Starting your own business can be exciting but daunting, so having access to the right professional advice can be vital to its success. If you’re launching a start-up business, there are many different issues you need to be aware of. Here, we look at answers to some of the more common questions that our business clients ask us.

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Ensuring your business is viable

When you’re starting a new business, one of your priorities should be to ensure you have a clearly defined product or service and an identifiable market for it. You don’t necessarily need a unique proposition, but you do need to show that you can stand out from the competition and there is customer demand. This will involve a lot of initial design and research, to ensure you’re not entering a market that’s already saturated.

Create a realistic business plan

Your business plan will be crucial for the successful launch of your business – particularly if you need to borrow funds to get it started. It should include a clear and reasonable business proposition with evidence to show any potential investor that you can deliver the returns they need to recoup their money. You should include research into the viability of your business, details of key personnel and their relevant expertise, marketing plans, how the business will operate, premises and equipment, and profit and loss (P&L) forecasts, including balance sheets and cashflow forecasts.

Ask your accountant or IFA for advice on how to structure your business plan. They’ll not only be able to give you expert guidance on what to include, but they may also be able to put you in contact with potential lenders or investors.

The importance of cashflow

Poor cashflow is one of the biggest reasons why businesses in the UK fail, so understanding it could be vital in making yours a success. You need to include variable income and costs, such as sales volumes and payment patterns. For example if you intend to give 30 or 60 day payment terms, estimate how many customers are likely to comply, and factor this in. You also need to include fixed expenses, such as rent, wages, loan repayments, VAT or PAYE and any relevant payment terms. Once you’ve identified these, you can use them to create a monthly P&L and cashflow forecast and assess if you’re likely to need a loan to start your business.

While it’s only natural to be positive about your business prospects, most lenders will be put off if they feel your cashflow forecasts are unrealistic, because they want to know you’re a viable risk. As events of the past year have shown us, anything can happen to disrupt your business, so it’s always best to err on the side of caution by underestimating income and overestimating costs.

Obtaining finance

There are many different ways to raise finance for your business and new approaches are emerging all the time. You may decide to use your own personal funds, or one of the most common routes is to borrow from an institution. However, you may also want to consider crowdfunding, or take advantage of government or local business grants. Pension-led funding is another option, although this is a specialist and complex area.

Your accountant and/or financial advisor will be able to give you expert advice on which funding option is right for you and your business.

If you need a loan or equity from an investor to get your business started, they’ll look for security, as well as a viable business plan and cashflow forecast. If your business has no assets, this usually means using your own personal assets as a guarantee. It’s natural to be concerned about this, but if you’re happy to put up a personal guarantee, the lender will see it as a sign that you have confidence in your business. Ask your IFA for advice on personal guarantees, as they can help to ensure you’re not overexposed.

Structuring your business

How you set up your business is an important decision that could affect your tax liabilities. You could choose to set up as a sole trader, a limited company, a partnership or a limited liability partnership. Each option has pros and cons, depending on the nature of your business, the key personnel and any funding requirements.

As a sole trader, you’ll have personal liability for all the business’s debts, so you need to register with HMRC before you start trading. If you set up as a limited company, either on your own or with others, the company is its own legal entity, responsible for its own debts and shareholders are protected through their capital in the business.

If more than one of you is starting the business, you may want to set up as a partnership. In this case each partner would have personal liability for any business debt and would need to register as self-employed with HMRC. The partnership will also need to register separately with HMRC. Alternatively, if you set up a limited liability partnership, the partners are protected from debt liability, as they have put funds into the business.

VAT registration

You may not need to register your business for VAT straight away, but there are threshold limits on your income if you’re not VAT registered, so you need to check you don’t exceed these. In some cases, there can be advantages in registering for VAT early – for example, if you invest in equipment to start up, you can claim any VAT back.

Talk to your accountant or financial advisor about VAT registration when you’re thinking of starting up your business and they will advise you on the best approach.

Keep your books in order

When starting up a business, it’s easy to focus on attracting customers and boosting sales, but it’s also incredibly important to keep on top of the paperwork and bookkeeping. As well as being a legal requirement to submit information regularly if you’re VAT registered, you may be asked to show evidence of income and expenditure by HMRC at any time. It also helps you to understand how the business is developing.

You may want to look after the books yourself, you might recruit someone to do it, or you could ask for external professional support. In each case, your accountant can support you. If you do the work yourself or employ someone else, they can check the first few sets of figures to make sure you’re being compliant. Of course, they can also take it all off your hands, so you can focus on building your business.

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At Grosvenor Wealth Management, we work with a number of new business owners, offering them support and advice tailored to their personal and professional needs. We also work closely with professional accountants to offer a fully rounded business service. So, if you’re thinking about starting your own business and want expert advice and guidance, please contact us using this form.

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