Got a business idea? Before you worry about logos, websites and social media, get these 12 things right.
Starting a business can look deceptively simple.
You have an idea, find some customers and start selling. In reality, there are a lot of decisions between having an idea and having a business that actually makes money.
You don't need to have everything figured out before you start. But getting the basics right early can save you a lot of money and headaches later.
Here are 12 things to work through before you launch.
1. Make sure there's a customer for your idea
A good business idea isn't enough. Someone needs to be willing to pay for it.
Before spending money on stock, premises, equipment or a fancy website, work out who your customer is, what problem you're solving and what they would actually pay for your product or service.
Talk to potential customers. Look at competitors. Test the idea cheaply before committing heavily.
The aim isn't to prove that everyone will love it. It's to find enough people who will pay for it.
2. Work out what it will cost to get started
Make a list of everything you'll need before your first sale.
That could include equipment, stock, insurance, software, professional fees, marketing, premises, transport and licences.
Then add the costs people often forget, like your own living costs, tax, unexpected bills and the money you'll need to keep the business going while sales build.
A business can be profitable on paper and still run out of cash. That's why the starting budget matters.
3. Know how you'll make money
Before launching, work out exactly where the money comes from.
How much will you charge? How much does it cost you to deliver each sale? How many customers do you need each month to cover your costs?
Don't just look at turnover. A business making £100,000 in sales isn't necessarily doing better than one making £50,000 if its costs are much higher.
Your margin matters.
4. Put together a simple business plan
You don't need a 50-page document.
A useful business plan should explain what you're selling, who you're selling to, how you'll reach them, what you expect to earn and what it will cost to run the business.
It is also a good way of spotting holes in your idea before you've spent money on them.
5. Choose the right business structure
One of the first big decisions is whether to operate as a sole trader, limited company or another type of business structure.
It's not just a paperwork decision. Your structure affects your responsibilities, tax and how the business is legally set up.
A limited company is legally separate from its owners, while a sole trader is personally responsible for the business. GOV.UK recommends checking which structure is right for the type of business you're running.
If you're unsure, get professional advice before registering rather than trying to unwind the decision later.
6. Get your numbers set up from day one
Keep business money separate from your personal spending and make sure you can see what's coming in and going out.
You need a simple way to track sales, expenses, invoices and bills.
Don't wait until the end of the year to discover how the business is doing.
A regular look at your cash position will tell you much more than a bank balance alone. A business can have money in the account today and still have a cash-flow problem next month.
7. Understand your tax responsibilities
Tax is one of the easiest things for a new business owner to underestimate.
What you need to do depends on how your business is structured and how much it earns. You may need to deal with Income Tax and Self Assessment, Corporation Tax, VAT or other taxes.
If you set up a limited company, for example, there are requirements around Corporation Tax, company accounts and tax returns. Directors remain responsible for making sure the company's records and filings are correct, even if they use an accountant.
Put money aside for tax as you go rather than treating the whole balance in your business account as spendable.
8. Check whether you need a licence or insurance
Some businesses can start trading with relatively few formal requirements. Others need specific licences, permits or insurance.
It depends on what you're doing and where you're operating.
Selling food, working with certain products, running a business from premises or employing people can all bring additional responsibilities. GOV.UK has a licence finder that lets you search by business activity and location to see what you may need.
Don't assume that because another business does something, you automatically have permission to do the same.
9. Get the boring paperwork right
Nobody starts a business because they're excited about filing accounts.
But records matter.
If you're a limited company, you'll need to keep company and accounting records and make sure the information held by Companies House is correct. There are also deadlines for filing accounts and tax returns.
Set up a system from the start. Keep invoices and receipts. Record expenses. Keep track of what customers owe you.
It is much easier than trying to reconstruct six months of missing paperwork.
10. Decide how you'll fund the business
You don't necessarily need a big pile of cash to start a business.
Depending on what you're doing, you might use your own money, a business loan, investment, a Start Up Loan, grants or finance from other sources.
The important thing is to understand what the money will pay for and how it will be repaid.
Borrowing to buy something that helps generate revenue can make sense. Borrowing simply because the business is short of cash every month is a different proposition.
Before taking finance, understand the total cost and make sure repayments fit your cash flow.
11. Don't spend your budget trying to look bigger than you are
It's easy to spend money on branding, offices, equipment and technology before you've made a sale.
Some of those things may be essential. Plenty aren't.
A new business doesn't need to look like a £1 million company on day one.
Spend where it helps you win customers, deliver the product or service and run the business properly. You can upgrade the rest as the business grows.
Your first priority should be building something people will pay for.
12. Know what success looks like in your first year
Don't make the mistake of measuring everything by turnover.
Set a few numbers that actually tell you whether the business is working.
That might be monthly sales, gross margin, number of customers, repeat business, cash in the bank or how much you're able to pay yourself.
Then review them regularly.
Your first year probably won't go exactly according to plan. That's normal. The useful thing is knowing where you are, what's working and where the money is going.
Starting a business is the easy part. Building a healthy one is harder.
There is no perfect time to start a business, and you won't have every answer before your first customer arrives.
What you can do is avoid some of the most expensive mistakes.
Know your customer. Know your costs. Keep an eye on cash. Understand your tax responsibilities. And don't take on finance without knowing exactly what it will cost you.
The businesses that survive aren't necessarily the ones with the biggest idea.
Often, they're the ones that understand their numbers well enough to make good decisions when things don't go to plan.
