Before starting a business, it’s important to ensure you have a viable model once you set it up, you want it to keep going even during hard times. The most important thing you can do is create a complete plan before you start trading since it helps you to improve your chances of success – especially at the beginning when you’re trying to find your footing.
A plan also helps you see whether your SME idea is viable if it needs tweaking, its weaknesses and strengths, and so on. As small business accountants, we’re taking a look at what you should take into consideration before quitting your job or investing all your savings.
Have a Detailed Plan
As mentioned, this is probably the first thing you should do. A comprehensive business plan helps you to lay out your objectives and better understand how to achieve them. It can also help you to identify potential issues so you can avoid them or fix them, as well as spot opportunities in the market, making it easier for you to see if you’ll run out of capital, etc.
A business plan is also crucial if you want to get a loan or an investor interested in your project since they’ll want to see if your business has legs.
There are many other benefits to creating a plan, such as having a clear structure of your marketing efforts and helping you to adapt to changing circumstances. Whether or not you work within a fast-paced sector, it’s important to be flexible in order to understand the changing needs of customers and the twists and turns of the market – this is crucial if you want to stay ahead of your competitors and, of course, if you want your business to be viable.
Know What Your Competitors are Doing
Being aware of what other people with similar businesses are doing should be part of your initial research. This will help you to identify your target audience, understand the resources your competitors have, as well as their positioning in the market and what makes their business different from yours.
Having a USP – or unique selling proposition – is vital to attract customers and avoid getting lost in the crowd. So, make sure you’re aware of how your products and services differ, be it on price or quality, for example. Without an USP, your SME may not be viable.
Getting a handle on the competition is also important to minimise the risk you’re taking with your own business. It helps you to understand the market’s needs, and whether you can answer them. Researching your competition also allows you to spot any obstacles in the way, so you can know whether you should pursue a particular business model or not.
In turn, this will help you to save money. Starting a business can involve a lot of capital, including your life savings, so you’ll want to make sure your idea is viable before jumping in. After all, if you already know what doesn’t work by observing your competitors, you can avoid a costly mistake. Likewise, you can see what works and use that as a guide when you face similar situations.
Understand If You Can Meet Client Demands
Another key step! If there’s no demand for your products or services, then your business is not viable. This means that you must make sure you can create the exact products your potential customers are searching for. By understanding your client demands, you can answer questions like, will I have enough time to finish my clients’ project? and do I have the skills needed to develop a particular product?
Figure out your start-up costs, your overheads and how many hours you’re planning on working. This will help you to work out how much money you can make (after paying the bills, etc). If you don’t have enough for living expenses, at a minimum, then your SME idea will need to be tweaked – or changed altogether.
In order to improve your chances of success, you may have to look into working longer hours, increasing your rates, cutting your overheads one way or another, this could include, opting out of hiring employees right off the gate or choosing cheaper equipment initially, for example.
Know How Much You Need to Sell
Calculate how much revenue you actually need every week or month in order to not just survive, but also thrive. Include the cost of making a product, payments to suppliers, your wages, staff’s salaries (if you employ people), how much the products sell for, how many days off you want to take, and how much your utility bills are, etc.
If your current set-up isn’t working, you may want to get better equipment to make your life easier, subcontract to someone else or even create a different product.
The same goes for your services. Think about how many hours you want to work and how many projects you need at the same time in order to pull in a good salary, for instance. In short, figuring out how much you need to sell is essential when calculating the viability of the business!
Hold On to Your Full-Time Job at the Start
Before thinking about leaving your current job, it may be worth it to continue working there while you set up and grow your SME, depending on which stage of the process you’re in. This will allow you to assess whether the business is working without putting you in a stressful position of having no job and no income from your brand-new venture coming in.
We can help you when it’s time to consider limited company formation, so you don’t have to worry about details like these when you’re coming up with a plan or analysing just how financially feasible your SME is.
Understand the Law
Because we’re sole trader accountants and limited company accountants, we know the importance of staying compliant at all times. UK tax law is complex and full of intricacies, not to mention that it’s always changing and evolving; just like you’re an expert at what you do, we’re specialists at managing our clients’ accounts and ensuring everything is above board, so let us assist with this side of your business.
We can provide specialist advice to help you realise whether your SME follows the letter of the law and if, financially, it makes sense to go ahead. For more information, call us on 0330 107 9678, and we’ll be happy to hear from you.
Keep an Eye on the Economy
Some industries grow quickly – IT and technology are some of the most popular – while others have ups and down. This is something to keep in mind when you’re deciding which business to set up, since you don’t want to end up doing it at the worst possible time from an economic point of view.
For example, if there’s a housing crisis, you may want to wait before starting to flip houses. During the pandemic, the hospitality industry suffered a lot, so it wouldn’t have made sense to open a B&B during that time, for instance.
It’s all about understanding the current economic trends and whether you should wait to make the most of an opportunity.
Consider Your Timing
The same principle applies with timing. Opening a seasonal shop with no demand for such products (an example would be Christmas items in May) makes it very unlikely that your business will succeed. If you sell summer products, such as ice cream, inflatables or BBQs, then winter is not the right time to do it either.
Not all businesses rely on timing, of course, but if your SME idea does, take this into consideration before investing your time, money and effort.
Find Areas Where You Might Be Spending Too Much
Your business plan may need updating if you find that your expenses are too high. Whether initial costs of ongoing expenses, it’s important to know much you’ll be spending and where you can make cuts to improve cash flow. The difficulty is to ensure this is a balanced decision, meaning you’re not compromising on product quality or foregoing essentials, since that can do more harm than good.
If you want to use a particular software to create designs for clients but find that it’s too expensive, maybe you can look for an alternative instead. If your bills are too high, you can either change suppliers or think about working from home if you were paying for office space.
How Do You Know if You Have a Good Business Idea?
It can be hard to be one hundred per cent confident in your SME idea, but you’ll know you have a good one if it meets certain criteria. Not only should you be doing all of the above, but you can also ask yourself:
- Does my idea solve an existing problem? (Usually, a business has a higher chance of success if it can meet people’s specific demands and needs)
- Will consumers pay for it? (You might not be completely sure of this until you start selling, but having paying customers is proof that your business is viable)
- How big is the market? (Choosing a niche may help you to find your target audience easily, and it also helps you see whether you can target enough consumers to have a successful business)
- Do I like my business? (While this may seem obvious, it’s important that you’re passionate about it in order to remain disciplined and motivated to keep going, even if you hit hard times)
- Am I open to criticism and feedback? (No one likes negative feedback, but the truth is that it can be a great help when planning or growing a business, as it allows you to listen to what people are saying and improve your services and products; the result is likely to be more consumer engagement)
Helping SMEs and Start-Ups Grow
You can count on us to help you set up and grow your business. As your partners, Gorilla Accounting will provide you with all the specialist knowledge you need to deal with the issues that new businesses face, such as submitting self-assessment returns or dealing with IR35 (you can get a free IR35 review when you choose us as your accountant as well).
You also get 24/7 access to FreeAgent bookkeeping software to track all your expenses, transactions and invoices from anywhere and from any device. And, when you become a client, you can get same-day answers to your urgent queries when you contact us before 3pm.
That, combined with having your own dedicated accountant, ensures you’re always on top of your accounts and can submit all key documentation to HMRC or Companies House on time.
Don’t postpone your dream to become a business owner – get in touch with Gorilla Accounting, and we can help you set up your SME and handle the financials for you. You can also reach us on 0330 107 9676 or request a callback.
