5 things to consider before starting a business
Got a great business idea? Here are some top tips to keep in mind when first setting up your business, from our accounting partner, Chris Gay.
1. Business Plan
Plan backwards, remain transparent and market your product or service from the get-go.
Planning from the exit or end is simple and effective. You shouldn’t overlook an exit strategy, whether you expect that to be three or thirty years from now. Working backwards ensures you have visionary, methodical steps year on year, motivating yourself and eventually your employees.
Remain transparent about your goals with your team, and present them in bite-sized chunks – not everyone will be able to swallow a plan in one feeding.
Prepare a marketing strategy (and make sure that this is incorporated into cashflow forecasting). Never underestimate the power of advertising, marketing, research & development (or the costs that they incur). Consumers and other businesses need to know you are around and what you have to offer, but this of course comes at an expense.
Quick Tip: Learn how to create a go-to-market strategy in this handy guide.
2. Business Partner
Choose well, and always create a shareholders agreement.
Choosing who to go into business with can be difficult, especially if you’re both unclear on the exit strategy.
At the tender age of nineteen, my business partner and I started a health and nutrition business selling various protein supplements, gym clothing and other accessories. As the business grew, our difference in growth strategy became apparent. I wanted to use the profits to begin wholesale distribution, implement logistics and create our own branded goods. My business partner had other ideas. You guessed it – after many disputes, we parted ways.
My own experience taught me the importance of a shareholders agreement. These protect the shareholders’ investment in the company and ensure that everything is run fairly. An agreement might seem formal, especially if you’re going into business with people you know.
But we all have fall outs or disputes from time to time, even with the people we are closest to – without the agreement, a partner fall-out could leave you with no ownership and little say in the business, as well as a soured relationship. A well-drafted shareholders agreement is definitely something you should have in place and will protect you against all eventualities.
If you need it, get it!
We understand. Thinking about all the things that might go wrong isn’t the most exciting way to kick start your business, but nevertheless it shouldn’t be overlooked. There are an abundance of options in terms of insurance, and from our experience these are the three most common.
- Employers’ Liability – covers you if an employee sustains injury / disease in the course of their role
- Public liability – covers you against accidental injury inflicted on others (other than employees, such as customers or the general public) or their property.
- Professional Indemnity – covers you if you are offering advice, service or handle customer information. For example, clients can claim if you make a mistake in the advice you give to them, the designs or calculations you make for them, or infringe on their legal rights in any way.
You may also wish to consider shareholders insurance options in the unfortunate instance of something unfortunate were to happen to your business partner.
4. Product pricing
Cheap does not necessarily mean cheerful!
As a start-up, it can be tempting to launch with heavily discounted products or services to attract as many customers as possible. However, low margins may leave you with little profit to invest back into the business, eventually contributing to slow growth. An important question to ask yourself is: “Am I planning on continuing to sell this product or service at this rate?” If the answer is no, an inevitable increase in pricing could result in a decrease in customer loyalty at a later date – not great news for your new business.
Instead, it may be better to keep your finger on the pulse of the market, determine your product or service’s market value, and stick to it as much as possible.
Failure – don’t fear it, embrace it!
Einstein said that “failure is success in progress”. Where there is no failure, there are no lessons.
Failure will show you which areas of your business need tweaking, and can even stimulate growth in the long run. It will develop your business knowledge and make you a more resilient entrepreneur.
There is no guarantee that your business will succeed, nor a guarantee that you will have a normal salary, sleeping pattern, or fixed business hours. However, we are certain that regardless of the outcome, you will learn and grow from your entrepreneurial journey and we wish your business every success.
Picture credit: unsplash.com