Not only is this a useful document to help keep you on track with your plans, a business plan will be essential if you need to raise finance for your business. From a financial perspective the plan should cover sales forecasts, cashflow projections, and budgets.
The plan should explain how the business will operate, the products and services it will offer and how you will reach potential customers. A market overview or analysis will also be needed; identifying the size of opportunity for your business and 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.
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.
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.
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.
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.
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.