Partnership, company or sole trader?
Do you want to operate independently and be the primary person making business decisions? Or would you benefit from the joint support of a business partner to share the responsibility? There are benefits to both sides of the coin, as we explore in this past article
Entering into business with little to no experience can be daunting, so getting a knowledgeable partner on board is great for comfort; that being said, are you willing to share all the glory and profit with this partner? Also, do you trust them not to expose you to losses, and are you comfortable with giving them creative freedom over business decisions? As you can see, there are many things to consider.
Our advice is to always set out clear guidelines to each of your roles within the business in some kind of contractual agreement before you launch. Remember that sometimes going into business with friends can be dangerous – know the person’s work ethic first.
Who (and how many) will be in my team?
Starting and growing a business requires more than going at it alone – especially when the pace picks up. A strong team can build a business’ success. Even those who decide on being a sole trader can benefit from incorporating a well-skilled team who can help support, add value to, and grow their business.
The type of people you hire depends on the areas in which you begin needing support. Firstly, it’s incredibly important to recognise you need support, and then to do something about it – otherwise, you will burn out, which will lead to the downfall of your business.
Typical roles needed within a business include sales, marketing, social media, bookkeeping
and accounting, and management. It ultimately depends on the size of your business and how quickly you’re expanding
. Without question, build a team of reliable individuals that you can trust and that have a broad mix of skills that could be potentially utilised to further your business. Also, find a diverse team from different backgrounds, ages, abilities, and experiences to add their unique take and skills to the business – this can enhance innovation, productivity, and creativity
While you may need support in various areas of your business, you need to be realistic about how many people you can afford to take on. Until you have the budget to take on staff in more permanent roles, you may need to recruit casual or part-time employees (or even interns who are keen to get some experience without pay). Remember that taking on staff can increase your productivity and in-turn boost your profits, so don’t think that by cost-cutting in this area that you’re doing your business a service.
Who is my target customer? And how are they responding to my business?
One crucial factor to consider before starting a business is knowing who your paying customers are going to be – this is something you work out in your market research, as explained above. Continuing on as a business, however, you should aim to stay intune with what your customers want and need from your business by listening to them – seek feedback, read reviews, and check your social media accounts for comments and interaction. Running a business should not be one-sided; you should also grow and adapt with your customers in mind to build success. This is a good way to also identify emerging trends early – your novel product or service may be in demand now, but in future, it could get replaced by a newer and shinier product or service. Don’t let your business fade into the background by not tracking your customer feedback and market research.
What is my niche?
A niche is a specialised area or category of the product or service you offer to your ideal customer. Operating within a niche will help differentiate your business from the competition. Your niche is a quality about your company that stands out from the rest, and it can help persuade consumers to purchase your products or services over your competitors due to the added layer of novelty and interest.
Remember, being niche doesn’t translate into being quirky. For example, if your company donates a % of each sale to an organisation, or ensures its packaging is sustainability sourced, these are niches. Your niche can come from various areas of your company, from where it’s made, how it’s made, competitive pricing, a charitable component, or the product or service itself.
Who are my competitors?
Even with the help of a business niche, it is likely your business idea will have several variations currently existing. To optimise your business offering, it is important to research competitors to understand exactly where your business lies in the market, whether your brand is differentiated enough, and how strong your competitors' offerings are. Through conducting a competitor analysis before you create your business, you can see how your competitors interact with their customers, how they present their products and how strong their branding is. Also, remember to stay aware of indirect competitors – these don’t offer the exact same product but can eat into your market share. Being aware of both direct and indirect competitors allows you to differentiate your business with better products, services, prices, and incentives to purchase.
How much funding do I need to start?
They say you’ve got to spend money to make money – this is especially true in business. So, how do you determine how much money to take out?
The secret is to calculate a bit more than you need as this money can just be redeposited into your loan or line of credit. To start your business, you will have immediate costs that pertain to registering your business name, finding a space (if relevant), paying for a website or marketing, registering a trademark or patent
, and then there’s the finer details like furniture, stock, and running expenses. Calculate an amount that will cover not only your startup costs but also ongoing expenses before you are generating profit.
How do you plan to finance your business?
Now that you know how much funding you will need, you need to ask yourself how do you plan on financing your business? Your funding options can include looking for investors, using your personal finance, or seeking external financing. There’s pros and cons to each.
While receiving funds from investors means you aren’t getting entangled with restrictions and interest rates, it may mean foregoing a certain percentage of your business. Further, it can be tricky finding investors, and for many, personal finance isn’t an option. Therefore, business loans and lines of credit are typically the way to go. Always do your research before entering a loan to ensure you can afford the repayments and that you’ve got a suitable interest rate.
Remember that if you’re getting involved with credit, that it’s important to make your repayments on time. It may be worth hiring a bookkeeper to help you stay on top of your finances and avoid missing payments and getting into trouble.
How will I define success after the first year of my business?
A part of being a successful business owner is being able to set attainable goals and forecast where you would like to see your business after its first year of operations. After thriving in that first year, how will you continue to climb and evolve?
Question to ask yourself include:
- Where will I be in another year’s time?
- Will I have a second location?
- What target number of clients, sales, employees, or profits will I earn?
- What are some of my personal goals I wish to achieve in my business?
Having run through those big questions, you’re just about ready to open up! As always, check for more advice and up-to-date information relating to small business finance on Shoebox Book’s blog
. We update regularly to keep you in-the-loop with relevant information for you and your business.