[Closed] How to start a business

I know a lot of sole traders. Frankly most are terrible at a lot of things when they start out and either pick up the skills along the way or out source. The trick seems to be the get the balance right. There’s a huge ‘business services’ industry and if you wanted you could spend all day just doing the core function of the business, but the costs could suck you dry and there’s a lot of shysters about who’ll take your money and do little useful in return.

I've just set up a new business but done so with a partner (former colleague) who has been running his own company for the last 5 years. The new venture is a limited company and we are both directors. He's a lot more focused on the admin / finance side, whereas I'm more technical / operational. The business development / customer facing part we divide equally. It's worked really well so far but knowing what I know now I'd be very reluctant to start out on my own without that additional support in place as it's a really steep learning curve to step into it cold.

I'm in training to start my guiding company. At the moment I'm working for a company based in Vienna.

https://www.viennaexplorer.com/tours/wachau-valley-winery-bike-tour-small-group/

I should have all certificates needed by July to do my own thing.

I think first and foremost, you need to know the business you want to set up. You need to do understand how to make a profit, pretty much from the outset.

Therefore, a few years of experience working in that particular industry is normally essential and building contacts who can help you when you go it alone.

After that it’s all about the following: Drive, persistence and a bit of luck!

I'm in a similar position looking to start my own business and luckily have enough cash to live off for a couple of years. I'm trying to find a job in a related industry - I don't care about the money, but to get an appreciation of how it works. When starting out a huge focus has to be on marketing in terms of attracting customers and working out what your 'offer' is.  What kills most small businesses is cashflow not profit i.e. having enough liquidity to keep paying for wages, goods and services whilst running the business.

Rockape +1

You can't expect to be good at and know everything from day 1. There's a lot to learn about accounts, vat, tax, employment law, h&s etc etc. If you tried to learn all of that first you might never do it. Everyone has to learn it as they go. Your priority at the start is to try and make the thing fly.

My tuppence would be:

If you can, hold off employing anyone for as long as possible, it adds a whole new dimension of admin, stress, do's and don't's etc,

Get a good accountant experienced with similar businesses to yours

In my experience, which is quite extensive over the years, there has never been a worse time to set up a 'business', the very word itself gets confusing, folk think OK I'll set up a business then everything will be fine, without understanding the fundamentals.

Which is the acquisition of money, lots of money, more money than it costs to do all that is necessary to 'run' said business, which in this day and age of high business rates, high utility cost, high wages, high transport costs, & excessive bureaucracy is very difficult.

My advice, try and start your venture whilst retaining income from your existing source of employment, then when the revenue stream gets large enough, or the drain on your time becomes excessive, you make the choice. There's a simple axiom with business, it's 'Sell it for more than you pay for it', preferably a lot more and if that rule is broken the business fails. The key obviously is working out how much it is you're paying, not only for the raw cost of the object or your time and ensuring you are getting paid a significant amount in excess of that cost, to the point it almost becomes embarrassing the cash surplus you generate and spend less than you are earning, a lot less, because sooner or later some factor will come along and take a huge chunk away from you.

Only then consider going 'legit', it's a minefield, here in the so called 'private sector' we're screwed by everyone, Government, Customers, Staff, it's a nightmare and you need lots of cash to cope with it, personally if I had my time over again, I think I'd choose crime, it's a lot more fulfilling and a damn site more tax efficient lol.

Farquaad nails it, it takes significant levels of cash (gross profit) to run even a small business and I would agree it's not the best time at the moment (low confidence, saturated markets, very low margins on product)

I have also said before on here working for yourself and setting up a business are very different things. Building a fully functioning business with employees and premises and vehicles etc takes monumental effort and lots of cash (flow)

At the moment you probably need to sell skills and knowledge but even they are becoming commoditised.

Another observation - don't judge peoples wealth (i.e houses cars etc) by the business they run... often the two have nothing to do with each other.

It's not too difficult to raise money if you can prove your concept and do a little research into funding, especially early stage when starting out. There are many investors looking for more efficient ways to make their money work  than the usual - Interest rates are low, public co's and property are priced high which adds risk + there are tax incentives for investing in early stage businesses ( https://www.gov.uk/guidance/venture-capital-schemes-apply-to-use-the-seed-enterprise-investment-scheme).

What kind of business are you looking at starting? Never worry about sharing with others - most ideas have zero value - it is all in the execution.

Self funding / bootstrapping while working full time while you're getting started as mentioned above is solid advice - no need to jump in head first while inexperienced. Once you can prove it works part time / on a very small scale there are start up loans, or you can raise your first £150k investment under SEIS (link above). If you need more than this then it gets a lot harder. No track record, start small with your own money, just to try and prove the concept / unit economics and only invest what you can afford to lose.

There are many schemes, business incubators and accelerators aimed at helping people start their first business. Don't be scared to ask stupid questions, many out there will be happy to help and started from nothing themselves.

Good book:  https://www.amazon.co.uk/Art-Start-2-0-Time-Tested-Battle-Hardened/dp/0241187265

I did a few courses at the local college before i set up my property venture, best thing i ever did as i met similar people and endlessly asked questions to the tutors.

Now i still ask people who i trust and have no vested interest in my decision, pain really, as you have to hear what you dont want to, but they know better.  Funnily enough yesterday i had a coffee with a client who has her own company, she said exactly the same.  The day you think you know everything is the day you should get out.

Also, visit a few places you would like to run, look at the staff, if they dont look happy it says alot.  The failure rate of new ventures is incredibly high.

poolman

...The failure rate of new ventures is incredibly high.

I'd change that to the dropout rate of new businesses rather than failure.

Failure is where you go broke, but often people realise the business is not going to fly and bail out well ahead of that. Beach the leaky boat, don't wait for it to sink.

What's most important is luck, or resilience. You rarely have control over circumstances, and luck often comes in the bad type, so it's resilience that's needed most.

There's nothing wrong with failure so long as you haven't stiffed anyone, Plenty successful people have regarded failure as a lesson and kept trying.

Probably the thing most new business owners don't realise is that they are now actually salesmen and their prime job is to put themselves out there where the customers are, and do it all the time. The more you do that, the luckier you get.

The importance of cashflow is mentioned above. It really is a killer for many small businesses as they expand, because increasing stock levels absorb all spare cash and the temptation is to extend payments out or borrow from the bank.

Oh, and banks are bastards. Do not trust or rely on them, they'll do you over when you are at your most vulnerable. There's many good guys in them who will go well out of their way to help you, but their work is overlooked by beady eyed vultures who are ruthless at the first sign of weakness. Always have at least 2 accounts going so you can switch.

In any case debt should be approached warily. The axiom is it's a great servant, but a lousy master. Make borrowed money wash its own hands, and avoid using debt for personal consumables like cars while growing a business.

Join a local business club/breakfast club.

It`ll be full of people just like you, its a great place to network and pool your collective resource. Offer your skills to those who lack them and they return the favour by helping out in areas that you are less skilled in.

This might go against what a lot of people will say but ask yourself the reason you really want to run your own business? Less hours, no boss to tell you what to do, more money?

I used to run a small business with one other and it was very, very hard work and stressful beyond belief. Perhaps it was a bad business model, perhaps we weren't any good at it, perhaps we missed opportunities but I decided after a few years that it wasn't for me.

I now work for somebody else, I get paid holiday, pension and sick pay, I can go home at the end of the day without worrying that our unit will burn down, get broken into or something else. I don't have to worry that one of the staff members will not show up for work in the morning. I don't worry that customers will go bust and we will lose the money we are owed.

In truth, I work far less now, earn more (when I take all the hours I was doing into account) and life is far simpler. I also have energy to play sport, see friends and enjoy my life.

I appreciate some people are looking for a simpler life but I'd ask yourself if you could get this by working reduced hours or in a different job somewhere else?

I am not saying don't do it, I am just trying to show another perspective on things. For balance, one of my best mates runs his own business and loves it, says he enjoys the challenges (the things I listed above that stressed me out) and wouldn't go back to working for somebody else.

That said, I have had a number of business ideas that I believe could be both viable and personally fulfilling.

I think you should probably share what kind of businesses you are thinking about. You can be vague, I'm not suggesting you give away your secret business model but there's a hell of a lot of difference between say, opening a coffee shop, restaurant, bike shop, consultancy firm etc and setting yourself up as a hiking guide for tourists or making bespoke rustic furniture in your shed and selling it on ebay. Yes there will be fundamental principles that are shared between something big and something small but the process of starting up and the risks involved can be completely different. For some people business means premises and employees, for others it means enough money to keep the lights on and buy beer.

As above, if you can work for yourself in some kind of consultancy role (by which I mean where you're selling your skills/expertise, rather than selling stuff), brilliant. Once it starts to involve staff, stock and/or premises, it starts to get more complicated and cashflow becomes the killer.

Turnover is vanity, profit is sanity, cash is king.

Is it a bike shop?

If I really had to start my own business I would do what my customers do in Africa and eastern Europe and buy a big mixing tank (a cut-open IBC would do) and manufacture cheap household cleaners, fabric conditioner and dishwash liquid then sell it in jerrycans. I would make cheap formulations using salt as thickener but add very good quality perfumes because if the product smells good consumers will buy it, no matter how rubbish the quality.

The good thing about this is that for very little physical effort you make a hell of a lot of product to sell.

Probably the thing most new business owners don’t realise is that they are now actually salesmen and their prime job is to put themselves out there where the customers are, and do it all the time. The more you do that, the luckier you get.

This has been the big learning for me. I started a business with a friend, and have a B2C for bike accessories and B2B company selling design services. I think our services and product are great but nearly 2 years in we beginning to struggle due to being naive about sales and marketing.

It doesn't matter how good your product is if you can't communicate it to potential customers. Operationally you are never going to get it right first time but you need to have a good handle on sales and marketing.

Other things to consider - service companies generally require much less investment and risk than one that produce a physical product. It can be very lonely, even with one other, especially not good if you suffer from a mental illness. The lack of sick pay, pension, holiday pay etc is a real eye opener after being an employee, it's especially tough with young children at home. On the flipside as your own boss you can be me flexible to fit round your family.

Been self employed for about 20 years.. the main thing I'd establish is how many customers you need in order to pay initial outlay, overheads and your wages, and then whether that is a realistic number to target (can you do that much work in a week - see what your competitors are doing to see if those numbers are viable) and a plan about how you're going to target those customers and make them aware of your products/services.  If no-one knows about you, you will fail - even if you haven't got the budget of your competitors, you can still reach your demographic by being creative, you just need a plan.

If you think that it's realistic that you can get the X number of new customers per month (every month) that you need, then it's worth pursuing (ideally as a part-time venture initially to cut down the risk)

All IMHO of course, no doubt others will have better advice..

If your talking a company rather than sole trader then, I've started a company built it up and sold it, I now help others do the the same. Happy to help if I can.

I would have the capability to communicate my business to a significant enough customer base.

This bit isn't that hard really, if what your offering has value then correctly targeting people shouldn't be difficult, takes work but it's pretty codified. (depend on offering / industry / etc)

A lot of the time it's risk, take a risk and you stand a chance of being rewarded. (you might also cock it up but that's just learning 🙂 )

Don't know 'till you try.