6 Top tips for a stress-free start-up

By Rosie Earl
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If you’re thinking about starting up a business, here’s what you need to know to go in prepared.

If working a 9-5 isn’t for you, you might be looking for something a little more ‘you’. As of 2016, 4.7 million people in the UK had decided to register as self-employed, and take their career into their own hands.

Online or front line?

Every great business starts with an idea. The first decision is whether your business will be online or a physical organisation. An online business will have cheaper running costs, as you can operate it out of a room in your home, but is not an ideal option if you’re going to employ a staff of 50 people. If you know where you want to be, for the first 12 months at least, you can use that as a jumping off point when you come to work out your finances.

Online Business

Pros:

Less up front costs

No premises to manage

Able to work from home or on the move

Customer access round the clock

 

Cons:

Customers can’t see product in real life

Staff have to be remote rather than present ‘at the office’

Can blur the lines between home and work

No face time between customers and business

 

Physical organisation

Pros:

Business can build up a relationship with customers

Customer can see or try out what they’re buying

Room to employ staff

Clear definition between home and work

 

Cons:

Need to comply with workplace regulations

More capital required to start up

Unnecessary in some circumstances (such as a one person copywriting service)

More costly to upkeep, due to heating, lighting, building rates for example

Add up the initial costs...

Here’s the tough love first: very few businesses start making money in the first few years. Ideally, you should work out how much you’ll need to stay afloat even if you don’t make a penny in the first 12 months.

Think about the cost of premises, your product, any vehicle costs, any uniforms and decoration. You should also keep in mind the cost of any specialist equipment, for example industrial ovens, and the cost of maintaining them if things go wrong. If you’re buying anything new, it’s worth checking if they have a warranty, as this will take some of the stress out of your first year if anything breaks down.

...And the running costs

As well as the one off costs, you also need to work out the running costs on a monthly basis. This could include wages, pension contributions, rates, rent, fuel, insurance, phone and internet. Most mobile phone providers offer deals to business customers and if you speak to them directly you can often negotiate something even cheaper.

 

Plan for the worst case scenario

Budgeting is essential when starting a business. Just like when you move house, it can be easy to go overboard and spend, spend, spend. After you’ve calculated the start-up requirements, 12 months of costs and overheads, compare this to the money you have at your disposal. It is important to think of the worst case scenario with finance, rather than underestimating. It’s better to end your first year with some budget left over, than getting nine months in and running out.


For example, a study by online business service Geniac found that the majority of  entrepreneurs underestimate the fundamental cost of admin by an average of £2,525. This can have a catastrophic effect, including 64% of small businesses saying that they’d been hit by unexpected costs in their first year. In many cases, this can be so detrimental, it leads to the end of the business, so having an emergency fund is essential.

Create a savings account specifically for business emergencies and put away as much as you can afford each month. Although this might mean you have to pinch the pennies in your first couple of year, you’ll feel better for it if an emergency occurs.

If you’re seeking finance from elsewhere, such as a business loan, you could factor in an emergency pot of money before you apply. You can do this by working out each of your running costs and adding an extra 5% on. This money can then go straight into your business savings account and only used in an emergency.

Invest in an accountant

Consulting an accountant can be invaluable when you’re starting up. They are experienced in the various funding that is available and will be able to offer advice on how to structure your business. They will also be able to offer support when it comes to filing your tax returns. This can be a positive investment up front, as you will get expert advice and peace of mind that you are on the right track, taking some of the stress out of your first few months or years.

 

Pros:

They are experts and can offer advice about funding and legal requirements

They can save you time. They do accounts all the time, so they’ll be much quicker than a novice

They can take the headache out of tax returns. They will make sure you don’t file late, avoiding fines, and they will be able to advise on the most efficient way to run the company in terms of tax (legally, of course!)

 

Cons:

Can be costly. Do your research to find an accredited local accountant within your budget

If you are running a very small business (for example, less than £5,000 expected turnover) this may be unnecessary

Legal responsibility still lies with you, and if your accountant makes a mistake, or fails to file your return, you are liable for any penalties

Set your goals

Think about what you want to achieve as a business and how you will measure the success. Then look at how your costs balance against achieving the objectives. The costs need to weigh up positively against your success. For example, if you’re setting up a shop that trades online, it makes sense that spending on super fast internet will help you to progress. In the same situation, spending a lot of money on an office that no customers will visit is illogical, and will cost you money unnecessarily.

Break down your long term business goals into small, achievable chunks with specific check points to measure your progress against. Do you want to have a million customers on your database? Set goals as to when you expect to reach 1,000 customers, 5,000 customers, 10,000 customers to keep an eye on your progress and give you a sense of achievement when you hit each mark.

The road is going to be a tough one (again, like dieting), so put yourself in the frame of mind for hard work. Make sure you have a good support network to help if the computers break down or you can’t think of a great headline for your first press release. Your network will help to motivate you, giving you the feedback and advice you need to keep on pushing to your overall goals.

And keep positive. Looking on the bright side will help you to take on even the toughest challenge!

Top takeaway

Keep an eye on your costs from day one. Make a budget and stick to it, and look at where you can reduce running costs as you grow your business.

Invest in an accountant, and ensure your tax information is up to date. You can do most of this online.

Set your business goals, and spend your money in areas that will progress your company rather than unnecessary expenses.

 

Author bio: Rosie is a massive geek who loves anything Hello Kitty or penguin related. She writes every day and wants to be Caitlin Moran when she grows up. If she was an animal, she would be a baby dragon (with a solid background in finance). The Sorting Hat would have put her in Hufflepuff, and she is cool with that.

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