Anyone who has the drive to launch a good idea into a new business needs to be congratulated. At LawBite, we advise SMEs across all industries and love to celebrate their success.
There is no doubt that your first 12 months in business will be full of ups and downs. One of the biggest challenges will be dealing with situations that you have no previous experience in, for example, accounting, managing cash flow, sales and marketing and maybe dealing with customer complaints. It is for this reason that running your own business will build up new skills like no other experience.
To ensure you enjoy the first year running your own venture, here are our top tips for getting things right.
Why not take our Legal Health Check for Startups (it’s free!) - get started.
Have a solid, exciting, and realistic business plan
A good business plan is a critical starting point. Not only will creating one help you clarify where you want your business to be in the next few years, it will also compel you to think about and write down what you need to do to achieve those targets.
A solid business plan does not have to be the length and breadth of War and Peace, however, it should cover the following sections:
- Company description: what you are trying to achieve and/or solve
- Market analysis: who else is in the market and how to they operate
- Management and company structure: the best organisation for your firm
- Service or product information: what are the features and benefits
- Marketing and sales strategy: how to make people aware and sell
- Funding information: do you need new capital, if so, from where
- Financial projections: detail your revenues, costs and profit each month
You can find a wealth of information on how to write a business plan plus templates at GOV.UK business plan hub.
Choosing the right business structure is key
The legal structure you choose for your venture will be based on several things including whether you are launching the business on your own or with friends/family, and how big you ultimately want your business to be.
There are four main types of business structures in the UK:
- Sole trader
- Limited liability partnership
- Limited liability company
If you envisage having a lifestyle business without employees (and there is nothing wrong with wanting to stay small) the sole trader model may be the best option. It is exceptionally easy to set up, all you need to do is inform HMRC and fill out a self-assessment form every year. You will pay tax on your profits. If, however, you are launching a startup and plan to rapidly scale up, a limited liability partnership or company may be a better business structure as it limits the liability of you and any fellow owners.
For more information on choosing the right structure for your venture, read our article on structuring your new business.
Invest in a great accounting system
Having well organised finances will mitigate the risks associated with common first year business mistakes, for example, not having enough money to pay your taxes or running out of cash. Furthermore, if you are looking to attract investment or apply for a bank loan, you will need to provide well organised accounts. And finally, managing your business finances effectively will go a long way to helping you feel confident in your new role as a small business owner.
There are several excellent online accounting packages available, including Crunch and QuickBooks. These make it easy to send invoices and late payment reminders as well as balance your expenditure and income.
Get all the legal aspects of owning a business in order
It is imperative to budget for legal expenses if you want to ensure your interests are protected. Plan to invest in the following:
- Terms & Conditions, data privacy compliance & commercial contracts
- Employing people
- Intellectual property protection: patents, trademarks or design rights
- Commercial property lease advice
- Insurances and licences
You will also need to consider the legal aspects of choosing your business name, for example, making sure it is available for you to use.
Understand business funding
To grow your business you are going to need funds. The stages of funding a business go through are given specific names. A startup will typically go through the following fundraising exercises before considering series A, B, and C funding:
- Pre-seed funding – this is used to launch your brilliant idea for a business into reality. Pre-seed funding is not technically a funding round at all because most of the money will come from you and the other founders and supportive family and friends
- Seed funding – like planting a tree, seed funding is the first funding used to grow an already existing operation. It is used to finance product development, market research, and hire talent. Although friends and family often act as seed funders, the most common investors in this space are angel investors who will expect a stake in your company in exchange for their capital.
Your business may never go any further than the seed funding stage, however, if you do require further investment to scale up, you may need to seek Series A funding. A detailed business plan and a pitch deck will be required to present to potential investors. The pitch deck is essentially an overview of your business plan and needs to be compelling enough to encourage prospective investors to read the more comprehensive document.
Get legal assistance from LawBite
Your first year in business will be one of the most exhilarating times of your life. As long as you plan properly and have the right professional support, your startup will not only survive but thrive.
Why not take our Legal Health Check for Start-Ups (it’s free!) - get started.
You can also speak to one of our commercial law solicitors about any of the points mentioned in this article. To book a free 15-minute consultation, just click below 'Get started' below or call us on 020 3808 8314.