It is the ambition and aspiration of many people to run their own business and built their own empire. Some choose to start up their own business to be more independent and receive the full financial reward from their efforts. Others may have found themselves redundant with the opportunity to start anew.

Whatever the reason starting up a new business can be a daunting experience and there are many factors to consider, one of the greatest of course is the prospect of business failure however with professional guidance there is a greater chance for success.

Initial considerations

In order to make your business a success there are a number of key factors which should be considered:

• Skill - you will need managerial and financial skills to ensure your business runs efficiently as well as a confident technical and marketing skill level. If you do not have these skills personally, then they can be sourced through an employee with appropriate training, a business partner or over time even yourself with the necessary training.

• Commitment - starting a business is demanding and can at time be stressful. Determination to succeed and enthusiasm for the business are essential to ensure a prosperous business.

• The Market - your product or service should have a proven or tested market or a new innovative niche market, but must not conflict with the patent or rights of an existing business as this will have serious implications.

In addition to these general factors to consider there are a number of more specific matters to evaluate before trading should begin.

The business plan

The business plan is the key to success as no bank manager will lend money without a sensible plan if you require finance and cannot provide them with a professional business plan they can have confidence in. Preparing a business plan will allow you to set out clear objectives and future projection for your business. Updated regularly a business plan can be used as a tool to monitor success and establish areas that require improvement to increase success and profit.

Your business plan should provide an extensive examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results and any future plans for expansion.

The business plan should cover the following areas.

• Overview. A clear overview of your plans for the business and how you propose to put them into action. This section may be read by those unfamiliar with your business and its market therefore avoid technical terms that they may not understand
• Description. A description of the business, your objectives and future expansion. Include in this section details of how long the business has been established for.
• Personnel. A detailed description of the current key personnel including you and any external consultants or contractors.
• Product. Extensive details of your product or service and your businesses unique selling point or niche market.
• Marketing. Clear and concise details of your target markets and your marketing plan. This may form the basis for a separate more detailed plan and should include details of competitors.
• Financial forecasts and requirements. This part of the plan converts what you have already said about the business into numbers including projections and assumptions about the financial success of your business. It should include a profit and loss section outlining how much money you expect to flow in and out of the business. From this the financial requirement necessary to establish and build the business can be obtained and in what form. A detailed outline of what the finance is required for and how you intend to repay any finance given is essential.

Business structure

There are three common types of business structure:

• Sole trader - This is the simplest form of business since it can be established without legal formality. However, the business of a sole trader is not distinguished from the proprietor's personal affairs.

• Partnership - A partnership is similar in nature to a sole trader but because more people are involved it is advisable to draw up a written agreement and for all partners to be aware of the terms of the partnership. Again the business and personal affairs of the partners are not legally separate. A further possibility is to use what is known as a Limited Liability Partnership (LLP).

• Company - The business affairs are separate from the personal affairs of the owners, but there are legal regulations to comply with.

The appropriate structure will depend on a number of factors, including consideration of taxation implications, the legal entity, ownership and liability.

Records and accounts

All businesses legally need to keep records. They can be maintained by hand in an appropriate ledger or may be held on a computer but should contain details of payments, receipts, credit purchases and sales, assets and liabilities. If you are considering purchasing computer software to maintain your records, obtain professional advice as not all software will meet your level of skill and technical ability.

The books and records are used to produce the accounts. If the records are correct and professionally ordered then it will be easier for the accounts to be put together. Accounts must be prepared for HMRC and if a company is formed there are strict legal requirements as to their format.

A company and a LLP may need to have an audit and will need to make the accounts publicly available by filing them at Companies House within a strict time limit.

Can I be successful?

Many people starting a new business wonder if they could really be successful at their new enterprise. Building and maintaining your own business may not be for everyone but the following is a list of attributes that successful business owners have. You do not need all of these characteristics but ‘go-getters’, those who truly succeed in business have the majority of the qualities.

Qualities needed for success in business

To help you decide whether or not you have what it takes to succeed in the enterprise culture do you see in yourself any of the following? Are you;

• Flexible - could you change your products or methods quickly when necessary to meet the needs of the business and clients?

• Self-critical - are you able to review your own performance and welcome advice from others developing your skill when needed?

• Positive - decisive and enthusiastic to succeed, thriving in a competitive fast paced environment?

• Determined - have you clearly-defined personal and business goals and act as the driving force to achieving these goals?

• Hardworking - do you mind being tied to the business seven days a week or will you be unable to give this level of dedication to your business?

• Leadership - are you able to get the best from your colleagues and discipline them when necessary, instilling confidence in them when needed?

Before starting your own business in the enterprise culture you must appreciate that in becoming self-employed you will lose the comfort of having a regular income as a regular flow of income may not always be obtainable. There will be times of financial plenty but also times when money is short therefore during these times of inconsistent financial flow you must be prepared to sacrifice some of the luxuries you, your family and your business have otherwise enjoyed.

Support from your family when starting a new business is essential, as without their dedication and understanding you and your business may struggle to cope with long hours away from loved ones. Their understanding is invaluable and many tasks can be delegated to them to include them in the new business to help build a strong foundation for a prosperous business.

Stepping stones to success

An essential stepping stone to success when starting a business is to first research your businesses market. You must research as much as possible about the current marketplace, your potential customers and competitors as well as any niche markets not yet established. It is essential to have in depth knowledge of these areas when considering whether you have a potentially successful business proposition.

You will need to find out about;

• Your target market - its size and whether it is expanding or contracting.

• Your customers - who are they? Where are they? What do they want? How much will they pay?

• Your competitors - what are their products, prices and market share?

This process can be done through extensive market research with current clients and potential new customers through surveys and questionnaires establishing areas in the current market that are unsatisfactory or desired. Working closely with potential customers ensures that the market research results obtained give a clear and concise evaluation of the current market and areas of improvement that your business can adopt to better the chances of success.

Planning for growth

Every business requires finance from the moment it is created to the point of future development but it is quite often unclear to many businesses what form of finance they require and who to get financial support from.

Finance is very often necessary. Any additional finance requires a commitment in terms of capital and interest payments and therefore must be considered carefully as the business must be fully capable of repaying the finance and any additional interest payments. A business must first evaluate whether it could increase its financial flow from inside the business itself such as reducing stock levels or collecting debts and customer bills more efficiently.

Types of finance

If however it is not possible to increase the financial flow from within your business and external financial assistance is required then TMA accountants can help you choose the most appropriate type of finance suited to your business and its needs. Finance is available in many forms sourced as loans, mortgages and overdrafts however, as interest rates vary considerably it is advisable to consult with TMA Accountants beforehand such as below.

Bank loans and overdrafts

Banks can be very supportive especially for small start up businesses that require financial assistance opting to provide an extension to your current limit or offer you an overdraft rather than a loan which can be somewhat inflexible in comparison.

Overdrafts are a flexible form of finance offering you and your business the ability to change the conditions of your overdraft agreement in accordance to the success of your business and can be easily pad off with a healthy business income.

Some businesses however feel far more comfortable with a fixed term loan as they find it easier to plan payments and pay off debt. Business can feel that their banks are more committed to their business when a loan is in use and unless you are failing to make payments on your loan, the banks cannot take the finance away from you.

Savings and friends

Often when starting new businesses, finance is sourced in the form of personal savings or financial assistance from family or friends. If this your businesses chosen source of finance it is essential that your friends and family only invest what they can afford and should they choose to invest in your business it is done through appropriate legal channels.

Shares

A common source of finance is found through shares. This offers investors a share in your business for a set investment. Before choosing this form of finance you must consider where and who this finance comes from and if they have skills or experience to bring to your business. You must consider what percentage of your business you are offering as a share and be aware that offering shares will mean investors will want to take an active part in decision making.

Government funding

There may be other forms of finance may be available for your business from government sources, from government start up grants, support grants or even your own pension scheme. Government assistance can be in the form of grants, loan guarantees or an enterprise capital funds. Other grants may be available on a regional or local level so be sure to contact your local office to investigate the possibility of government funding.

Whatever form of finance is offered, the lender will always require some form of security. However the level of security sought may vary ‑ beware the lender asking for unreasonable guarantees.

How we TMA Accountants help?

Whilst some generalizations can be made about starting up a business, it is always necessary to tailor the strategy and business plan to suit your situation. Any plan must take account of your circumstances and ambitions.

Whilst business success can never be guaranteed, professional advice can help to avoid some of the problems which befall new businesses.

We welcome the opportunity to assist you in formulating a strategy and business plan suitable for your own business needs and requirements. We can also provide key services such as bookkeeping, management accounts, VAT return and payroll preparation at an early stage to help you experience the best possible results from your business.

This factsheet has been published by TMA Accountants for the information and benefit of clients. It provides only a brief overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice as detailed above. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.