Updated: October 22, 2018.
With one good idea, you can create a lucrative business. However, there are a number of issues you’ll need to consider before you get your venture up and running. Rapid Companies outline four key steps you should take before you start your own business.Decide on a Legal Structure
First, decide on your venture’s legal structure; should you set up as a sole trader or form a limited company? Registering as a sole trader is quick and easy, so it may help you keep start-up costs low. However being a sole trader also involves a degree of financial risk, for instance you’ll be personally responsible for any losses your business makes. If you believe you could run up significant debts while operating your firm, form a limited company to accrue some measure of financial protection.
You should also find out whether your company needs a licence to operate e.g. the law requires you to obtain certain licenses and qualifications before your company handles food. Finally, you need to think about Value Added Tax (VAT). When your business’ revenue reaches the VAT threshold (over £85,000), you’ll need to add 20% to your invoices. Also, you’ll be able to claim back VAT on certain goods purchased to run your business. It’s worth pre-planning for VAT now if you think this may affect your business, so you can deal with these issues when they arise.Conduct Market Research
It’s vital to assess whether there’s a target market for your products or services. Conduct extensive market research to determine who your target consumer is, and what they’re looking for from the products or services you hope to supply.
Conduct research to figure out your business’ unique selling point (USP); the thing that differentiates you from your competitors. Construct a profile of your target consumer – what do they like to buy, what time of the year are they most likely to purchase products and services, what do they spend their cash on etc., as this will help you determine your businesses USP, and plan your marketing strategy.
Also, examine your competitors. Look at their operations and think about how you can improve on their weak points to provide consumers with a more effective service. It’s helpful to collect customer feedback on your products or services e.g. through online questionnaires. Their opinions will show you how you can improve your business, to ensure it appeals to your target audience.Construct Your Marketing Strategy
Once you’ve established your target market, develop a strategy that’ll inspire them to bring their business your way. This can include traditional marketing mediums such as radio and print advertising, but with so many potential customers online, we’d strongly suggest that you explore ways to market your company online as well.
Creating a company website so consumers can find you online is the first way many start-ups establish a presence online. It doesn’t have to cost much; you can build a basic website on platforms such as WordPress without hiring a professional web designer. Second, develop a strong presence on popular social media sites like LinkedIn, Twitter and Facebook. Pick which platform works best for your company e.g. LinkedIn is more suited to corporate businesses. By developing a focused social media campaign you’ll be able to communicate your brand more clearly to your target audience. Keeping a close eye on how your business is appearing online; this will help you to assess whether the different elements of your marketing strategy are delivering a return on investment. That way you can eliminate ineffective marketing mediums and keep cash flow under control.Determine cash flow
Before you start your business you need to work out cash flow, to determine how much money you’ll need to launch and expand your venture. Your sales forecast will help you figure out how much revenue your company can expect to earn. Consider how much you expect to earn in your first three years of operation.
Next, work out your business’ operating costs; how much money you’ll need to stay afloat. Work out fixed costs such as rent, as well variable costs, for example marketing budget. Combine these with your sales forecast to predict how much net profit your venture can expect to make annually and what your ‘breakeven point’ may be – the process will help you establish clear sales targets.
Finally look at pricing; how much do you need to charge consumers to ensure your company survives? There are two types of pricing; cost-based, where you charge based on your operating costs and value-based, where your price is based on how much you think consumers will pay. At this point, ensure your company has the financial infrastructure required to manage cash flow.