START UPS – PART I – FROM IDEA TO REALITY

27/07/2016

A bright idea!

When it comes to business start ups, the question, ‘Which comes first the chicken or the egg’, is appropriate. Do you have a burning idea for a new product or innovative service Do you like the idea of working for yourself, envisaging managing your own time with holidays to suit and flexible hours? If it’s the latter, I’m sorry to shatter the illusion! Starting up a business will probably be the most time-consuming and stressful thing you do. You will need real passion about what you have to bring to the market, commitment and confidence there is a market niche for what you have to sell.

Before you do anything else, don’t focus solely on what you are planning to offer - ask yourself two fundamental questions:

• Why will it address the needs of your audience?
• Why are you best placed to deliver this offering?

You may think your product is fantastic but will others agree? – does it meet a need, is your target market large or too closely defined (each scenario will bring its own challenges)? Will you need to produce different colours or sizes of your product? If so how will that impact your staffing and your bottom line? Who are your competitors? What gives you the edge over them? Research, research, research!

Assuming you’ve done your homework and know that it’s not just you who could get excited about the product or service you want to offer, you’re ready to go, right? Set yourself up in premises, get a website up and running…Wrong! Take the time at this early stage to draw up a business plan.

Putting things on paper

A business plan will clarify your ideas, your business location, your potential customers – and highlight areas that need attention such as funding, cashflow, etc. It will inform you of the order in which to take the next steps at a time when so many things will be clamouring for attention.

Your business plan will address some fundamental questions such as - How will you make money? What is your break-even point? How much profit potential does your business have? Take the time to invest in preparing financial projections.

A cash flow projection will show you how much working capital you will need during those “gaps” in your cash position. This project should cover:

• Start up Investment
• Assumptions
• Running Monthly Overhead
• Streamlined Sales Forecast
• Cumulative Cash
• Break-even

Cash is King!

Pay particular attention to your cash management. Ensure your forecasts are realistic and constantly re-evaluated. It’s unlikely you will need a full-time finance director but it would be worth contacting an accountancy firm to whom you could outsource not just your book-keeping requirements but also your company secretarial needs. Many firms will offer this at a reasonable rate and free you up to concentrate on your core business – Anglian Cloud Accounting would be happy to help and, with all your accounts in the cloud, they are accessible at any time, from any device.

That’s a key consideration in the early days when you will need to be monitoring your income and expenditure like a hawk. If with a few clicks you can keep a weather eye on which invoices have gone out that day, check that enough cash has been set aside for eventualities such as VAT; it will allow you to focus on closing the next sale or making your next appointment.

Next Steps…..

With a comprehensive business plan and cashflow projections you will be aware of the amount of capital you will need to get your business up and running. In Start Ups – Part II, we will look at funding options for your business.