We take a look at what to do, and what to avoid, when starting-up a new business.
Around 400,000 businesses start up every year. It is estimated that around one third of these cease trading within the first three years. But new business owners do not set out to fail. So what steps can you take to ensure you don’t fall into the failure category?
Starting up a new business can seem like a minefield. Should you trade as a sole trader or as a partnership or company? Start-up costs also require funding, which has to be found and secured. Then there are administrative responsibilities such as bookkeeping and invoice processing. When you register your new business with HM Revenue & Customs you must also decide if you need to register for VAT and PAYE (Pay As You Earn). The VAT registration threshold is currently £79,000 and there are a range of schemes which may be appropriate for your new business. As for PAYE, you may have heard about the new system that requires employers to report payments to staff in real time. This has added another layer of responsibility for business owners.
But, when you start up, what you really want to do is take your entrepreneurial talents into the marketplace, make a profit and enjoy your new found freedom.
Some may have thought it was that easy and maybe many of them are the ones that do not make it past the three year mile post. Here are some important tips to help your start-up get off, and stay off, the ground.
Consider the franchise model
While there is an upfront cost when buying into a franchise, you have the advantage of buying into the expertise of the franchisor. You will need to research which franchises might be appropriate for you but there are always a wide range available. Franchisors offer varying services and so research, particularly talking to those who are experienced in franchising, is important. Maybe you could arrange to talk with those who are operating a franchise in which you have an interest.
There are more than 900 franchises available in the UK, which together turn over more than £13 billion and employ more than half a million people. The British Franchise Association reports that 91 per cent of franchises are profitable, which means that nine per cent are not. Careful planning is essential as your investment is at risk if the business fails.
Business structure is important
There are advantages and disadvantages for each trading structure – be it a limited company or an unincorporated business – with respect to control, perception, support and costs.
The choice of business structure can also be relevant in how you extract money from the business. A limited company is a useful tax shelter but only until you take the money out for personal use. There are different ways of doing this, for example with salaries, dividends, loans or rent.