Guest post by Stacey McIntosh, Editor, Sage Advice UK & Ireland
Starting a small business is no easy feat, especially during the first few years – there’s a lot to think about, but with forward planning, you’ll give your business the best chance of success.
This article covers some necessary steps for creating a successful small business. While not mandatory, they’ll give you the right kickstart you need and should help you get through those crucial first years.
1. Do your research
Once you’ve chosen your idea and target customer, you’ll need to spend time properly researching your chosen market to help you spot opportunities and gaps. Then, once you’ve taken these into account, analysing the economy will help you predict how your business will fare, both against competitors and financially, over the next one to five years.
Doing this research will help to show potential funders that your business is a viable investment.
Sage, a market leader in cloud business management solutions, has created a free, downloadable small business toolkit that includes a business plan template, cash flow forecast and e-book. The latter’s contents is a great start for your research as it highlights the pitfalls to look out for and offers expert advice too.
2. Create a business plan
A business plan is effectively a blueprint of what your business is and what it could potentially become. It includes all the information and planning an investor needs to be confident that your business will be a success and therefore offer investment.
The business plan template in the small business toolkit from Sage contains all the sections you need to provide information for, as well as helpful hints on how to fill each one out and why you need to do so. It covers:
- Organisational structure
- Market analysis
- Financial analysis
- Glossary of key business terms
Once you’ve written your business plan, be sure to hand it to friends, family, a mentor or someone you trust who has business knowledge to look it over and offer suggestions.
3. Plan your finances
A lot of businesses fail because they don’t have proper financial planning at their core.
Planning and predicting your finances accurately can be tricky, especially if you’re still in the very early stages of setting up your business. The most important thing is, to be honest, and transparent about what you do know and use reputable industry data to support your forecasting predictions if you have no previous records to go on.
The business plan of the small business toolkit has a section for financial planning where you can summarise a top-line view of your financial forecast but you’ll need to complete attach some additional financial documents when pitching to an investor:
- Cash flow forecast: A document detailing all financial activities (e.g. payments, expenses, loans) to show much money is expected to flow in and out of your business.
- Start-up cost breakdown: This should deal with any costs that you need to cover in order to get your business off the ground.
- Break-even analysis: An estimated date for when your business could break even and start to cover its ongoing costs (details for how to calculate this are included in the help section of the business plan template).
- Profit and loss forecast: A document detailing income versus outgoings showing your business’s predicted profit or loss.
- Balance sheet: This details all the assets your business owns or finances out minus the debts. This will help investors predict when your business’s income is likely to balance out debts accumulated in the start-up phase.
While pulling these documents together may seem like a mammoth task, planning and managing your finances effectively will help.
4. Get funding
Unless you’re using your own savings, you’ll need some form of funding – securing it could be one of your bigger challenges. The documents you’ve prepared will give you a better chance of securing investment, but you’ll need to do your research to understand the different options available to you based on your circumstances.
If you need funding, one option is to apply for a small business loan, either from a bank or an alternative lender.
Another is turning to government support – it has several financial options in place to support small businesses, including loans and grants (the latter is money that doesn’t need to be paid back). There are often special conditions you need to meet in order to access them, so be sure to read our guide to government grants and loans to learn more about the range of potential funding options available.
5. Spend time developing your strategy
Having a well-thought-out strategy for how your business is going to achieve its goals is critical to its potential success. In your business plan, you will have shown investors how well you know the market, your target customers and why your value proposition is different from competitors in the space.
You’ll need to develop a plan of attack for acquiring (and keeping) your customers and building awareness for your brand and product or service. Think about your goals and the sales and marketing tactics that will help you get there.
6. Put everything into action
Now you have funds in place and a plan for your business, you’ll need to start implementing your strategy.
Start by choosing accounting software, purchasing any equipment outlined in your business plan, registering yourself as self-employed with HMRC (if you’re a sole trader) or setting your business up on Companies House if you’re starting a limited liability company. Depending on the nature of your business, you may need to design a website to advertise your products or services (it can really help your business if you have an online presence), purchase stock or buy equipment – whatever your costs are, it’s important to make sure everything is properly entered into your accounting software, so you can keep track of your outgoings.
7. Promote and sell
Now the ball is rolling, it’s time to start selling. Again, be sure to keep track of your sales. There may be some kinks in the logistics at first, but with time these should straighten out and you should have an idea of how many sales you need in a month to hit your targets. If your business is starting out with a small team, make sure you organise regular check-ins and keep an eye on your marketing channels, being sure to promote your products when needed.
If you’re starting from scratch, the small business toolkit can be a great place to begin and there’s plenty of free advice and forums out there that will help you along the way.
Stacey McIntosh is the editor of Sage Advice UK and Sage Advice Ireland. He has more than 15 years of editorial, PR and social media experience, and has worked across print and online for national newspapers, magazines, PR and marketing agencies.