Starting a business – the Yorkshire Powerhouse Quick Launch Guide
Starting a business can seem like a big step and there are a lot of factors to consider from a legal, financial and practical perspective. Here at the Yorkshire Powerhouse we have combined all our experience to bring together the information you will need to start your own business. From articles on how to write a business plan to downloadable documents (cashflow forecasts, marketing plans, etc) all to help you get your business started and ALL FOR FREE and provided by our expert collaborators!
If you have a great idea, concept or service then getting the foundations of your business correct is absolutely paramount. There is lots of advice available but the best advice is to ‘seek advice’. Some of the professionals you will need to speak to include Solicitors, Accountants and marketing companies.
Getting the Basics Right from a Financial Perspective
Often the biggest consideration for a new business is cash flow. How will you finance the start up? How will you pay your personal financial obligations during the start up process? These are not always easy questions to answer:
- Open a bank account, you’ll need to do this as soon as possible and it’s worth shopping around with flexibility at the heart of your decision.
- Decide if and when VAT registration will be necessary, only do it if it makes sense.
- Decide and procure the system you will use to do your accounts and bookkeeping, its worth taking time to understand how to use it well.
- Payroll set up, register with HMRC and use the simplest system you can find, HMRC’s own Basic PAYE system is free.
- Create a personal financial plan independent of the business, how much do you need from the business to survive.
- Do a cash flow plan for the business, over 1 month, 3 month and 12 month, do it yourself so you understand. (Free downloadable template in the downloads section)
- Consider what start up finance is required and how this will be funded. Are the partners or shareholders putting money into the business, if so how much money is being put in and are all of the owners putting an equal amount in?
- Do you require start up finance and if so who will provide this. Will a mainstream lender fund the start up or would you need to consider an alternative funder such as the Business Enterprise Funds. Alternatively do you need to consider venture capital or a third party funder?
Getting the finances of the businesses right from the outset is likely to be one of the primary factors influencing the success or failure of a business. It is important to be aware that many business may have a degree of time when they are not making any, or any substantial profit. This is not unusual so you need to be aware of this fact so that you are prepared for this personally.
Getting the Basics Right from a Practical Perspective
We often speak to individuals who have a dream of owning a business or an idea of what life will be like as a business owner. For a business to succeed however, it takes more than a broad idea or dream. Often business is all about the detail but what’s more, business should be about what you love to do.
- Download FREE templates for business plans, cashflow forecasts, marketing plans, competitor analysis and PEST and SWOT analysis … click here to access them now!
- What do you love doing and what do you hope to achieve by setting up a business? Often asking yourself ‘Why you are setting up a business’ is more important than the ‘How’? Each person’s reason for setting up a business is different, some people want to make money, some want to set up a business due to a particular passion, it is important that you understand what your reason is from the outset.
- What does your exit from the business look like? How will you recover your money from the business? Will you sell to a competitor? Will you pass the business to your children or family? Have a goal in mind and strive towards it?
- What makes my business different from everybody else’s? What will be your message and pitch be? Do you have a ‘unique selling point’?
- Do you understand who your customer is and what they want? How will you market to the customer and what will be your budget for marketing?
- Do you have the skills to manage the business or would you benefit from further management training or a mentor?
- Do you want to employ staff and how will this be funded? What culture do you want to encourage in the business?
- How will you organise the business so you can holidays?
Getting the Basics Right from a Legal Perspective
There a number of factors to consider at the outset of a business, particularly if you going into business as a partnership or with other people.
- You need to understand what corporate structure is suitable for you. Many people opt for a limited company due to the potential tax advantages and the limitation of liability however this isn’t the only option available. It may be worthwhile trading as a sole trader or a partnership. Whatever mechanism you choose, it is advisable to speak to a professional as there are legal and tax implications of each avenue;
- If you decide to set up a limited company then expert advice should be taken on how the company is structured. This is particularly pertinent when there are multiple shareholders. A company is formed by creating Articles of Association which set out the basic aims and restrictions on a company. Many companies decide to use the model articles widely available but these may not always be suitable. If there are multiple shareholders then it is imperative that you draft a Shareholders Agreement so that all parties are aware of their rights and obligations but further than this, a Shareholders Agreement will provide protection to each Shareholder. For instance a Shareholders Agreement will ordinarily prevent shareholders from setting up competing businesses or taking clients from a company, it will also deal with the sale or transfer of shares should any shareholder wish to sell.
- If you decide to trade as a Partnership then we strongly recommend drafting a Partnership Agreement. For reasons similar to a Shareholders Agreement, a Partnership Agreement will set out the relationship between the partners including any restrictions and dealing with matters such as drawings and expenditure.
- Failure to put in place a Shareholders Agreement or Partnership Agreement can result in Partners or Shareholders being exposed both financially and legally.
- Ensure that you have appropriate terms and conditions of business. If your business deals with consumers then there are stringent laws (called legislation) which place significant obligations on businesses when dealing with consumers including obligations on a Consumers right to cancel. If your business will deal with other businesses then a company has greater freedom to draft their terms and conditions but it may be important to consider terms such as limitations of liability but most importantly any terms and conditions need to deal with the payment terms and any penalties which arise from late payment.
- If you are taking on employees, it is a legal obligation to provide an Employment Contract under the Employment Rights Act 1996. Failure to do so can result in employees seeking damages. You also ought to provide a staff handbook to incorporate the requisite policies and procedures which an employee is expected to abide by.
- If you are taking commercial premises, it is important that you take expert advice on the terms of the lease. A commercial lease can include wide ranging obligations on a tenant which can be extremely costly. This is clearly the last thing you will need as a new business.
- Do you understand your obligations under Health & Safety legislation? This is particularly relevant where you have employees but can also apply where you are working as a contractor at another parties site.
Understanding your legal obligations is paramount to having a successful business. There can be a perception that seeking legal advice is expensive however many firms will offer a free initial consultation to discuss some of the above issues.
A final thought
When starting a business, be obsessed with perfection and control. Don’t try to set up a business on the cheap … invest and do it right from the start and your business will reflect your approach.
Don’t be afraid to ask for advice as it will be that advice and assistance which will help your business strive. Businesses should be surrounded by a core group of professionals working collaboratively for the good of the business. This circle may include one or more of the following professionals:
- Accountant and Tax Advisor
- Financial Advisor
- Business Coach / Mentor
As your business expands you may also need to develop relationships with marketing consultants/agencies, recruitment companies, IT Support and Supply Distributors as appropriate to your business.
If you would like to be introduced to trusted, skilled and reliable suppliers and professionals, please simply get in touch and we will be more than happy to help you.
When starting a business, ensure your approach is measured, skilled and based on sound strategy. Lacking a vision or goal, not considering a strategy and not having the financial, legal and business practices in place will jeopardise your success.