You’ve done the market research and established that your business idea has legs, so now it’s time to start thinking about the legal and financial aspects that will help you get off onto the best possible footing.
At Clayton & Brewill we’ve helped hundreds of people to get started in business, preparing business plans, taking care of the statutory requirements, liaising with the bank, and providing a sounding board for advice when needed.
Here, our C&B Comply team members highlight the key financial, legal, and regulatory points to consider before starting a new business.
The business plan
Not only is this a useful document to help keep you on track with your plans, but a business plan will also be essential if you need to raise finance for your business. From a financial perspective, the plan should cover sales forecasts, cash flow projections, and budgets. This can include considering what, for example, the future of retail could be regarding software and if you will want to use this new technology in the future.
The plan should explain how the business will operate, the products and services it will offer, and how you will reach potential customers. Moreover, the plan should talk in detail about what approaches you, as an entrepreneur, would like to take in order to make your business a success. For instance, would your business adopt Frederick Taylor’s Scientific Management theory to be successful? Would you think about creating a user-friendly website that can highlight the products or services that you provide? Could you consider creating a digital marketing strategy, perhaps with the help of firms similar to WebEnertia (you can get more help regarding the subject matter if you visit the aforementioned firm’s website) for building a huge customer base? However, for you to decide on all these, a market overview or analysis will also be needed; to identify the size of the opportunity for your business and its growth potential.
Your business plan will need to focus on the short, medium and longer term, so this is a good exercise in thinking ahead in terms of what you would like to achieve. If you are working with an accountant, they should be able to offer help with the business plan and provide you with a template to follow. Similarly, if you are a company who focuses on providing services as a software (SaaS), you have to be extra careful about your own cybersecurity as well. Your business plan for your own company should take this into consideration and get professional help (from the likes of https://www.fortinet.com/solutions/enterprise-midsize-business/network-access and similar agencies) for such an issue.
Selecting the structure
Sole trader, partnership, limited liability partnership or limited company: how you structure your business will affect your tax position and also the level of regulations that you need to comply with.
By way of example, a limited company structure can be more tax efficient as your business grows and, importantly, controls your exposure to financial risk as there is effectively a firewall between you and the company. On the downside, the administrative requirements with both Companies House and HMRC can take a bit of getting used to.
Setting up as a sole trader is a much simpler option and gives you greater flexibility but your liability is unlimited – meaning that if the business fails then your personal wealth and assets can be used to meet the business debt. Equally, when choosing a structure for your business you should consider your prospective clients and customers; would they be put off without the guarantee of a limited company or is it unlikely to concern them? Talk to us for advice on the best structure to suit both your current and future needs.
Finance requirements
Cash flow is vital for all businesses and never more so than in the early days when expenditure is likely to exceed income. Drawing on the cash flow projections in your business plan, you need to assess the level of finance you require, identify potential providers and submit your proposals / applications. As well as bank overdrafts and bank loans, there are various funding pots offering grants and loans – particularly in sectors that have been identified as “high growth.”
Once you’ve secured your finance, maintaining a good working relationship with your bank and other lenders is essential, and a regular flow of good quality management information can help with this.
Regulations and compliance
In the early days business owners can find themselves doing lots of the ‘doing’ as well as trying to get the business off the ground. Make a plan for how you will deal with the initial statutory procedures with Companies House and HMRC as well as the ongoing requirements.
Whilst it is important to minimise expenditure it may end up being more cost-effective to appoint an accountant or book keeper to help you keep on top of the company secretarial matters and avoid falling foul of your statutory duties.
VAT
For businesses that are trading ‘business to business’ your clients may expect you to be VAT registered, whereas those trading directly with consumers (the general public) may feel less pressure to be VAT registered. Either way, if you expect your turnover to exceed 83,000 in its first year then you will definitely need to register for VAT.
The flat rate VAT scheme is available for a company with sales of 150,000 per year or less. This can be a good and simple option for businesses that don’t have high levels of capital expenditure. Find out more about managing your VAT here.
People plans
If you’re planning to employ people there are certain things you need to consider, including contracts of employment, how and when you will pay salaries, what benefits you will offer and the working facilities you will provide.
The workplace pension rules (known as auto-enrolment) mean that all employers (including those with just one employee) will have to offer a company pension and contribute towards it. Your accountant should be able to offer you a cost-effective payroll service as well as advice on how to get ready for auto-enrolment.
Marketing
It is no secret that marketing plays a significant role in helping a business to thrive. Without effective marketing, getting your products and services to your target audience is a huge struggle. Put simply, marketing helps you to tell people about what your business can do, while also showing them what products and services you offer, and of course proving to others how terrific your company is and how you can help. Marketing even provides opportunities to educate people on topics related to your business, including how to solve common problems and which solutions are best.
In recent years, marketing has moved online. Digital marketing therefore involves using various channels, such as social media, websites, search engines, email campaigns, videos, podcasts, and blogs to promote your business. Similarly, SEO stands for search engine optimization and is the process of improving your site to increase its visibility when people search for products or services related to your business online. The better visibility your pages have in the search results, the more likely it is that you can attract attention and persuade prospective or existing customers to spend money on your products or services.
However, marketing is very much a management process. This means that it is important to continuously monitor and adapt your digital marketing efforts to ensure that they are working. For instance, one way to check that your SEO efforts are having an impact is by conducting an SEO audit before and after a digital campaign. If you would like more information about SEO audits, you can find a useful guide here: https://victoriousseo.com/services/seo-audit/. Above all, finding the right digital marketing tools and strategies for your business might take some time, but the results will speak for themselves.
Running your own business can be hugely rewarding as well as exhausting, daunting and, from time to time, downright scary. By spending time at the outset thinking through the financial and regulatory aspects you can give yourself the freedom to focus on the branding, sales and marketing that will really help you to make your business fly.
For help with your business idea, contact the team at Nottingham accountants Clayton & Brewill for friendly, confidential and no strings advice. Call us on 0115 950 3044, or click here to email us.
