I hate my boss!!!!

Ever felt frustrated with your boss. You are not alone. According to Companies House, 801,006 businesses were incorporated in the UK in 2023, an increase of 6.4% on 2022 *. Many individuals share the desire to be their own boss, manage their work-life balance, and pursue their dreams.

Before you print your new business cards there are many considerations that should be made to give you every chance of success. Here, in the first of three articles, focus is on the start-up phase. Further articles will cover the growth and sale.

Start up

Running a business is challenging. It involves long hours, managing cashflow and addressing numerous employee related issues.

Running your own business is not suitable for everyone. If you prefer set hours and the freedom to leave work behind until your next shift, being the boss may not be the right choice for you.

If you are enthusiastic about taking on the role of a leader and handling all tasks and responsibilities at any given time, and you are willing to give up your leisure time without expecting any compensation other than the fulfillment of the job, then you might be prepared for this opportunity!

Prior to quitting your present job, it is essential to take various factors into account. As Benjamin Franklin once famously stated, "By failing to prepare, you are preparing to fail," which holds true especially in the business world. It is advisable to write down your thoughts in an organized manner. These notes will serve as your business plan, allowing you to revisit and refine it over the weeks, months, and years ahead to maintain your focus.

The Start up phase.

·       Identify your opportunity – What is it you are going to do?

Identifying your strengths is a crucial first step when considering starting a business. Venturing into an unfamiliar sector or market significantly reduces the likelihood of success. The business world is rife with challenges and risks, and entrusting your funds to others without understanding the landscape can lead to minimal returns. Therefore, it is imperative to make well-informed decisions right from the start.

Select a field that aligns with your expertise, interests, and strengths. Since running your own business will consume a significant portion of your time, ensuring that you enjoy what you will be doing. Just imagine the difficulty of working tirelessly for hours, days, or even months without pay if you find yourself hating your new job!

·       Consider your relationship with risk

Business involves risks. Some decisions will be easy, while others will be more challenging. You will make both correct and incorrect decisions. The key to success in business is realizing that making thoughtful decisions will lead to better choices.

Understanding the risk that increasing prices might result in fewer customers, and being able to control and react promptly if needed, such as by lowering prices again, can help attract more customers.

Risk is inherent in business. Each day, the choices and decisions you make will have a direct impact on your business and personal life. You must be willing to take some risks and acknowledge that every decision will have consequences. Running a business requires a constant balancing act. By making informed decisions, your new business venture will be thrilling, demanding, and stressful. However, by carefully considering the outcomes of your decisions, you increase your chances of making choices that will ultimately be very rewarding.  

·       Will your business give you what you want?

After determining your course of action, the next step is to choose between charging your skills and services out at an hourly rate or selling a product. You should then calculate if you can work enough hours to cover all your expenses and still have some money for personal enjoyment. In case you opt for selling a product, you can then figure out the quantity you need to sell to meet your financial obligations and maintain a comfortable lifestyle.

If you find yourself unable to meet all your financial commitments at this initial stage, it is essential to reconsider your strategy to ensure financial stability or evaluate if entrepreneurship is the right path for you.

·       Do your market research?

How will you differentiate or improve? Simply launching a business doesn't guarantee customers or success. What reasons would a customer have to opt for your business over their current supplier?

The answer to this question is the start of your marketing plan. Many companies offer the same service or product. It is critical you understand and think about how to communicate this to potential customers. Many business books discuss Unique Selling Points (USP’s) but these are likely to be identical for similar suppliers. You must identify the reason why your customer will buy from you and this become part of your sales process; an Emotional Selling Point (ESP) is a much better description and you should be very sure of your reasons why you are different or better. Communicating your USP’s and ESP’s helps you stand out from a crowd.

Where is the gap in the market? Is there a gap? A great example of exploiting a gap are the numerous price comparisons sites that are so frequently used by many people. Twenty years ago, insurance brokers were commonplace on the high street, but today the high street insurance presence has almost disappeared. The market has been transformed by the arrival of the internet and numerous comparison sites. The founders of these sites identified a gap in the market and took full advantage. 

·       Make sure your numbers add up. Will the business generate enough profit for you to live and hopefully make a profit?

This element is very important. Below are simple considerations but these are a basic method to check you can earn enough before getting into detail. 

If you can sell your services at £20 per hour but you can only work Monday to Friday for 6 hours a day, the maximum you can earn every week is £20 x 5 days x 6 hours = £600.00. This gross profit is before holiday or sick pay so you must carefully consider if this is enough for you to pay your bills.

If you buy a product for £6 and sell it for £10, you make a £4 gross profit on every sale. Lets assume you can sell 100 every week, this will give you a gross profit of 100 x £4 = £400.00. Again, this is before holiday of sick pay so you must carefully consider if this is enough for you to pay your bills.

Once the basic calculation above gives you enough money, you then should work out your break-even point. There are many free templates available on the internet for break-even calculations and many use new phrases such as fixed cost, variable cost, overhead etc. Now may be the time to find a trusted advisor or mentor to help you understand the minimum number of hours you must work or the minimum products you must sell to pay all you bills.

The advisor can help you factor in costs you should expect when running your business and also help you factor in the cost of holiday pay and tax. This type of planning will help you understand how a change in the number of hours worked or variation to the volume of products sold will impact your finances.

Have you considered if you have or need a financial safety net before you start trading.  Perhaps three or six months of your personal bills and expenses in the bank or accessible before you start to trade so you can start your business in the knowledge that if it does not work in three or six months you can still live and look for a new job before bailiffs are knocking at your door.

·       Ask yourself the tough questions.

It is a big step to start your own business. You must be certain it is right for you. You must ask yourself if your idea really is a good one. Will the business really work? Have others done the same? What can you learn from other similar businesses?

You must ask yourself if you have considered every angle? What if no one buys my service or product? What if I get complaints? What if too many customers buy? Although this is a nice problem, you must ask how would you cope with that? You must not let customers down and disappoint so a plan for over achieving is also a good idea.

Do you have the right skills? We can not all be good at everything so you must decide which skills you may need to buy or hire. This could be an accountant or qualified tradesman and the cost of this help also needs to be factored into the break-even calculations. Can you afford this help? What must you do if you cannot afford them initially?

Finally, you must ask yourself how this new business will affect your immediate family and friends. Perhaps you will be relying on your spouse or wider family and friendship circle for childcare more frequently. Is this possible? How can you ensure it does not affect personal relationships?

·       Take the plunge

If you are happy that you have considered your new business fully, your planning is complete and you are ready to start trading, it is now time to take the plunge and formally start your business.

There are many legal entities a business can take. Three of the options include becoming a Sole Trader, forming a Partnership with others or starting a Limited Company. Your advisor may be best placed to help you decide on the most suitable legal entity as each format has advantages and disadvantages and one may be more appropriate than another based on your personal circumstances and specific business.

Don’t forget to tell Her Majesty’s Revenue and Customs (HMRC) that you have started a new business. If you are going to be a Sole Trader or Partnership you will have to complete an annual tax return under self-assessment. If you are starting a Limited Company, you will also need to register your company at Companies House including Director and Company Secretary details and then also tell HMRC so you can register for self-assessment. 

The Government’s website GOV.UK has detailed information available to guide and support people starting to work for themselves - https://www.gov.uk/working-for-yourself

GOV.UK also has detailed information about starting a Limited Company including the requirements of Companies House - https://www.gov.uk/limited-company-formation/choose-company-name

·       Boring stuff.

The euphoria of staring your business now needs to be balanced by some tasks that are essential to prepare your new business to do business.

Banking – How will you receive payments and pay your business costs and expenses? You should consider whether using a personal bank account for your business is appropriate. Many banks do not allow this and separating personal and business expenses in the future may be difficult and time consuming and lead to a higher than necessary tax liability. Limited Companies will need a new bank account. Talk to a number of banks to see what accounts they can offer to help you? Many offer reduced rates for a period of time. A Google search will result in current options. Perhaps look at one of the many comparison sites for a market overview of what is available.

Accounting – While on the subject of money, regardless of legal entity you choose for your business, you will need an Accountant to help guide you through the various laws and regulations that will apply. If you did not speak to an Accountant before you started trading within the planning process, now is the time to ask friends and family for recommendations and also Google search small business accountants near you. Take the time to go and meet at least three so you can decide if you can work with them, what their likely charges are and how you pay these, (many offer monthly plans to spread the cost), but most importantly, they must work well with you and understand your business.

Insurance – An often overlooked but essential part of business. Having the correct level of insurance cover for both public and employees is critical. In the UK, it is a legal requirement to have Employees Insurance if you have staff and certain businesses may require professional indemnity insurance to trade. While public liability insurance may not be legally required, many customers insist on this cover in case of accident and will not allow you to work with them without a minimum level of insurance.

Health & Safety – We all go to work assuming that we will come home at the end of the day. Complying with the required Health & Safety laws is essential in whatever business you start. This is not just for building sites but every location where work is undertaken including your home address. The Health and Safety Executive website is a great source of information - http://www.hse.gov.uk/simple-health-safety/index.htm

Data – Your business will collect data from day one. Whether this is relating to customers, suppliers or employees, by law this data should be protected. The information Commisioners Office offers support on its website to help ensure you stay within the law and avoid prosecutions. https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/

Licensing, industry or trade specific compliance requirements – Some trades or professions require a license or accreditation to trade. An example of this is that an engineer working with Gas must be registered on the Gas Safe Register. If your business needs similar accreditation or license, you must obtain this or your trading opportunities will be reduced.

Domain name & essential IT – Every business needs a Website these days. Part of planning for your new business should include a domain name search to secure your perfect site. There and many suppliers for these services who offer relatively cheap domain registration, website hosting, website design templates and also offer email addresses and the Microsoft office 365 products necessary to send emails and use the Office suite of products many Companies use to run their businesses.

Stationary – Now is the time to create and print those business cards, leaflets and letterheads you dreamed of. You know, those things that started you on this journey.

One final thing – don’t forget to resign from you job!

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The next article will focus on growing your business.

Author – Andrew Kime, October 2019

www.adkconsulting.co.uk

www.linkedin.com/in/andrewkime

Source - * - Companies House https://www.gov.uk/government/statistics/companies-register-activities-statistical-release-2022-to-2023/companies-register-activities-2022-to-2023