The start-up stage of a business is a time when you need to pay close attention to your finances to ensure you are in the best position possible for long term success. The media regularly informs us that many people go out of business within the first couple of years, mainly because they don't have adequate cash flow, and you don't want to find yourself amongst these statistics.
What steps can you take then to ensure your business foundations are sound and you don't fall prey to problems in the early days?
Establish the Right Legal Entity
There are numerous options when it comes to setting up your business. You canestablish yourself as a sole trader
, enter a partnership or found a limited company. Each option comes with its own advantages and set of responsibilities. Your own circumstances and the personal financial risk you are willing to expose yourself to, will all play a part in your decision.
Protect Your Data
Whatever type of business you run you will quickly accrue a substantial amount of data in both paper and digital formats. This will include personal and financial details for you, any employees and for your clients and vendors. It is important therefore to store this data securely. The safest option is to use the services of adocument management company
so you don't have to worry about repercussions should you experience a break-in, fire or flood.
You should also protect your online data in the following ways: ensure you have virus protection software in place; use strong passwords which you update frequently; and back up your data daily to the cloud. We live in a time of frequent computer hacking attempts and therefore you don't want to find you have breached your customer's confidentiality because someone has installed malware on your network or enticed you to disclose sensitive data through phishing.
Keep Accurate Records
Every business venture, including sole traders, will need to submit a tax return to HMRC on a yearly basis. If you are a limited company you will also need to submit a full set of accounts to Companies House annually. This means you will want to keep accurate records from the start. Set up a dedicated bank account for your business and record every amount you pay or receive, including petty cash. You will also need the back up of invoices and receipts when you submit your tax return.
To make sure you aren't paying too little or too much tax it is wise to get expert advice early in the life of your business. This can save you substantial amounts of money going forward and will ensure you don't fall foul of any tax regulations.
Don't Over Extend or Stifle Your Business
Once you have set up your business you naturally need to keep your expenses as low as possible while you are becoming established. This means thinking carefully about any purchases or investments including: property; equipment; and staff. However, your frugality at this stage should not be so extreme it stifles your growth.
Investment should be made in a website so that you can showcase your products and services to the world. You will also need to network and market quite aggressively to bring in new business. While some marketing methods, such as social media are free, they still take a time investment. If you are a local business you should get active in the local community to acquire new leads and if you sell online you need to look to paid forms of advertising.
Cutting back on expenses is a good thing within reason, but your revenue needs to grow quickly if you are to survive in business. Getting customers through the door or winning new billable clients is what will ultimately protect you from financial vulnerability in the early months and years of your enterprise.