SO YOU WANT TO START A BUSINESS? THE LOW-DOWN ON START-UPS

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THE LOW-DOWN ON START-UPS

Dreaming up the idea for a new business – or deciding the time is right to buy an existing business – is an exciting time. It can also be a lot of work; as most potential new business owners soon find out.

Almost half of new business start-ups survive the first four years of operation. This really highlights how critical it is to carefully research, analyse and plan all aspects of your proposed venture before you invest a lot of time and money into launching a new business.

Whether you’re considering a brand new start-up, getting into a franchise or buying an existing business, many of the same considerations apply.

In this ebook we discuss what to think about before setting up or buying a business; and how to assess the feasibility of your idea. We’ll also touch on how to choose a business structure and what systems you might need.

By developing plans, and identifying gaps and requirements early on, you’ll be giving your new venture the best chance to succeed.

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3

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5

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INTRODUCTION

GETTING PERSONAL

WILL IT WORK?

BUSINESS PLAN

STRUCTURE AND SYSTEMS

GETTING HELP

Now is the time to channel all your excitement, motivation and desire for independence into setting things up right.

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1McCrindle Research, 2013. Referenced in Rose Powell, June 2013 ‘Research reveals trends, survival rate and the future for Australian small businesses’, Available at www.smartcompany.com.au.

STARTING A BUSINESS: A PERSONAL CHOICE

There are some great advantages to running your own business. In addition to the potential financial rewards, the flexibility of being your own boss, being able to pursue your own goals and do something you really enjoy are serious draw cards.

ARE YOU READY TO START A NEW BUSINESS?

uAre you willing to sacrifice your personal income and invest any profits back into the business?

u What about giving up time with family and friends for the benefit of your business?

u How long are you willing to do this for?

u Have you got the required skills and experience specific to your business sector; or appropriate business or management experience?

u Are these skills you can realistically learn prior to your business launch?

There’s no ‘correct’ answer to any of these questions. It’s simply a matter of being aware of the potential reality of starting your own business.

Ask yourself: ‘What’s important to me? Would I be better going to work for someone else for a wage or salary?’

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INVEST IN YOUR RESEARCH AND PLANNING

Once you’ve established you’re ready, it’s time to invest in your research and planning.

It is crucial to look closely at the commercial feasibility of your new business venture and assess the potential of your business concept, products or services. This is a very broad area but generally includes conducting market research, testing your idea and working out how much work needs to go into setting up the business before you start to see a return.

One of the first tasks is to define your target market. You’ll need to have a thorough understanding of your target customers’ needs, behaviours, purchasing patterns, price expectations and how well your business, product or service aligns with this. This research will also help you work out the potential size of the market.

THE BOTTOM LINE

Often, the biggest factor determining the feasibility of a new business is its financial viability. You can start by asking questions like:

u Have you made a list of the expected start-up costs?

u What is a realistic pricing structure for your goods/services?

u Have you developed sales forecasts and are these realistic and achievable?

u At what point is the business expected to achieve a profit?

Your accountant or business advisor can help you work out if the numbers add up using various financial tools (e.g. cashflow and sales forecasts, breakeven and sensitivity analysis). They can also help you identify and access potential sources of funding for your new business, like grant funding or government incentives.

Sometimes your idea might need some fine-tuning to make it viable. Remember, it’s better to be realistic. If the numbers don’t add up, be prepared to start again.

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DO I REALLY NEED A BUSINESS PLAN?

Once you’ve determined that your business is viable, the next step is to develop a business plan. This will help you get clear about your business direction, target market and financial commitment.

A useful tool for you, a comprehensive business plan and set of financial forecasts is also usually required by financial institutions and/or grant funding bodies if you need to apply for funding.

WHAT SHOULD YOU INCLUDE?

The business plan should address all key areas of the business – every aspect will have an impact on whether you can achieve your goals for the future.

It should be an accurate, well researched and clearly presented document that will withstand due diligence. Ask for help if you’re not sure how to prepare one. Your accountant or business adviser will be able to advise you on what should go in and how to put it together.

uTarget audience

u Competitior analysis

u Industry analysis

u Cost and feasibility

uSWOT analysis

u Risk management

u Technology

u Financial forecasts

uVision and goals

u Skills and capacity

u Due diligence

u Marketing plan

uLegal requirements

u Licences and permits

u HR and staffing

u Systems and operations

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GETTING READY FOR BUSINESS

You’ll need to decide on an appropriate business structure for your new venture.

The most common types of trading entities you might consider are sole trader, partnership, discretionary trust or company. You might also consider a combination of these.

Each comes with its own implications regarding income tax, capital gains tax and accounting in general – so it’s important to consult your accountant regarding the most appropriate structure for your individual circumstances.

Sole trader

Partnership

Company

Disctretionary Trust

uBusiness profits treated as personal income

u Trading under own name or registered business name

uFlat rate of tax paid on the company’s profits

u Net amount reinvested in company or divided among shareholders

uProfits distributed to beneficiaries who then pay tax on this amount

uProfits distributed to partners based on their % share

u Partnership agreement is recommended to protect all interests

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Before your business is up and running, you’ll also need to choose a bookkeeping system.

A cloud accounting system like Xero is by far the easiest way to keep track of your finances. It uses internet banking level security to store your data – with online backups to ensure your data is always safe. Some of the other benefits include:

u Access all your financials from smartphone, tablet and desktop

u Save time and effort with less data entry

u Upload and store invoices and receipts electronically – less paper

u Prepare invoices and authorise payments from anywhere

u Record timesheets, process payroll and pay staff remotely.

MANAGEMENT REPORTING Real time management

reporting

ADD–ONS Streamline business

processes

COLLABORATIVE Look at the same

information as your accountants

SECUREInternet banking level

security

EASY TO ACCESS Via smartphone, tablet,

laptop or desktop

UP-TO-DATE Stay compliant with the

latest tax rates

SAVES TIME Automated links to bank

accounts and credit cards

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BDODrive

Our approach is built on flexibility. We give you choice around which services you need based on what’s right for your business and your stage of growth. BDODrive services

INFORMATON

• Bookkeeping • Payroll • Cloud accounting• Financial review • Tax and compliance

INTELLIGENCE

• Management reporting

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BDODriveA better way of doing businessGet in touch today to see where BDODrive could take you

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MARK SYKES Partner +44(0)161 833 8307 mark.sykes@bdo.co.uk