Top 10 tips for setting up a successful business

Entrepreneurs often approach us with a common problem. They have the passion and determination to set up their own business, but are unsure of the financial matters they need to consider.

Our top 10 things tips for starting up your new venture: 

1. Tidy records, promising future

Financial and legal records. Crucial for the future of your business but rarely what an entrepreneur, intent on seeing their ideas come to life, wants to focus on. Don’t drop the ball here though – we cannot emphasise enough how important these records are when it comes to the future of your new venture and securing growth capital. Without them, the future is not so bright.

2. Registering for VAT

The smallest of preparation in this area can make your future a little simpler. Register for VAT, even before your business meets the minimum threshold and as soon as applicable you’ll be able to reclaim VAT on expenditure such as travel, fuel and subsistence. Every little helps!

3. Are two heads better than one?

Running a business alone isn’t for everyone. If you have a trusted person in mind with good working chemistry and a common vision, a co-founder can provide you with great support as well as reducing the burden of being the sole decision maker. You’ll have someone to bounce ideas off and they will bring their contacts with them, doubling the size of your business network. However, you will likely have to split the initial equity, diluting your share of the business and choosing the wrong co-founder may lead to issues down the road when raising finance or selling. 

4. Choosing a solid foundation

When structuring your business, a Private Limited Company (LTD) and a Limited Liability Partnership (LLP) offer many of the same advantages. You can set up at LTD as an individual, naming yourself as a director and major shareholder, but an LLP requires at least two people. One significant difference is that as an LTD your business can receive loans and capital investment from outside investors, which is great for when you are looking to grow your business in future. LLPs can only receive loan capital and cannot offer equity shares to non-LLP members, which makes it more difficult to do an equity fundraise from an institutional investor later on.

5. Appoint your council

If you are the solo founder, but would still like some support, you can add experience to your board in the form of non-executive directors. Non-execs can provide valuable advice and even more valuable funding for your new business. Be meticulous with who you choose. You want a breadth of skills and experience, without big egos and butting heads.

6. Attract investment

Alongside non-execs, early funding may come from family, friends or a high-net-worth individual you know through your wider network. The Seed Enterprise Investment Scheme (SEIS) is designed to help your new business raise funds by offering tax reliefs to individual investors who buy new shares in your company. Reduce the burden on those who are helping you reach your goals by utilising the SEIS scheme.

7. Employees vs contractors 

You may consider hiring contractors in the early stages of your new business because you will save on national insurance and have the ability to stop using and therefore paying the contractor if cash runs out. However, an independent contractor can work for others and often sets their own hours of work, unlike employees who work the hours you choose and can be trained in the way you want the job done. Beware! If you use a contractor on an exclusive basis, they may be deemed an employee regardless, which can lead to the paying of employer’s National Insurance as well as penalties from HMRC. 

8. Guard your equity

In the early stages when cash is tight, it can be tempting to use equity as a form of remuneration. Once equity is given away it is very difficult (and expensive) to get it back. Instead of using equity, consider implementing employee share schemes, such as Enterprise Management Incentive (EMI) options, to incentivise early staff.

9. Your three pillars of advice

It is important to get the right advisors on board who are able to guide you in your decisions, in order to maximise the value of your new business.  The three key advisors to consider are Bankers, Lawyers and Accountants. 

10. Don’t get ahead of yourself

When setting up your business it’s easy to get caught up in planning for the future. However, it is important to focus on steady growth and hold off on investing in a corporate structure until you have a clearer understanding of how your business will perform over the coming years. When you have time, take time.

Considering these top tips will put you in the best position for future business success. Don’t forget why you set up your business in the first place, remind yourself of your goals and what you want to achieve in order to stay on track.

This article is part of our Lifecycle Of An Entrepreneur series. Click here for more top tips!