How to decide when to start your business
While we always encourage people to get stuck into their businesses, there are some technicalities to consider before your first definitive step. Most importantly, investing in starting a business before you've gone through all the planning and research necessary can see you waste your life savings on an idea that simply isn't ready yet.
The sections below will give you an idea of what you need to have worked through before you make that final decision.
- You absolutely must do market research before you think about properly starting a business.
- Unless you know there's a market for your business and you have clear USPs which will make customers buy from you rather than the competition, you don't have a business.
- You should also be putting lots of phone calls in to suppliers to figure out how they could manufacture or supply your products and for what costs. This is imperative so you can start filling in the detail or your business and see how realistic it is and what your costs are going to be like.
- Similarly, you need to be talking to as many people who fall within your target market as possible. That doesn't just mean friends and family - you need thorough investigation.
- Look at our guides on *market research* for more advice.
- Bear in mind that thorough research takes months, sometimes years.
- Without a doubt, the most vital ingredient of starting a business successfully is money. Because once you've got going, your money will disappear like there's no tomorrow - and it can take years for any business to turn a profit.
- You need to have costed out how much you're going to need extremely carefully - you can look at our *guides* elsewhere to learn more about this - and how exactly how long you need it to last for.
- As a general idea, you'll need enough money to sustain you and your business from anything from six months to two years before expecting a profit - possibly longer.
- Your startup will always cost more than you think it will - lots more. As a rule of thumb, double your costs and half the income you expect in your predictions. It may seem harsh, but if you underestimate the amount of money you have available the worst that can happen is you're left with more profit. Overestimate, and you risk bankruptcy.
- Absolutely do not start your business until you have the money in place that you need.
- Just as an introduction to the standard costs you might be considering at this stage, remember: equipment, stationary, staff costs, utility and phone bills, supplies, materials, marketing budget, advertising budget, living costs, office/premises running costs, manufacturing costs, transport costs, lost profit on giving away free samples and demos.
- Make sure you've also accounted for the cost of launching your business: any plans for a launch party, PR, promotional material, expenses for taking target clients for lunch and other costs involved in this process.
- Smarta Business Builder provides you with all the tools you need to track and keep control of your finances.
- There are some core skills that you just can't do without when you're running a business.
- A good understanding of the industry you're entering is essential.
Market research will help you establish this if you're unfamiliar with it.
- You should also speak to as many people within the industry as possible - ideally other business owners.
Attend industry events and read relevant trade mags.
- You also need a grasp of finance and accounting. If you can't get numbers, running your own business could prove way too much of an uphill struggle. You don't need to be an accountant - but some basic knowledge is invaluable.
- Ensure you understand balance sheets, profit and loss sheets, and basic bookkeeping before you start up.
- You also absolutely have to be able to create, understand and control a business model and understand how it'll work and what factors will affect it. A business idea is nothing unless it's monetised!
- To begin with, you'll probably be the one drawing these up - but even if you have an accountant who does it all for you, you need to understand them.
- Luckily, computer spreadsheets have made all of these a lot easier and quicker.
- Try out an evening course on basic bookkeeping and accounting to boost your confidence and knowledge.
- Communication skills are a huge help. Business is nothing without relationships.
- Basic understanding of sales and marketing.
- The ability to think up good sales and publicity ideas can be the make or break of a business.
- Read books on the subject or take a short course if you're unsteady in these areas.
- Read our guides on sales and marketing.
- Leadership ability. Even if you're not planning on taking on staff any time soon, you may do in the future.
- If you're business is at all seasonally orientated think about how you can time your launch with the part of the year people are most likely to be engaged with what it does.
- Launching a florist in the run-up to Valentines, for example, could allow you to offer special startup discount rates, exposing you to the maximum numbers of customers drawn to your offer at the busiest time of the year, so getting as many people as possible to discover your new business.
The big picture
- You might be itching to get started, but you need to be sure this is actually the right time in your life and career to do it.
- If things went wrong, would you be potentially disrupting your career so much that you wouldn't have much of one to go back to?
- Sometimes waiting a year or two to gain more experience in your current role affords you the security that if things did go wrong with your business, you'd be able to find a job pretty soon after.
- Are you going to want to start a family anytime soon? Starting a business takes up more time than you can possibly imagine, and you don't want to leave yourself in a situation where you're forced to make sacrifices you could have avoided by waiting.
- Similarly, if you have kids, think carefully if it might be better to wait until they're old enough to not need your full attention.
- If you're nearing university age and want to go, figure out whether you're going to have time to work on your business while you're there.
- If you're thinking of buying property anytime soon, figure out what your priorities are - if you're launching a business, it's likely to use up most of the savings you have.
Get stuck in
- Having said all that, there are some ways to test the water before you commit yourself.
- You should definitely be making preliminary phone calls to suppliers, potential stockists and potential clients at this stage.
- Registering a url costs very little but is well worth a couple of quid to protect the domain name you want.
- Having a website can also help your research your market and test when it's ready for you.
- You only have to register as self-employed or with Companies House when you start actively looking for work. That means you can basically get all aspects of your business in place before that point. And so you should - because it's only by doing that that you'll start getting as clear a picture as necessary to know how you're business will work - and if it will.
USP: unique sales proposition. Something that clearly differentiates your business or a product from competitors, that target customers should be drawn to rather than using a competitor's equivalent. Your USP can be anything from lower price to better delivery time to better colour and design - anything that your research has shown you your target customer would appreciate.
Business model: very simply, how your business makes money.
- Hot Courses is a search engine for short and longer courses
- MeetUp is a site that allows people to organise often industry-based events. Check it to find events for your sector
Smarta Business Builder
To help you on your business journey, we've created Smarta Business Builder, the complete online tools package for growing your business. Website Builder, Business Plans, Accounting Software, Legal Documents and Email - all in one place - from just £20 per month with no contract! Try it out today.