Starting a business is risky. Horribly, terrifyingly risky. However, there are many great opportunities and rewards from starting your own business.
The benefits of starting your own business is the rewards you gain from your enterprise. Firstly, the sense of satisfaction when you start your own business, when it is fully set up and is bring in the first of many sales. This can be a great reward to the business owner showing that his hard work is starting to pay off.
Secondly, the benefit of hiring your first couple of employees, shows that your business is starting to grow and this can be rewarding for the business owner as it is start of something bigger. For example, this could lead to opening of a new store or moving to a new location.
Lastly, the financial reward you gain from having your business after taking a massive gamble and risk in starting your own business will pay off after getting a better quality and standard of living. You will be able to afford the things you have dreamt off.
You should also remember that there is a strong tradition of entrepreneurs who have built and sold one business for a substantial amount going onto build other successful businesses. They never lose the entrepreneurial buzz. Such people are called “serial entrepreneurs”
Before you embark on this exiting journey, there are few things you need to do to plan for success. Below is our list of top 4 things to plan before you dive in:
Firstly, when starting your own business, you need to write a business plan. This is absolutely vital. A good business plan will let you structure your business properly, allowing you to understand how to set up your finances efficiently, show potential investors why they should invest in you, and will help you focus on the business growth. It also allows you to keep track on your progress after the business launches.
A plan should cover all the important matters that will contribute to making your business a success. These include:
- 1. Your basic business concept. Here you can list the industry you will operate in, your business structure, your particular product or service, and how you plan to make your business a success.
- 2. Your business strategy. This includes the specific actions you plan to take, the goals of the business as well as how you plan to achieve them.
- 3. Your products and services. This is where you need to go into more detail about what you plan to offer. As part of your business plan you should do a swot analysis on your competitors. This will help you plan better your sales proposition and put a solid marketing plan together.
- 4. The markets you’ll operate in. This section is all about your marketing. Start by identifying your buyer’s persona (your customers), where they are based, how will you reach them and communicate your offering with them. What is your strategy for attracting them, converting them and ensuring they will buy from you on a regular basis in the future. You need to set aside a marketing budget to help you with that. If you plan to advertise through Google for example, you need to understand what is the volume of searches for your products and searches, who are your competitors and what is the average cost per click so you can set up your budget.
- 5. The background of your management team and key employees. This is not meant to be a long and detailed biography of each person involved, however it will help you identify the right type of people you will need to meet your business goals. A mistake than many small business owners make fairly early on is that they employ people and then create a role for them instead of creating a role and then employ the right person for it.
- 6. Your financial plan. Here you need to list your projected costs together with targeted sales targets. It’s very important that you are in control of your finances from day 1, which also includes cash flow. It’s very exciting when you win your first client, and you will want to start on the work straight away, however make sure your payment terms are reasonable and in-line with your financial planning. There is no point delivering a job if you won’t be paid for months on end. This will put a massive strain on your new business and could even put you under.
As you write your business plan, stick to facts instead of feelings, projections instead of hopes, and realistic expectations of profit instead of unrealistic dreams of wealth.
Click here for a free business plan template
How To Write a Business Plan when starting your own business
Start Your Own Business by Writing Business Plan. How to write a successful business plan when starting your own business. Step By Step – How to write a business plan an effectively for starting your own busi…
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2. Perform a market research
Market research comes to play once you have written your business plan. The idea behind a market research is to help you identify what your potential customers want to buy so you can package your offering the best you can.
You should however also use your common sense as if your market research consists of asking 50 people of their opinion of your new product or service, this is not a big enough crowd to determine the success of your business going forward.
Collect as much information as you can but use your experience and gut feeling to take the decision about how you want to go about it.
There are 2 main ways to collect market research:
Primary research uses surveys, test marketing, focus groups and interviews. This is extremely important for entrepreneurs as this gives them a chance to get an understanding of the customers and purchasing decisions. However, this can be time consuming when the business owner is doing everything by themselves.
Secondary Research involves the summary and collation of existing research in which the data has been collected. This will give you background history into your market, the success of previous products and services in your niche as well as your target market’s previous purchasing habits. This is a quicker solution for any entrepreneurs looking to find data about their market as they can access it instantly. However, the data could be out of date or be misleading so it needs to be considered with cation.
Having done a market research as part of the business planning will help any future entrepreneurs secure additional funding.
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3. Selecting the best business structure
There are several factors that could determine your choice of business structure. This in turn will directly affect the business growth.
We are only going to focus on the most commonly used business structures in this article, however we recommend that you do further research if you believe neither of those suit your plans.
The four most common business set ups are as follows:
- Sole Trader
- In partnership
- Private Limited Company
- Limited Liability Partnership
A sole trader operates a business as an individual. They are the exclusive owner of a business and typically the only employee. Typically, if you are working as a tradesman, such as painter and decorator, a plumber or an electrician, you will operate as a sole trader. You will be personally liable for paying for the bills and responsible if the business makes a loss. You’ll need to keep records of all transactions; however, you can claim a lot of your expenses back and are entitled to keep all profits after tax has been paid. You are also liable for all losses.
A partnership is a business owned by two or more people. A contract is normally written up, which states the type of partnership it is, how much capital each party has contributed, and how much profit and loss will be shared. However, everyone involved in the partnership is still liable to unlimited liability, just as a sole trader.
Private Limited Company
Private limited company’s finances are separated from your personal finances. Limited means that the financial responsibility of the company is limited to the value of the company’s shares owned by its members and the liability of each member is limited to the original value of the share. The company must pay corporation tax out of any profits and can then distribute the remaining profits among the shareholders. As a director of a company you would typically pay yourself a salary and dividends if the company has made a profit. Any shareholders in the company will be entitled to dividends as well.
Limited Liability Partnership
A limited Liability Partnership is like the general partnership except that it has two classes of partners. The general partners of the business have full management and control of the partnership business but also accept full personal responsibility for partnership liabilities. The investment made by the limited partners have no personal liability beyond their partnership interest.
More information about registering as a limited company
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How do I decide which structure to use?
To understand the structure in more detail its best to weigh up the pros and cons on each and then to look at your business plan to see what works the best. Few questions to help you decide:
- Are you starting on your own or with a business partner?
- Do you want your personal finances to be separate from those of the business?
- Do you plan to employ people immediately or in the near future?
- Do you plan to raise finance against shares of the business?
How big do you want to grow? If you have big ambitions, it’s always best to set up your business with that in mind.
4. Business Name
Depending on the type of business you are planning to set up, the business name you choose could play a vital role in the success. It is not always about having the best product, service or idea. Branding is not just a memorable logo but also an effective memorable name that can really help people remember you.
If you will rely on Google for people to find you, choosing the right domain name is also very important. Consider what people search to find services or products that you plan to offer. If you have a searchable keyword within your domain name, you are more likely to rank in Google for anything relating to it.
To help you choose a name it’s best to brainstorm few ideas with family and friends. Make sure the business name is original, simple and memorable. Once you have chosen a good name, you should register your domain name and open all the social media channels under it, to avoid anyone else doing that before you.
For help with setting up your domain name, social media channels or a new business website contact Art Division for a free consultation.