Starting A Business From Scratch (Part 1)
This is one of a number of business startup guides that will be posted over the coming weeks thanks to Duncan Accounting. Today’s post is the first of two posts on the basics of starting a business from scratch.
It is the ambition of many people to run their own business. Some may have been made redundant. Others make the decision to start up in business to be more independent and obtain the full financial reward for their efforts.
Whatever the reason, a number of dangers exist. Probably the greatest concern is the possibility of business failure. Read on for guidance on some of the factors which need to be considered before trading begins.
Initial considerations
In order to make your business a success there are a number of key factors which should be considered:
- Commitment – starting a business is demanding. Determination and enthusiasm are essential.
- Skills – you will need managerial, financial, technical and marketing skills. If you do not have these skills personally, they can be found in a partner or employee, or acquired through training.
- Your product or service should have a proven or tested market, but must not conflict with the patent or rights of an existing business.
In addition to these general considerations there are a number of more specific matters.
The business plan
The business plan is the key to success. If you need finance, no bank manager will lend money without a sensible plan.
Your plan should provide a thorough examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results.
Business structure
There are three common types of business structure:
Sole trader:
This is the simplest form of business since it can be established without legal formality. However, the business of a sole trader is not distinguished from the proprietor’s personal affairs.
Partnership:
A partnership is similar in nature to a sole trader but because more people are involved it is advisable to draw up a written agreement and for all partners to be aware of the terms of the partnership. Again the business and personal affairs of the partners are not legally separate. A further possibility is to use what is known as a Limited Liability Partnership (LLP).
Company:
The business affairs are separate from the personal affairs of the owners, but there are legal regulations to comply with. The appropriate structure will depend on a number of factors, including consideration of taxation implications, the legal entity, ownership and liability.
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Keep an eye out next week for part two of starting a business from scratch.
Business startup guides courtesy of Annette Ferguson from Duncan Accounting
