This is where good financial planning and management come into play, helping to give your business a solid foundation as you look to establish yourself in the market.

In this article, we’ll share some of the best things you can do in the beginning to set yourself up for continued success.

Grab a notepad and pen, and let’s get started.

Do your homework

It can be tempting to just dive in headfirst once you have a business idea you’re happy with. But take a moment to consider how much you actually know about the market you’re looking to enter.

Do you know the ins and outs, or do you have more of a working knowledge?

If it’s the latter, you might want to rectify that before you get up and running. Conducting research into your chosen field shouldn’t just be a formality, though, or an exercise in ticking boxes.

Carrying out good market research and analysis is a sound business practice that can pay dividends in the long run – hopefully literally, if you’re running a limited company!

As well as giving you a good idea of what your operational costs are likely to come in at, early and ongoing market research will help you with things like:

• Setting fees and prices
• Understanding who your nearest competitors are
• What your customer is looking for from you, which will give you a better chance of securing work

Track your spending

Two words: cash flow.

This is super important to understand, but it’s also tricky for new businesses just starting out.

Again, your first impulse might be to cut to the chase and start spending right away, and this actually makes a good amount of sense. You obviously need to invest in your business if you want it to grow, right?

Yes, but you also have to be smart about it. If you miscalculate and then can’t pay your new suppliers on time then you might be out favour before you’ve even had a chance to make a good go of it.

Thankfully, good bookkeeping software can help with this, allowing you to track your spending and use short and long-term forecasting to work out when clients need to pay, so you can pay your own bills on time.

Once you have a cash flow forecast, you can then build in a buffer zone to give yourself a bit of breathing room.

Understand your tax obligations

Now, before you start to nod off, make sure you know what you owe.

The best starting point to this is deciding on a legal business structure. The way you set yourself up, for example as a sole trader or director of a limited company, affect the type of tax you need to pay as well as the deadline to pay it.

Failing to pay the correct amount (or type) of tax can result in hefty fines from HMRC, and no one wants that.

Some of the types of taxes you might need to pay include Income Tax, Corporation Tax, employer’s National Insurance, and VAT.

Being aware of these means you’re in a position to plan ahead, which brings us back to the importance of cash flow forecasting!

Set clear goals

If you want to hit a target, you first need to aim at one. That may go without saying, but it bears repeating.

So, using all the knowledge gained from conducting thorough market research, as well as from your cash flow forecasting, you should try and pinpoint exactly what you want to achieve with your business in both the near and distant future.

This ensures you are constantly improving and making progress, which helps to support long-term growth.

The bit that lots of startups struggle with is the fact that everyone’s goal is “make money”. Looking at all the facts and figures can help you make things a bit more clear cut. For example, “take on one client and bill this amount by this date”.

Leverage technology

If you’re starting a business today, you simply can’t afford to ignore the digital tools and platforms available to you.

Technology can and should create savings, representing a valuable return on investment.

For example, if you’re starting up in retail, you should familiarise yourself with Electronic Points of Sale (EPOS), and perhaps even inventory management systems if you really want to make your life easier.

More generally, you should look at ways you can market your business on social media platforms like Instagram and TikTok, as this is a great way to expand your reach (and hopefully your customer base).

Every business will of course be different in this regard, so find your unique selling point and get creative.

We know it’s not easy taking your first steps in business formation, but put in the effort with financial planning and you’ll reap the rewards.

If you’re unsure about any of this, don’t hesitate to get in touch with an accountant, who will be able to simplify everything and walk you through the whole process.

Find more help in our online accounting hub, and learn more about how to find the right accountant for your business.

The post Top Tips for Financial Planning in the Early Days appeared first on The Cheap Accountants.

Here, we walk you through the following topics to make sure this process is as valuable as possible:

• Why it’s so important to test your new product or service idea on the market
• When is the best time to carry out this type of market research
• How to go about market testing your product or service

Why is it so important to test a product on the market?

Here’s the thing: just because you believe something is a good idea, it doesn’t necessarily mean it is. Sorry.

But what do we mean by a ‘good’ idea? In this context, ‘good’ doesn’t just mean clever or unique. It also means profitable and sustainable in the long-term; something there will be continual demand for moving forward.

That’s why it’s so vitally important to test your product or service on the market before you go full steam ahead with an official launch. In fact, market testing is success-critical and not a step that you should miss out from your business plan.

Won’t it slow me down?

It can be tempting to bypass the market testing phase in a bid to actually get to market faster. The trouble is, doing so usually only means denying yourself invaluable insights into your target customers, competitors and industry trends. This crucial information will help you launch, grow, and sustain your business much more effectively.

What if the market testing fails?

Then you’ve either had a lucky escape, or know what to fix! If you test your product or service on the market, you may very well find that actually, there isn’t much appetite out there for it.

Discovering this at this early stage is a blessing in disguise for business owners, helping you to save time, energy and money being wasted on a business idea with a high risk of failure.

If there is demand out there, then great! You can then use your findings to help steer your business plan and go-to-market strategy.

When is the best time to test a product or service?

The most effective time to test a new product or service on the market is before any official launch and prior to any significant go-to-market investment. This is because the aim of this type of testing is to ascertain whether or not you actually have a viable business model, and assess the level of demand for your idea.

You can also conduct this type of research after you launch and on an ongoing basis. In fact, it’s recommended to do so, so that you can ensure you’re evolving and developing your offering in line with market demand. Don’t forget to update that business plan!

How to test your new product or service on the market

There are a whole host of ways you could test your new product or service on the market. Which methods you choose are up to you, though largely dictated by things like the nature of your offering, your desired timelines, and of course, your budget.

Below are some of the most common ways business owners test the waters, so to speak, before officially launching their idea to give you some inspiration.

Talk it out with friends and family

While this should by no means formulate the foundations of your market research, friends and family can still provide some helpful insights. They can help make sure you’re communicating your ideas and your objectives in a way that makes sense in layman’s terms wherever necessary.

Make sure this personal group also includes friends and family that aren’t your first connections. Include friends of friends and relatives of others to rule out any emotional bias. Your own friends and family, while their feedback is valuable, might be clouded by love and support for you. This is a lovely thing to have, but doesn’t necessarily always make for the most objective feedback.

Bring a focus group together

If you have the time and resources, convening a focus group is a highly effective way of testing your idea on the right market. It involves gathering a group of people from your target demographic, introducing them to your product or service and getting feedback from them. It only has to be a small number of people but whatever the size of the group, their perspectives are invaluable.

A focus group (sometimes referred to as a ‘control group’) can help you:

• Work out precisely who your target audience is (or should be).
• Establish how much demand there is for what you’re offering.
• What your target customer loves and where they would like to see improvements.
• Insights around things like how much they’re willing to pay for what you’re offering, and whether or not they’re currently purchasing something similar from competitors. If so, who, and why?

Working with a focus group doesn’t just have to be a one-off thing either. You can work with the same group or even a new and/or expanded group further down the line as your service or product evolves in the market.

Prototype product or beta service

When going to groups of people for feedback, whether it’s people you know or a non-biased focus group, it helps to have a prototype product or beta service to show them. This way, you can run demos and allow them to use the product or service as if they were going through the intended customer journey.

Not only will this make for more comprehensive feedback, it will also help you iron out kinks and see where you need to make changes.

Of course, building a prototype product or beta website/app comes at a cost, whether that’s financial or time, so it might not be viable for you at this point in the process. Don’t worry though, because it’s more of a nice-to-have, than a necessity. You can still progress without a prototype or beta version of your idea.

Set up some test ads

If you happen to have some spare cash that you’re willing to invest in this preliminary research phase, you could consider running a set of trial social media or search ads. These would be targeted to your desired audience and use relevant keywords.

Not only would this give you a good indication of online appetite, it would also give you an informed idea about things like:

• CPC (cost per click – if you chose to run social media or PPC ads, for example).
• CPA (cost per acquisition – how much it might cost you to acquire a potential customer).

Conduct a soft launch

Soft launches are where you launch your product or service but only to a specific group of people or for a prescribed amount of time. It’s similar to the concept of a focus group whilst being more like an official launch. This involves actually opening access to your product or service and assessing things like reception and sales, rather than gathering preliminary feedback.

This will help you monitor the performance of your product or service in a controlled environment before you fine-tune it to be launched to the wider market.

One more thing before you go…

Top tip: In the market research phase, we’d also highly recommend scheduling in some time with your accountant to assess the financial viability of your new business idea.

It might be a great idea and there might be sufficient demand for your product or service but is it a good financial move? A qualified accountant will be able to help you answer this question and make more informed business decisions.

Looking for more business support? Head over to our info hub for more handy news and resources.

The post How Do I Test A Product or Service Idea on the Market? appeared first on The Cheap Accountants.

A solid business plan is a crucial tool for success for businesses of all sizes. Whether you are a sole trader, or you run a limited company with several members of staff, a business plan keeps you focused, aligned and aware of what is going on under the surface.

Not only is it a tool for you as an owner, but it also allows you to communicate and demonstrate your business’s success to stakeholders, including investors and lenders who want to know what is happening to their money.

When should I update my business plan?

Putting pen to paper and crafting your business plan should be one of the first steps on a start-up journey, something to do before you even begin trading. However, once you have a plan in place, it should not be static.

Revisit and update it periodically, and you stand a better chance of ensuring your business still aligns with its purpose, and that any market, economic and consumer developments are considered.

Having an updated business plan is perhaps more crucial right now than ever. Costs are spiralling for both companies and consumers, inflation is sky-high, loans are more expensive thanks to increased interest, and we are in a period of general economic and political volatility.

A business plan that considers all of this will allow business owners to navigate these challenges and stand a better chance of steeling themselves against recession.

Business plans should be based on company performance and what is going on within its markets. From here, realistic goals, plans and contingencies can be identified to act as the solid foundations on which to achieve continued business success and growth.

How to analyse business performance

Owners need to consider multiple aspects when assessing business performance. There are, of course, hard statistics such as turnover, profits and leads, but there are also less tangible elements to consider.

If you have employees, for example, how is their experience? Is there anything in their day-to-day work that you may not see as the boss? How do your customers and clients perceive you and how does this compare to competitors? Reviewing this will help give you a true overview of how the business is performing.

Review sales performance and budget

Looking at your finances first will give an immediate indicator of your business’s health. Good cash flow should be a small business’s biggest focus, especially in times of economic turbulence.

Examine the success or failure of different strategies in delivering a good reserve of cash, and how changes such as growing the team or moving premises may impact these.

This will tell you what you can afford and how much money you need in the bank, helping to make informed decisions accordingly.

Look at the wider market

A successful business is aware of what its competitors are doing and how they’re doing it. Stay up-to-date with what’s happening in the market, predict growth and trends, and keep an eye on developing niches within the industry. It will strengthen your position and allow you to jump on opportunities.

There is a lot to be learnt from gauging competitors, particularly in looking at what they do, that you are not, and the reasons for this. There’s also a lot to learn from ailing competitors or those who go out of business. Competition is dynamic, so it is important to regularly update this.

Engage employees

Talking to your team will flag any areas that require extra resource. Are packing and dispatch staff overstretched because more orders are coming in? Are the customer service team twiddling their thumbs because there aren’t that many enquiries? Getting this on-the-ground intel will indicate if teams need restructuring, a different allocation of resources, or simply more people on board.

This will also reveal employee satisfaction and show if you need to re-evaluate the way you support employees in doing their job, and reward them. Ensuring your team is happy is more important than some owners give credit for, so make sure it’s a core element in your plan.

Seek customer feedback

Your audience is what keeps your business going and without them, there would be no cash flow at all! Engaging in casual conversation with appropriate customers and clients and looking at online reviews are simple ways of doing this, but there are also data-driven ways that will give richer insight.

Digital feedback tools ask for reviews that can lead to more focused discussions, and business analytic tools give insight into what customers are buying and their purchasing journeys. Audience needs to be at the centre of every business plan, so really try to understand what your ideal customer needs and how you can provide it for them.

Does your plan fulfil the business’s purpose?

With an accurate view of your business’s performance, founders need to ensure that it is still meeting its purpose. The business plan needs to clearly demonstrate what customers want and how you are achieving that. If the plan, performance, and purpose no longer align, it’s time to revisit what you’re doing, and how, and then communicate this to those involved.

How regularly should I monitor business performance?

Analysis across every area of the business must be ongoing. Each month, business owners should have a top-line look at their finances, employee satisfaction, customer feedback and the wider market. This will highlight any immediate issues as they arise, and allow owners to tweak business plans accordingly to mitigate the impacts.

Ongoing monitoring and reporting will help catch problems in their infancy, rather than allowing them to fester and grow over time.

Business owners should then do a deep dive into their business performance on (at least) an annual basis. This can coincide with the end of the financial year to give a good view of the yearly results and allow comparison. At this point, founders should be willing to throw their whole plan out and start again if required.

Setting realistic goals

Goals in a business plan need to be achievable and realistic. Etsy sellers, for example, probably shouldn’t aim to double their profits in the midst of a cost-of-living crisis. Having unrealistic targets will give you a warped view of how much money you need or will have in the bank, and lead to problems further down the line, as well as having the potential to demoralise owners.

Creating SMART targets (specific, measurable, attainable, relevant, time-based) will ensure goals are ambitious enough to encourage growth without being impossible to achieve.

Why is updating your business plan important?

A business plan is the fabric and foundation of a business – you would not start building a house without clear and accurate plans of what you wanted to achieve.

• Focusing on the next stage of growth maps out how to achieve it, keeping goals and targets on track
• Helps you to make better decisions and formulate ongoing strategies
• Allows you to share the vision of your business and communicate viability to investors, employees, freelancers, lenders, and business partners.

All in all, your business plan is an essential resource that legitimises a business, as well as you as its leader. Keeping it up-to-date and sharp demonstrates business know-how and makes you a trusted partner.

Despite it having the potential to be a burdensome task, a solid plan will underpin success.

Looking for a new accountant? Compare accountancy packages to get started.

The post How Do I Update My Business Plan? appeared first on The Cheap Accountants.

Or do you? If a recent Nixon Williams’ survey of 1,000 UK contractors and freelancers is anything to go by, then 64% of the self-employed in the UK are avoiding putting money aside into a personal pension scheme.

Don’t be one of them. The longer you leave saving for your retirement, the harder it becomes, as your money has less time to earn interest and tax relief—remember, even if you don’t pay tax, you still get tax relief on your pension contributions. Why miss out on a 20% bonus or more, if you do pay tax and are a higher rate tax payer.

So how can you go about saving for retirement?

Continue paying into a workplace pension

If you have an existing workplace pension, you may be allowed to carry on paying into it. Check how it is affected by your resignation from your workplace in terms of bonuses, performance and related benefits (life insurance etc.). Freezing it or moving it elsewhere may be a better option.

Personal Pensions

Standard personal pensions

The conditions are primarily set by the pension provider you choose, who invests on your behalf. How much choice you have between types and risk-levels of investments varies between providers, as does the amount you’re required to contribute, but generally there’s a fixed minimum contribution and providers usually require you to contribute monthly, without a break.

Your provider may give you a choice of funds or pre-built packages of funds to invest in. This can give you the option to go for low, medium, or high-risk investments, types of investment (e.g. green, property, UK) or to mix them. The provider will claim basic-rate tax relief on your behalf, which will be added to your pot.

Currently, you can start drawing retirement benefits at 55 (whether you’re still working or not), and sometimes earlier if you’re suffering from ill-health. You can withdraw up to 25% of your accumulated fund as a tax-free cash lump sum, with the balance used to provide an income.

SIPP (self-invested personal pension)

This is a Government-approved personal pension scheme which allows you to hold various investments including stocks, mutual funds, and exchange-traded funds (ETFs) in your pension pot.

Money in a SIPP can be accessed from age 55 and you can take 25% of your total SIPP balance as a tax-free payment. Charges are often higher than with other types of personal pension, but potential investment types are more varied and you have a great deal of control.

SHP (stakeholder pension)

Stakeholder pension schemes are a type of defined contribution pension scheme that’s Government-regulated and designed to be accessible, flexible and portable. They’re usually offered by insurance companies, investment platforms, banks or building societies. A novel feature is that other people can contribute to your SHP, and you can contribute to the SHPs of others (your partner or your child). They are flexible, so if you begin employment again, you can carry it on and your new employer can choose to contribute to it as they wish.

Currently, you can start drawing retirement benefits from an SHP at 55 (whether you’re still working or not), and  you can withdraw up to 25% of your accumulated fund as a tax-free cash lump sum, with the balance used to provide an income.

Government regulations for SHPs mean that:

• You can switch to a new pension provider without incurring a charge from the old provider
• You can start contributions from as little as £20, and pay weekly, monthly or at less regular intervals
• You can stop, re-start or change your contributions whenever you want without penalty fees

• The scheme must be run by trustees or by an authorised stakeholder manager, whose responsibility will be to make sure that the scheme meets the various legal requirements

NEST (National Employment Savings Trust)

While NEST is a Government-funded workplace pension scheme set up for auto-enrolment purposes, you can usually join if you’re self-employed or a sole director of a company that doesn’t employ anyone else. It’s run as a trust by the NEST Corporation for the benefit of scheme members, with no shareholders or owners. If you want to check if you’re eligible, visit NEST’s self-employed page.

An in-house investment team spreads funds across diverse investments from around the world using funds from leading fund managers. Five alternative funds are available to suit different risk level and belief requirements.

Lifetime ISAs

Another investment option to consider if you’re self-employed, particularly if you’ve maxed out your yearly pension contributions, is a Lifetime ISA.

Unfortunately, they’re only available to those aged 18-40. You can invest up to £4,000 a year, which will be topped up by 25% by the Government. Investment can carry on until you’re 50, but you can’t touch the money until you either buy your first property or turn 60 (well, you can, but there are expensive penalties involved). Lifetime ISA are available from a variety of providers.

For more information on pensions, check out the Pension Advisory Service webpage.

The post Saving for Retirement if you’re Self-Employed appeared first on The Cheap Accountants.

If you’re worried about the future of your business we’ve put together a list of top reasons why business go under, and how to avoid becoming the next one.

Overestimating market

Unfortunately, the market is sometimes the last consideration for some entrepreneurs. They consider their desire to own a business and their own opinion of the product or service before questioning whether anyone needs or wants it.

Not thinking of your potential market first and foremost is a huge mistake because after all, the market determines your success or failure. It’s best to always analyse whether there is a current need for your business first before you get up and running.

Losing sight of customer needs

Following on from the previous point, even if you do have a market for your business, the work doesn’t stop there. Customer needs change and develop and to continue delivering what they need you need to keep up to date with them.

Market research isn’t just something you do in the beginning and forget about. Even if you do nail it at first, it’s easy to lose sight of customer needs when you get busier and the company grows.

Regular meetings with customer focused aims will help to keep everyone on track. With every new development you make in the business, the impact on the customer must be top priority.

Make sure market research is an ongoing task so you’re aware of any improvements you need to make to keep customers happy.

Poor financial management

If managing accounts isn’t your area it can quickly become overwhelming and damaging to your progress if you get it wrong. Many people overestimate the profits they’ll make or when they’ll turn a profit. Others underestimate their tax responsibilities or the importance of emergency funds when it comes to cash flow problems.

Always be realistic about what you can afford and have an emergency fund to help soothe cash flow problems when they arise. For financial management, hire an accountant to take some of the strain off you, and make sure that you keep your bookkeeping as up to date as possible.

Scaling up too quickly

A lot of businesses will have a good few months followed by a naturally quiet period. Those who are unaware that businesses have highs and lows, may focus only on the highs and expect nothing else in the future.

They splash the cash either on themselves or on the business, investing in shiny new equipment, new staff, new offices and so on. When reality hits and the busy period quietens down, they’re left with hollow investments that don’t really add anything except bills and upkeep. This is a slippery slope towards major cash flow problems.

All new investments should be thought out carefully and not just based on last months revenue figures. Always assume revenue will fluctuate and try to get a second opinion on all major changes.

Management skills

Not everyone is manager material. It’s more complicated than simply telling people what to do. Managing people require excellent communication and diplomacy skills as well as the willingness to take responsibility at all levels.

Many people struggle to show strong leadership which can lead to an unfocused workforce. Others are more overbearing, leading to stifled micromanaged staff. Either way, poor leadership can cause poor morale and low productivity which can snowball and damage the business.

Learn to delegate and trust your workforce so they don’t feel micromanaged. If you struggle with giving instructions, consider leadership courses instead to help you build confidence and authority.

What are some reasons you’ve seen businesses fail? How would you ensure success long-term? Please share any thoughts below.

The post Five Top Reasons Businesses Fail and How to Make Sure Yours Isn’t Next appeared first on The Cheap Accountants.