Essential Research Before Starting A New Business

sign postWhen you are fired up by a great idea for a new business it can sometimes be tempting to skip past some of the preparation and research that should be done as part of your planning process. Having a gut feeling that your business will be a great success is simply no substitute for proper research and preparation. Do not lose sight of the fact that far more new businesses fail than succeed in the long term.

Investing a little time up front can save you a lot of heartache further down the line, because it will mean that you are better prepared when you launch your business and it could provide you with vital information that has an impact on the fundamental nature of how your business operates.

We have compiled a list of eight essential things that you need to give proper consideration to before you launch your business idea. Work through this process and you will be able to build your business on a much stronger foundation at the end of it.

What is Your Business Called?

You should not decide on a name too lightly. This might be the only thing a potential customer sees and if it does not reflect what it is you are offering, or if there are confusing or alternative meanings, you could lose people before you even start. Check to see if the name you want is being used by anyone else. You can check for limited company names on the companies house website. Also check in case the name is already trademarked. These simple precautions can save a lot of work and expense later on if you find that you need to change your company name.

Another major consideration these days is whether a domain name is available for the business name you want. You do not want to have to be including lots of hyphens in the domain, or using a .net domain because someone else owns the alternatives. The standard for international websites is .com and if you are aiming mainly at UK customers then the geographical .co.uk is suitable.

Prepare A Business Plan

There is a step by step guide to writing a business plan on this website. Working through this will also help you think about the preparation and planning that you need to go through in order to increase the chances of success for your business.

You will certainly need a business plan if you need to approach investors or lenders about funding for your business. Even if you do not need to attract investors, you need to have a blueprint for how to set up your business and how it will develop over time. A good plan properly prepared really will help you understand how your business needs to operate and what your priorities need to be.

What Will the Legal Status Of Your Company Be?

The nature and size of your business will in part dictate the way you set it up. A limited company is more complicated to set up, but offers protection if the company gets into financial difficulties. Being a sole trader is the simplest and probably most sensible if your business and potential liabilities are going to be relatively small.

A sole trader is indistinguishable in law from their company, so any liability incurred by the company is incurred by you personally. The flip side is that you totally own the company and any profit after tax go to you. With a limited company you can avoid being personally liable if the company becomes liable for large costs. The profits belong to the company, and you can be paid a salary or shareholder dividends, or both.

What income you will get is another issue you must consider as part of this process. Will you take a salary from the business? Will you have enough to live on? You must be clear about how much you need to cover your living expenses and where this money will come from.

Finances And Accounts

As part of your business plan you will create financial forecasts, including a profit and loss and cash flow. This will help you identify whether you are going to need to seek external funding, how much and for how long. If you are lucky, your business idea will not require huge investment and you may be able to get along without it, but most businesses will require some investment up front and you need to plan for where this will come from. You also need to identify a good business bank account. Many will offer free banking for an initial period for any new business, so shop around for the best offer.

If you are approaching investors you need to be very clear about how much you need, what the money will be used for and when it will be paid back. This all comes back to the financial forecasts in your business plan and these need to be robust enough so that you can justify and explain all the figures in them.

You are going to need an accountant, so getting someone on board at an early stage can be very advantageous. Especially if you find someone with a lot of experience who can do much more than just produce your end of year accounts. Someone who can offer general business advice based on their own experience can be very useful in the early stages and save you a lot of money by ensuring your business and accounts are set up in the most advantageous way.

You will be paying your accountant for their time, so do not cost yourself more money than you need to be passing on unnecessary and trivial work to these professionals. It is surprising the number of people that maintain appalling records of receipts and invoices and expect the accountant to spend hours sifting through an unsorted pile of papers. Put sensible recording and filing systems in place from the start and you will be able to provide the accountant with ordered information and records. That way you avoid paying an expensive professional to do something that a filing clerk could have done.

Know Who Your Customers Are

No business can exist without customers, so you need to have a very clear idea of who is going to buy what you are offering. You must be able to clearly define exactly who your customers are, including whether they are individuals or businesses, if businesses – what sector, if individuals – how old are they, where do they live, what are their interests, etc.

You also need to have confidence that these people are going to be prepared to use your business and be interested in your product or service. The best way to confirm this is by carrying out some market research. Approach some of the people you expect to become your customers and try to gather evidence in the form of a questionnaire.

Get To Grips With Your Competitors

Understanding the real nature of the challenge before you has to involve understanding who your competitors are. The starting point is to know who the people you expect to become your customers are using now. You must gather information about any other companies that are providing the same, or a similar, service to the people that you have identified as your customers. Think about where they are based, how big they are, their resources compared to yours, their product or service, their prices, etc. Consider how you will negate the impact of any advantages that they have over you.

This leads onto considering your own unique selling point (USP). If you are to win customers from your competitors there have to be good reasons for them to switch, and you must be able to spell out these factors. Is your product or service unique, or significantly different to your competitors? If so, does that make it more attractive to customers, as different does not automatically mean better? Are you offering a superior service or a more attractive price? Are you offering some form of added value that your competitors are not?

Marketing Your Business

Now that you know who your customers are and are confident that they are going to want what you are offering, you must consider how you are going to let them know you are there and how you will provide your product or service to them. The best product in the world will not sell if the people it is meant for do not know it exists. So planning how you will market yourself is crucial.

You need to work out your route to market, which means the mechanism by which you sell your product or service. This will be self explanatory for many people, but you must understand it as there will be costs involved in each option. Will you be relying on telesales; will all your business come through your website; are you running a retail outlet or taking a market stall?

Start getting involved in social media like Twitter, Google Plus, Facebook and LinkedIn. Set up pages for your business and participate in forums and discussions related to your field of business. Get yourself known and build up contacts. Do not worry about trying to sell to begin with, as you need a good network of contacts before you can begin to take advantage of it to more actively promote your business.

There are many different ways in which you can market your business and you will almost certainly have to use a combination of these. The particular mix you go with will depend largely on the type of product or service you are offering and who your customers are. It is very easy to spend huge sums on marketing and advertising, but with any new business it is best if you can steer clear of anything that is very costly to begin with. There are many low cost marketing activities you can use, which we will consider in more detail in a separate guide.

Every business should have a website and this does not have to be expensive. How crucial it is will depend on your business model. Clearly if you are planning to primarily sell online then you will need a good e-commerce site which makes it easy for customers to find and buy what they want. It may be that you do not need to consider selling online and will just use your site as a sort of online brochure, making it easy for people to browse through your products or services. You need to have a clear idea of what your website needs to do before you start setting one up.

Logistical Considerations

Finally, you need to think through the detail of how your businesses will work on a daily basis, in terms of the systems you will have in place for routine work such as taking payments and paying invoices. Consider also what premises you are operating out of and understand all the costs associated with this, including any equipment you need. Remember to build in insurances, including public liability, employers liability and any others you need relating to premises, stock, tools, etc.

Do you need any licenses or permissions from a local authority or other body? Any type of food outlet will require licensing as will selling alcohol. If necessary take legal advice on this as you do not want to be fined or closed down just when you are getting going.

You will need to plan for employing staff. Even if you are not employing anyone to begin with, your plans for growth may mean you hope to further down the line. Have this planned out in terms of how many people you need, what skills and experience they should have and likely salary. Also ensure you understand your responsibilities with regard to PAYE and National Insurance.