If you are looking to start a new business, establishing a solid financial base should be one of your main concerns. Whether you are intending to set yourself up as a sole trader or register a limited liability partnership with a trusted acquaintance, it pays to think like an accountant. Developing a financial plan for your business might seem like a chore, but it is something you cannot afford to ignore.
Keeping your start-up costs down
One of the most crucial tasks you will need to get to grips with is working out your start-up costs and keeping them to a minimum. The less you spend on setting up your business, the less you will have to turn over to breakeven and the more likely you will be to see your business through the first 12 months without falling into a financial crisis.
Depending on the nature of the business you are intending to launch, your premises costs are likely to be one of your greatest overheads. If you can start your business without having that financial burden, you will be more likely to see your business thrive in the long run.
Providing it will not hamper your ability to operate effectively, starting your business from home and then moving into dedicated business premises when you can afford to do so can help you to keep your premises costs as low as possible. If you need to meet with prospective customers, you may be able to arrange to do this at an alternative location, such as at a library or coffee shop.
To be able to operate successfully, you may need to acquire assets such as furniture, computer equipment or company vehicles. If you have the money, you could buy these assets outright. However, the initial expenditure may affect your cash flow.
If money is tight, leasing these assets may be a better solution. Leasing lets you use assets over a fixed period in return for regular payments. However, it means that you may never own the assets outright.
Protecting your initial investment
Regardless of the amount of money you spend on setting up your business premises and acquiring any necessary assets, you must ensure that you protect your business with the right insurance coverage. You may need to take out an insurance policy that covers your business premises against damage from a variety of causes, including fires, floods, and malicious damage.
As well as insuring the premises itself, you may need to consider taking out contents insurance to protect your assets, public liability insurance to protect members of the public who visit your premises and employer’s liability insurance to protect your employees. When buying insurance, you should always compare quotes from several different insurers. If you do not do this, you will run the risk of paying over the odds for your insurance premiums.
Unless you have a generous amount of money to work with, you must keep your start-up costs to a minimum. Every penny you spend must generate money – otherwise, you may struggle to keep your head above the water.