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Out of the doom and gloom of the pandemic, new businesses are sprouting up – many built around successful concepts launched and developed during lockdown.
Launching a business can be daunting and risky, to help, we have prepared seven tips that all start-ups can follow:
You must undertake thorough market research to ensure your idea will work and is competitive. This will help you to identify customers and competitors, analyse potential markets and consider the costs associated with the business.
Having conducted thorough research, entrepreneurs should be able to calculate their pricing strategy and begin to think about the development of their business in the future.
Comprehensive market research is also an important step in preparing your business plan and is likely to be essential if you want to raise capital at any point.
Assess your finances
To launch a business, you will need sufficient capital to carry out your plans. Finance is often one of the biggest barriers to launching a business and in the current climate lenders and investors are likely to be more risk-averse, which may make sourcing funding more challenging.
The finance you require depends entirely on the business you are launching. Some companies are relatively low-cost to set up and run, while others are resource and cost-intensive.
If you have properly identified the costs of setting up your company then you should be able to break the necessary investments up into three distinct categories.
Essential costs – Your business cannot operate without these.
Useful investments – These make your business more efficient but would not prevent your business from operating.
Additional investments – These offer small benefits to the business but are by no means essential or necessary.
Create a business plan
Start-ups need to have a comprehensive business plan that acts as the blueprint for their company.
If you have done sufficient market research and worked out your financial situation, then you should be in a strong place to tailor your plan to your needs.
A business plan is often a requirement for any form of financing you may be seeking and will help keep you on track.
Choose a business structure
You’ll need to decide if you’re going to start a business as a sole trader, a partnership or as a limited company.
Depending on which model you choose could lead to different tax and governance issues for you to consider.
Many businesses prefer the protection of operating as a limited company, as the liability is only tied to the amount you have invested within the business and not directly to the founders.
Establish and monitor KPIs
If you do not monitor key performance indicators it can be difficult to assess how well your business is doing. The most important growth metrics for young businesses tend to be:
Gross Profit Margin – The amount you receive once you have covered the cost of goods or services sold.
Customer Acquisition Cost – The price you pay to acquire a new customer.
Spend Rate – The speed at which the company spends its capital.
By monitoring data around each of these KPIs, you should be able to spot weaknesses quicker and also identify areas of growth in which to invest more resources.
Many start-ups find that investing in cloud accounting technology helps them to monitor and assess their performance, especially if they collaborate closely with their accountant.
Entrepreneurs are encouraged to avoid premature scaling by carefully monitoring their spending, minimising debts and keeping overheads to a minimum.
Overspending before establishing a market for your product or service is believed to be one of the key reasons for most premature business failures.
If you are carefully monitoring your KPIs and have a robust business plan in place you should be able to scale progressively.
New business owners do not have to go it alone. One of the first and most important things they can do is seek help from professional advisers, such as a trusted accountant.
A little invested early on in expertise can go a long way to helping a company survive and thrive.