Key considerations for starting a business
Read these useful tips to get an idea about what sorts of questions you should be asking yourself as you consider setting up your own business:
- Get everyone involved in setting goals and objectives.
- Find out all you can about your customers.
- Understand who your competitors are.
- Identify your strengths and weaknesses relative to opportunities and threats.
- Determine which capabilities you absolutely need to succeed.
- List all the things you do that add customer value.
- Make sure that you do your financial homework.
- Imagine several different versions of your company’s future.
- Appreciate the impact of the Internet on your business sector.
- Recognise the value of leveraging social media.
Business success based on six factors
A combination of several fundamental factors determines the success of a business. Refer to the following important points to make sure that you’re covering all vital areas:
- Plans: Company mission, vision, goals and objectives that all work together.
- Organisation: A structure for your company that makes sense.
- Procedures: Efficient and effective ways of doing things.
- Leadership: An ability to build a team and to influence and encourage others around you.
- Skills: The talents and expertise your people need to succeed.
- Culture: Beliefs and attitudes that lead to doing the right thing, always.
Key components of a business plan
A business plan is a key document communicating the developmental objectives of your business. To be sure that this vital information is as functional, accurate and comprehensive as possible, be sure to include the following basics:
- Executive summary
- Company overview
- Business environment
- Company description
- Company strategy
- Financial review
- Risk analysis
- Funding requirements and milestones
- Action plan
10 key rules for avoiding business trouble
In business, a dangerous area of marketing arises when people try to bypass regulations that ensure fair pricing, safety and honest advertising. In the UK, as in Europe and North America, there are regulations as well as self-regulatory industry guidelines:
- Make sure your pricing is fair (because unfair competitive practices are usually illegal).
- Clarify the limits of warranties for services or goods.
- Provide full warnings and details about your product’s content and source on labels.
- Follow an open and honest policy with the media.
- Never say anything deceptive or misleading in ads or other communications — remember the watchwords “legal, decent, honest and truthful.”
- Never distribute products that can do harm to anyone.
- Never discuss prices with competitors (that’s called price fixing).
- Keep an eye on future trends that may impact on your performance.
- Don’t become complacent — change is inevitable, so see it as an opportunity.
- Pay attention to how your business appears online.
Keeping tabs on your business cash
Cash is the lifeblood of any business, whether it’s a multi-billion-pound empire or a small independent company. Refer to these handy guidelines when delegating the handling of cash within your business to ensure a fail-safe system of cash flow:
- Separate cash handlers. Be sure that the person who accepts cash isn’t also recording the transaction.
- Separate authorisation responsibilities. Be sure that the person who authorises a payment isn’t also signing the cheque or dispersing the cash.
- Separate the duties of your bookkeeping function to ensure a good system of checks and balances. Don’t put too much trust in one person – unless it’s yourself.
- Have a cash reserve. By monitoring business cash, you can be better prepared for unexpected events or emergencies. A sufficient cash reserve allows you to handle unforeseen expenses, weather economic downturns or seize opportunities that may arise. It provides a safety net and enhances your business’s resilience.
- Start out each month with a cash-flow projection as far out as is needed to break even. Without sufficient cash, you won’t be able to pay essential suppliers or your key employees.
Tracking business finances through timely bookkeeping
All businesses need to keep a record of their financial transactions in order to assess their financial health, provide status reports to various bodies and comply with legal regulations. Use these steps as a guide to keeping your books well and truly up to date:
- Transactions: The purchases or sales of items start the process of bookkeeping.
- Journal entries: Enter transactions into the books through journals.
- Posting: Post journal entries to the Nominal Ledger.
- Trial balance: Test accounts in the Nominal Ledger to see if they’re in balance.
- Worksheet: Enter on a worksheet any account adjustments needed after the trial balance.
- Adjusting journal entries: Post adjustments from the worksheet to affected accounts in the Nominal Ledger.
- Financial statements: Prepare the balance sheet and income statement using the corrected account balances.
- Ratios: Use ratios to cross check performance from one accounting period to another. Any major change could signal an error in record-keeping if you can’t account for it by a known change in performance.
- Closing: Close the books for the revenue and expense accounts, and start the entire cycle again with zero balances in both accounts.
