In a recent study it was found that over 50% of new start up businesses do not survive beyond 5 years. In this blog, using my 20+ years of acting for start-ups, I give my Top 5 tips for any new business to consider.
1. Watch the cash-flow
Lack of cash is the biggest reason why businesses fail and can even bring down a supposedly profitable business.
• Produce cash-flow forecasts to identify likely ‘pinch points’
• Only buy what you need, not what might be desirable; yes, a £20k all singing, all dancing website might look great but is it too much of a luxury?
• Consider payment terms, both yours and your suppliers
• Negotiate with your bank for an overdraft facility that meets the needs of the business
2. Use your time profitably
A lack of time is the business owner’s next issue due to the sheer number of different tasks within the business and the difficulties of achieving a home/life balance.
• Identify where your strengths lie (e.g. sales and marketing) and focus your efforts there
• Outsource the tasks you don’t like to third parties, (e.g. book-keeping) but keep in mind the cash-flow issues arising from this
• Make use of the talents of your staff and delegate to them
• Avoid ‘displacement activity’ - these are activities that make you feel busy but don’t necessarily achieve the goals of the business
3. Develop a network of advisors
To paraphrase John Donne, ‘no business owner is an island’, you will need many different advisors to help ensure your business succeeds.
• An Accountant is the most important because they have the all-round business skills to be a confidant to you and a ‘critical friend’ to the business
• A Commercial Solicitor can handle your T’s & C’s and can draw up a shareholders’ agreement
• A bank that understands the business needs and ideally has managers ‘in branch’ so you can meet with them
• Other professionals to help you develop the business including developing the branding of the business, maintaining the IT and creating an appropriate website
4. Control your book-keeping, don’t let it control you
Book-keeping is a vital function of your business but you need to keep on top of it, especially with Making Tax Digital.
• Good records can mean you claim all allowable expenses against your tax and nothing is missed!
• You can derive accurate reports from your book-keeping software that give you the information you need to run your business effectively
• Come into the 21st century! Consider a cloud-based system – these can be accessed from anywhere on any device; for the most part, manual records and spreadsheets won’t work with Making Tax Digital
5. Contact Thomas Westcott!
And now, the shameless plug at the end – at TW we are business owners ourselves who know what it’s like to run a business. We are also specialists in acting for start-up businesses; I have written a booklet especially for new limited companies, if you would like a copy or have any queries at all, please get in touch.
For further advice on this subject, please do not hesitate to contact me or your local Thomas Westcott contact.