It can be quite overwhelming being the new kid on the block. There’s a lot to try and understand very quickly, and you don’t know what you don’t know.
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.
