Timing the jump
Starting a business can be a confusing operation: so many decisions to take, so many actions to carry out. It can be important to keep to the right path. If you fail to take one step when it is necessary, this can delay your start.
What is in this chapter?
This chapter should help you to keep to the critical path. It sets out 60 steps. Not all will apply to every business – decide which are critical for yours and which you can ignore. You might find it convenient to combine two steps even though one does not need to be done until later. But, in general, carry out the steps in the approximate order given. The steps are divided into four sections:
Initial preparation
1 Carry on in your job, if you are in paid employment; if able to, carry on drawing Jobseeker’s Allowance, if unemployed. You can undertake the initial preparation and research while still doing this, although to keep the allowance you also need to carry on looking for a job. If you are unemployed, you may be eligible for some help in starting your business through the New Enterprise Allowance (p. 59) – talk to Jobcentre Plus*.
2 Analyse your character and abilities. Are you the right person to start on your own (p. 33)?
3 Discuss with your family the possibility of starting a business. Are they aware of what it will mean to family life? Will they be committed (p. 35)?
4 Come up with a shortlist of ideas for a business. Do you have the necessary skills? Does the market look promising (p. 40)? Will you be marketing yourself or through an online platform?
5 Briefly define product ideas (p. 11).
6 Brush up inadequate skills. Apart from reading the relevant sections of this book, consider training courses and counselling (p. 58).
7 Consider whether you should start the business with someone who has complementary skills – that is, who is strong in those skills in which you are weak. Negotiate who gets what share in the partnership or company.
8 Decide how big a business you want. Will it be large- or small-scale? How much growth potential do your business ideas have? Do you have the essential management skills to opt for a fast-growth route?
9 Did your self-analysis suggest that you needed ongoing help? Or have you been unable to come up with a sound business idea? What about a franchise? Typically, you need between one-third and one-half of the purchase price (p. 99).
10 Investigate the possibilities of buying a business if you have the necessary funds or can raise them (p. 69).
11 Carry out detailed market research into a shortlist of ideas (p. 30). Do this whether you are starting from scratch, buying a franchise or buying a business.
12 Identify a market sector (p. 23) and work on the product for your chosen sector.
13 In steps 11 and 12, narrow down possible ideas to a leading prospect.
14 Work out your principal selling method – online platform, e-commerce, direct mail, intermediaries, for example.
15 Develop first rough estimate of amount and timing of sales.
16 Review yourself, your skills, your family, your idea (p. 33). Take the decision to proceed, do further work or abandon. It is better to drop the idea now than carry on with doubts.
Getting into greater detail
17 Draw up an initial business plan. Forecast sales, costs, cash flows. At this stage, figures will be very approximate (p. 285).
18 Make a preliminary decision about your need to raise money. Roughly, how much will you need? Who is the likeliest lender (p. 303)?
19 Discuss with your family what you will be able to invest. Consider what security you can offer (pp. 35, 308).
20 Seek out and employ the advisers you may need. These could include a solicitor*, accountant*, bank, design consultant, IT specialist, database experts and web designers.
21 Decide how much you will spend setting up, but keep a margin of safety. Tailor the amount to how much you are willing to risk yourself, as the funds you can raise will be a multiple of what you can invest.
22 If you are currently employed, are you able to give the necessary effort to get the business going? Or do you need the extra income? Consider giving up work.
23 Test your product or service to confirm its performance. Test-market your product or service, if possible. Review your product as a result of testing.
24 Apply for a patent to protect the product or register the design or trade mark, if applicable (p. 111).
25 What form will your business take: for example, sole trader, partnership or limited company (pp. 59, 60, 63)?
26 Decide your IT strategy – accounts package, spreadsheet, e-mail, database and so on.
27 Name your product and business (p. 121). Keep in mind your sector of the market and the product’s benefits. The name is part of your selling effort.
28 Register the company or limited liability partnership name, or change the name if buying a ready-made company (p. 82). Check there is no other company with that name. Sole traders and conventional partnerships need take no action.
29 Draw up a partnership agreement, if applicable (p. 64).
30 Come up with some initial ideas about a web site design and branding.
31 Develop ideas about how to sell your product or service. Identify the product benefits and advantages. What means will you use to get your message across: web site, social media channels, leaflet, etc. (p. 131)?
32 Identify possible suppliers. Begin your negotiations.
33 Develop a pricing strategy (p. 179).
34 Refine a business plan (p. 49). Be pessimistic about sales and costs.
35 Ask an adviser or colleague to go through the plan with you, challenging all the assumptions and figures. Have you identified the principal risks, threats, opportunities, strengths and weaknesses?
36 Review the plan yet again. Does the business look viable? Will you go ahead, research further or abandon? All the momentum is to push forward because of all the work and commitment put in so far. But if the idea does not hold water, the right decision is not to proceed but to research something else.
Setting up
37 Consider what equipment your business will need. Investigate how to pay for it: cash, hire purchase or leasing.
38 Establish guidelines on what credit to offer, what credit to take from suppliers, how you will control cash (p. 323).
39 Find out what insurance you will need for your business (p. 277).
40 Estimate the amount of initial stock and production run, if applicable.
41 Make first approaches about raising money.
42 Decide if you will start trading before you raise the money or if you will wait until you have finalised. Remember with complicated finance, it can take several months.
43 Register for VAT if you are forced to and, if not, consider whether it would be beneficial (p. 399).
44 Choose accounting package (p. 363) and decide if you need to use an experienced bookkeeper or accountant.
45 Work out what your accounting period should be. There is some advantage in a year-end early in the tax year if profits are rising (p. 374).
46 Consider the virtues of trading from home, even if several of you are joining together to start the business. E-mail, mobiles and other messaging links can help you to communicate from several locations. Otherwise, start the search for premises.
47 Finalise decisions about your online presence.
48 If you will need staff when you start trading, start the search now.
49 Carry on developing your ideas about image (p. 123), how to sell (p. 151) and how to get your message across (p. 131).
50 Draw up terms and conditions of sale, if applicable. Set up your database for actual and potential customers.
51 If you will be selling direct yourself, develop a sales dialogue. Train by carrying out role-play with your spouse or a colleague (p. 163).
52 Set up a financial control system – that is, how you will compare actual performance with budgeted performance as drawn from your business plan.
53 Finalise your decisions about mailers, apps and social media channels.
54 Draw up contracts of employment for any staff.
Ready to trade
55 Finalise premises (if applicable), fitting out, employing staff, sales methods.
56 If you are still employed, hand in your notice. If you are unemployed, contact your local Jobcentre Plus* to find out whether you can get any financial assistance from the start of trading.
57 Tell HM Revenue & Customs (HMRC)* if you are to be a sole trader or partner (pp. 59, 63).
58 If you are forming a company or taking on staff, ask HMRC for information on how to operate the PAYE tax system (p. 251).
59 Set up a reporting system for your staff.
60 Plan the opening.