Congratulations! You’re going to make the leap and go it alone. But now you have your great idea ready, it’s time to decide how to shape your start-up.
Here are 10 questions you will need to think about…
- What kind of business entity should I be?
Most entrepreneurs have a straight choice when they start up – becoming a sole trader or starting a limited company.
There are many pros and cons to both, but start by asking yourself what is the purpose of your business? Are you aiming for turnovers akin to the FTSE 500, or a lifestyle business that allows you to pursue other interests? How many hours do you want to work, when and with whom?
If you’re looking at a smaller business, the sole trader model keeps running costs and admin lower. The business’s money is your money and you can use your personal bank account. However, you’re personally responsible for any losses and in the event of any legal disputes you will be sued personally unless you have suitable insurance. Also, some customers may be less willing to work with you if you are not a limited company.
If you expect to generate a larger turnover then consider creating a limited company. As a legally separate entity from the people who run it, a ltd business will have separate finances from your personal ones, so there is added protection if things go wrong. Yes there’s extra admin – you have to register your business name and details at Companies House, and complete accounts and tax returns, but advantages include being able to dish out dividends and the ability to issue shares so you can sell stakes to raise money. Plus, registering your business’s name at Companies House ensures no-one else can nab it. It also gives your operation more credibility.
There is a short overview of your options here… BUT if you want to run a business with two or more members, you’ll also want to consider a limited liability partnership. Decisions, decisions…
- Should I get an accountant?
Ask yourself this: where is your time and energy best spent? If you’re super-organised, great with figures and have the will to stay on top of ever-changing legislation, go it alone.
However, if you’d rather be out selling, want the reassurance of impartial outside advice, or you hate spreadsheets, a good accountant will be more than worth the money you pay them.
- Where should I work?
Café-hopping is a familiar routine for new-starters but the cost of lattés soon adds up. Battling with unreliable WiFi, and enduring the isolation and monotony of working alone or from your living room every day can also be a drag.
As you develop, you might choose to use a shared workspace. It can be more cost effective, as well as a great place to socialise and network. Coworking also allows you to better structure your workday too, and offers a professional environment to bring clients.
Work.Life’s membership options takes into account different stages of a business’s development. Our Flex membership is pay-as-you-go, Local offers hot-desking for a monthly fee, while Resident users rent permanent office space – ideal for SMEs.
Until the end of September, friends of current members have a week’s free use of any Work.Life space – an ideal chance to see if shared working is right for you! Sign up here if you’ve got a pal who resides at Work.Life.
- Should I get business insurance?
Almost certainly. Always make sure you are legally compliant. For example, accountants, architects, financial advisors, and some healthcare professions have to have professional indemnity insurance. And if vehicles are used for your business, you should have commercial motor insurance.
Exactly what insurance you need (e.g. commercial property, cyber, public liability) largely depends on your trade. Is it high-risk, is health and safety an issue, do you have high value assets, where is your place of operation, where do you store stock? Plus, as soon as you employ someone you must get employers’ liability insurance – it will help you pay compensation if staff become ill or injured from the work they do for you.
- What online presence should I have?
Websites and social media are useful tools in communicating about what you do. But having an all-singing, all-dancing website is not always necessary. What are you going to have on your site? Do you have time to maintain and update the site and your social media channels, and to provide regular, engaging content to inspire visitors and conversations?
Undecided? There are several free open-source website template sites you can try before committing funds to designers and domain names. Or perhaps just create a succinct landing page to secure a presence online.
- Should I pay to promote myself?
This depends on your type of business. If you’re lucky, work through word of mouth will be your most cost-effective promotion. Free and popular social media channels, email approaches or cold calls can also bring in jobs without financial outlay.
An alternate way that could help build your network, knowledge and know-how is joining a relevant member organisation. They often run regular socials, pitching, workshops and learning events that are a great way to get yourself noticed. But these organisations can be expensive – try to get along for a taster event before paying for an annual subscription.
- Should I seek a partner?
Again, this goes back to question one and your business plan… you have got a business plan, right?
If you’re going down the partner route, ensure you know why you want them on board. How will they grow, enhance or complement what you’re trying to achieve? Are you prepared to potentially give up a portion of your business, have others chip in with advice and opinions that might challenge your own, and be open to consider their take on your business’s direction? And will your relationship withstand the strains of the start-up life – families and friendships can easily be torn apart.
Don’t forget the benefits mentors can bring too. Maybe they can provide the skills you require, without the need for a formal partnership.
- How should I charge?
Your mode of charging – hourly, flat fee, mark-up etc – will depend on your product or service offering. But first stop is that old business plan again – what is your goal for an annual salary, what overheads must you cover, and what’s your desired profit margin?
Check out what similar businesses and competitors in your area are charging for what level of service or product, and also gauge market conditions. Consider those along with your experience and skills or overheads and value to set a basic rate.
Whatever you do, always review prices regularly, and don’t undercharge. It’s a sin that many start-ups are guilty of.
- Which business bank account should I get?
Most banks usually offer the first year to 18 months without fees for start-up ltd companies. But after that it’s unavoidable having to pay charges for having a business account and related services.
However, don’t forget the big names aren’t the only options and it’s worth shopping around the ‘challenger’ banks to see what best suits your operation and business needs.
Business Banking Insight is a useful resource for SMEs in association with HM Treasury, British Chambers of Commerce and the FSB. It allows you to compare business banking products with its impartial ratings service.
- Do I need a business plan?
Yes. Even if you don’t need investors, this will be a great document that will keep you laser-focused on your strategy.
Good luck with developing your business. And if in doubt, why not chew the fat about building your empire with a fellow Work.Life member at one of our events?
Find out more here.
Please not that the information on this post is general guidance and is not legal advice.