Amanda Walls, Cedarwood Digital
Making the decision to start a business, or choosing to finally go it alone, isn’t done lightly. According to FundSquire, around 20% of businesses fail within the first year and 60% within the first three years, so making the move to create a start-up is definitely not without risk. That said, there are steps you can take to try and ensure your start-up is built on a solid foundation, with a clear plan and strategy in place for growth and sustainability.
If you are considering moving into the start-up space you will likely have a lot of questions; these can include:
- How do I start a business?
- Where do I get the funds from?
- How should I structure my business?
- How do I pay tax?
- How do I market my products?
- Who am I selling to?
- Will this even work?
All of these questions are perfectly normal. It’s important that you take the time to research and clearly understand the answers and your position before taking the leap, so that you can build a solid business plan.
If you are considering building a start-up, and want to avoid being in the 60% that fail within the first three years, below you’ll find several considerations and actions to help you on your path to success.
Building A Business Plan
Building the plan isn’t just about looking at the product, it’s about looking at your entire strategy; your marketing, your procurement, your staff, your margins, everything! Which is why it’s so important to put some time into a business plan before you kick your business off, to make sure you have a solid foundation.
If you aren’t sure where to get started with a business plan then there are a whole host of free resources available on the gov.uk website. These include free business plan templates, helpful examples and advice on how to write a business plan; all of which can really help guide you. Using a template (or a couple of templates) is a great way of ensuring that you have all bases covered, and it can also challenge you to think about things that you might not have originally.
When pulling together a business plan there are a number of key elements you should keep in mind:
- SWOT analysis – to get a good overview of the market
- Financials, projections, predicted P&L
- 1,3,5 year plan
- Marketing strategy
- Staff and structure
- Procurement/sales funnel
Getting the business plan right is an important first step. Make sure you maximise any available support at this time using the range of services available to you. Cementing your business plan means you have a solid foundation in place right from the start.
Find And Research Your Market
According to CB Insights, around 35% of businesses fail because there is “no market need.” That means that, in some cases, the market hasn’t been well-researched or is already over-crowded with the product or service the start-up is offering, and there isn’t enough of a differentiator to set them apart. Your product or service is the most important asset that your business has, so make sure that whatever you are offering has some element of uniqueness and has a clear USP that helps you stand out in the market.
Researching the market well and identifying/profiling your target market will go a long way to ensuring that your product has a captive audience. Some important elements to remember here include:
- What is the competition for your product/service?
- How does your product/service stand out?
- How are you displaying any USPs? (i.e. are they prominent on your website/marketing material)
- How are you planning to market your product? What are others in the market doing?
By taking the time to thoroughly research your market, you can help to ensure that you don’t fall into the 35% of businesses who fail due to a lack of market need.
Deciding Whether To Take Investment
Deciding whether to take investment is one of the hardest business decisions you’ll make. Whether you’ve seen Dragon’s Den or not, you’ll know that any type of investment usually comes at a cost. Generally that cost is a certain percentage of equity within your business or perhaps a share of income.There are a number of different investment platforms available to help you which you might wish to explore. You can also gain investment, along with advice, from non-executive directors who will usually be able to give you some guidance along the way from their areas of specialism. Yet regardless of what’s available, the first decision that you need to make is do you need investment and, if so, how much?
A lot of the time, being a start-up does mean that you need to be a little frugal or, rather, wise with money so that you aren’t over-spending or being lavish buying things you don’t need. When I initially started, I set-up on the dining room table. As the business grew I moved to a subsidised shipping container and kept my overheads low – I didn’t splash out on luxuries, I focused on re-investing and making the business financially stable as a priority. This kept investment low and also meant I wasn’t having to rely heavily on loans, which is something to consider carefully with ever-increasing interest rates.
As part of your business plan you will likely have to factor in whether you need investment or not. An extra step I’d advise you to take is to identify where you can also make savings. There are a lot of free tools available to start-up founders and some great networking programs. Take advantage of these to keep your costs low wherever you can.
Understand Finances And Taxation
Understanding finances and taxation is key to ensuring that you have good cash flow and that you understand taxes as they are due. The best way to deal with this is to take on the services of a good accountant or financial controller. They will help you stay on top of any money that you owe, and ensure that you plan any taxes that are due into your budget, so that you don’t find yourself unprepared.
Shop around when it comes to this and even consider finding someone that is a specialist in your vertical; they may understand any specific situations that are pertinent to your vertical, and be able to advise you as a result of this expert knowledge. This is a great way to ensure that your finances are in good shape.
Building a start-up can be an incredibly challenging task with a lot of sleepless nights, but very rewarding at the same time. By taking some of the steps above you can ensure that you are well-placed to put your start-up in the best possible position for success, and that you have a solid foundation on which to build a successful business.