to have a game plan regarding how you are going to survive until your business starts making you money.

Starting a New Business - Research & Plan: The first step is to thoroughly research and develop your business idea and how it is going to fill a gap in the market. If you don’t already have an idea, try thinking about how you can use your hobbies and skills to develop a new product.

You’ll also need to make sure your business is viable with careful and in-depth market research. Find out exactly who your customers are, who you are competing with and how and what they are doing right or wrong.

Next, create a strategic plan, noting your business goals, objectives, strengths, weaknesses and how the business will work. Write a business plan to guide and focus your progress.

Starting a New Business - Advice and Information: Choosing Your Business Structure

The way your business will be structured will depend on what the business concept is, how big you envisage it to be, the level of control you want over the running of the business, whether you need extra start-up cash, how much you want to be personally financially protected from the ups and downs of the business and the tax implications.

New Business Tips - The Options:

• Sole Trader: A small business owned by one person who takes all the profit and is responsible for all the losses and debt. It’s quick, easy and inexpensive to set up or dissolve, gives you complete control, and in terms of tax, the law sees you and the business as the same entity. On the downside, your personal assets are at risk if the business fails, and it may be difficult to raise enough cash to get started.

• Partnership: A business shared by two or more people. As with a sole trader, legally the partners and their business are seen as one. Make sure you set out a written legal agreement stating who will contribute what to the business, how the profits and losses will be split and how partners can be bought out, even if you’re not planning for that to happen. Partnerships are still relatively easy to establish and it’s easier to raise funds. Plus, everyone can bring their own complimentary skills to the table and tax is deducted according to personal returns. Unfortunately, you then have to share your profits and control with others and share responsibility for any illegal or stupid actions they may make. And if one partner leaves, the whole company needs to be dissolved and start anew. It is possible to form a Limited Partnership – meaning that some of the partners have less personal liability for the company’s debt.

• Limited Company: A Limited Company is complicated to set up, but the major advantage is that the business is a separate legal entity from its owner – meaning it is taxed in its own right. It’s much easier to raise capital, and your liability for the company’s debts is limited, so you can’t lose more than you’ve chosen to invest and your personal assets are safe. Plus, the company doesn’t need to end just because a shareholder retires – you can easily transfer shares without the hassle it takes to remove a partner from a partnership. On the downside, it’s complicated, expensive and requires a lot of paperwork to set up, run and dissolve the business – and anyone is allowed to look at your paperwork and research the workings and accounts of the company. You’ll need at least one director to manage the business (this could be you), plus a company secretary to keep up all the official documents.

Finding Funding for your New Business

Now that you know exactly what product you are offering and how you are going to provide it, you need to raise cash to set it all up. Work out how much financing you’ll require to fulfil all your immediate business needs, such as renting offices, buying stock, advertising or even employing staff. Make sure you’ve planned how you’re going to manage your cashflow by forecasting future costs and budgeting.

You can use your savings, borrow from friends or family, get funding from a venture capitalist investing in your business, apply for a grant or go to a bank for a loan. Whatever you do, don’t be reckless and decide to put your costs on your credit card – the results could be catastrophic.

So why should someone to invest in your business? Because you’ve come up with a brilliant idea, and you can prove exactly how you’re going to make it a success. Show them how you’ve researched and planned everything, and let your enthusiasm speak for itself.

Starting a New Business: Beware of the Tax Implications

Your tax responsibilities will obviously differ according to the type of business you are running – a sole trader, partnership, limited liability partnership or limited company – and they can change every year. Besides income tax rates and National Insurance contributions, you may need to take into account employee tax issues and regulations, VAT, capital gains tax or corporation tax.

VAT will apply to you if you’re going to be involved in selling goods or services. It basically means that as soon as your turnover reaches a certain bracket, you’ll need to charge extra VAT for every item you sell and hand this over to HM Revenue and Customs.

To find out exactly what the tax issues will be for your own business, Click Here.

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