Many of us have considered ditching our jobs in favour of starting a business from scratch. The incentives are obvious and exciting but even with an investable lump sum burning a hole in your ‘Service-leaver sky rocket’ it’s best to proceed with caution. Here are our tips to giving your start-up the best chance of success.
All businesses have an idea at their core (or a principle, raison d’etre, call it what you will). Furthermore, at least part of that idea needs to be different, ideally, unique. The Telegraph and The Guardian, for example, are both broadsheet newspapers – one is left leaning, the other right leaning. They both also have unique selling points (USPs) in their writers and layout etc. What you need to establish is what is unique about your business vision and why nobody can get what you offer elsewhere, perhaps based on quality, speed, precision, price or personality. Your idea needs to be compelling and provide the basis of your marketing message.
There isn’t much call for ice in the Arctic nor sand in the Sahara; in other words, make sure that there is a market big enough to support your venture. You need to learn as much as you can about the sector you’re aiming to get into and who your potential customers are – and what they’re looking for. There may well be similar businesses to the one you have in mind operating in the area (aka: the competition). What do they do well and what do they do badly? Find a gap or a niche and you might be on to a winner. Similarly, if they’re all struggling, you might think of switching direction or at least location.
Consider timing the opening of your business to coincide with when your product is at peak value/interest or desire.
Not all businesses work out of shops or offices. Premises can be a huge outgoing and you might find working from home or even remotely from a van, for instance, a good way to start without overcommitting finite resources.
It’s a good idea to get feedback on your proposed venture. An honest evaluation from a friend can be a good idea although they may be guilty of being too polite to tell you that your idea isn’t amongst the best they’ve heard.
The other school of thought says that people are sometimes jealous that you’ve had a brainwave that they didn’t think of and may start picking holes in it unnecessarily. So, the advice is: ‘listen, but don’t listen’.
A step along from this is seeking out a properly qualified business advisor or even somebody connected with a bank, who will spell out exactly what they think of your ideas; nerve-racking indeed, but better than throwing your money away.
You also need to think carefully about how running your own business will impact your life. Although you’ll have autonomy, business owners, especially in the early days, rarely finish at five o’clock.
Starting a business costs money. The problem is that you don’t yet have customers to supply money to you. It’s true that you might have a lump sum to invest but you need to be careful regarding income versus outgoings and how long you can run potentially at deficit before turning a profit. Cash flow issues kill businesses.
Accountants can be hired to advise on tax-efficiency and forecasting, which may be money well spent.
Branding and marketing
One of the seemingly simplest things that a new business owner needs to do is establish what they are going to call their venture. A name needs to be simple and narrative enough to remember as well as carry your ethos along with it. It might be wise to consider it as part of a wider branding package that includes a logo and company colours and so on. You need to stand out – but not too far that people think you’re crackers.
You need to remember your USPs and consistently market your brand aligned to them through websites, social media and so on. You’re aim should be to get noticed and quickly.
Get it set up
Your business is not a hobby. For instance, don’t feed your business from your personal bank account but set up a proper business account. You also need to register properly in order to formalise your business. (Depending on your business, the list below may not be exhaustive.)
HM Revenue and Customs
Find out if you need to pay tariffs or get permission to trade. You may also need to register for VAT.
You may want to register your business as a limited company or limited liability partnership (LLP).
It is sensible to review your home and life insurance and check whether you need special business insurance.
This document should crystallise everything about your business, from how it will operate through to how it will make money and by when. The document is likely to be important when looking for investment or funding regarding your business since it describes your strategy and ambitions.
As your business changes so should the business plan, taking in new initiatives and ideas as your circumstances change.
Funding from banks is not as easy to find as it used to be. Nevertheless, they remain an important source of start-up money.
Naturally, the bank will want to be given certain guarantees regarding the safety of their money and will want to see a well presented business plan that stacks up properly. Saying that, they aren’t the only show in town: there are alternatives such as peer-to-peer lending, invoice discounting or angel investors. Even so, they will all want to see the business plan and your incredible business idea and USP’s shining through.
An altogether different method of setting up a business is to invest in a franchise. In short this allows people to run a small portion of a greater business and therefore benefit from the reputation of the brand. Ongoing training and support in the required skills is usually provided from good quality franchising opportunities for which the franchisor (representing the parent company) takes fees and a share of the profit.
Franchises are popular when it comes to attracting backing from banks and have a statistically superior chance of success over starting a business from scratch.
British Franchise Association