Going into business for oneself can be the most rewarding step you could ever take. However there are a few key things you really need to consider and keep in mind at the beginning.
1. It’s going to take twice as long and cost twice as much
It’s a frequently used maxim but only because it’s true, even today when the cost of starting a business is lower than its ever been. It is easy to underestimate how much needs to be done before revenues come rolling in and one’s plans rarely allow for any contingency, or indeed your own living expenses, until the business really starts to take off.
2. Test your proposition first
If it’s a product you are going to sell you’ll need to at least have some advance orders, or have demonstrated that you have already made some sales whether off or online before deciding to spend the time and money really building the business. If it’s a service, make sure you already know the industry, if not then you could be someone’s apprentice or stand in for a week or two first, and see if you are cut out for going it alone.
3. Strongly consider becoming a limited company
A limited company is a separate legal entity to you and so if things go wrong it can go bust without you having to. Also, with a limited company you can ensure you are remunerated in a more tax efficient manner and use the share capital to raise equity finance at different stages of the business’s development.
4. It’s all about the team
If you are going to raise money from venture capitalists or business angels, they’ll want to see a team in place with all the key roles covered. They won’t necessarily all need to be employed by the business, but they’ll need to show a certain level of commitment and mix of skills to make the business successful. Having a strong network will help you in this respect, while savvy investors are increasingly looking for entrepreneurs who can demonstrate a high degree of online influence on sites such as Twitter.
5. Be a little selfish or greedy
If this is your plan, or simply you seem to be doing most of the work, you don’t have to settle for equal participations all round. If the chances are you’re going to lead this, then take the biggest share. Kindness at the beginning can cause problems later. Don’t be too ready to issue shares, consider share options and also make sure you can buy back any shares easily if things don’t work out.
6. What’s your ‘Ronseal’ pitch?
Forget elevator pitches, life’s too short even for a quick explanation of what you will do. Ronseal ‘does what it says on the can’. Can you summarise your business proposition to anybody in a single sentence?
7. What need does your offering satisfy?
Very little in this world is completely new, so most times there is already a need. If there’s a need, does your proposition deal with it? If there’s no existing need, because it is as revolutionary as the Sony Walkman or Apple’s iPad, then you’re going to have to create the market too.
8. How will the competition react?
Be careful if a market opportunity appears to exist because of competitors’ inefficiencies. If by starting, you show them wanting, they’ll surely move to shut the door on you. And remember too, existing loyalties might make their customers slow to switch to you.
9. Don’t rely on professionals
Lawyers and accountants etc make their money by charging for their time. Often at hourly rates you’d happily take as a daily salary. So make sure you acquire as much information and knowledge yourself, find professionals who have a track record with startups and when you do engage anyone ensure you know what you are asking for in terms of outcomes, give detailed instructions and always push for and try to negotiate a fixed fee quote.
10. Look for a mentor
Starting up is full of tricky situations you might never have encountered but invariably someone else has. Consider approaching an ex-boss or industry legend to see if they might agree to help you in your early stages. Surprisingly such help is often willingly given for free and experienced entrepreneurs enjoy helping out where they can.
Michael Carter is the author of ‘Take the plunge – 101 things you need to know before starting in business’. This easy-to-read, colourfully illustrated book covers everything from business plans to VAT, selling to find premises, hiring people to limited companies and isavailable at a special price of just £5 (post paid) to visitors from www.efactorybooks.bigcartel.com