Starting a business – where do I begin?1
Lisa Forde has been running her 2 online card based businesses, www.thecardgallery.co.uk and www.treeofhearts.co.uk for the past 10 years. Lisa can well remember the challenges of starting a business from scratch and over a short series of posts offers tips and advice gained over the past decade. This week she discusses the challenges of starting your own business.
Starting a business – where do I begin, by Lisa Forde
When I began my business, The Card Gallery, just over 10 years ago, I set up my business from scratch. If you are looking to do the same, then I hope this article is of help. There are lots of books and website articles which will help with the planning stage of your business, the following are pointers from my personal experience. My overwhelming feeling at the beginning was that there was so much to do, and just me to do it. The following points outline key areas that you will need to work through:-
A business plan and financial plan – whilst these words may give you a feeling of dread, a plan of what you are aiming for, timescales both short, medium and long term plus associated costs, will all be of great help to you. To be taken seriously by banks and suppliers, you need a clear plan; it should be concise and well documented. This will also be a handy tool to refer back to periodically, both to see if you’re on track and to see where your plan needs to be revised. Sometimes when you run your own business, you can be so involved in the ‘running’ aspect that you forget to take a step back to see how far you’ve come and where you need to go to next, a business plan will give you measureable targets to help with this.
Finance – a critical element of your business plan, you need to have a clear understanding of what is turnover, profit (both gross and net) and breakeven point. Project your sales turnover, cash flow, costs, and time. If you are making/dispatching all items, you need to cost in your time – as you grow you may choose to take on staff to help with these areas so these costs need to be accounted for – never think of your time as being free of cost!
Consider whether you will need funding and if so where will it come from. Do you need a wage to survive the first few months/year or could you afford to reinvest any profits your business makes?
Also think about VAT – if your aim is to become larger and possibly employ staff, I would recommend working VAT into your prices. You will need to register for VAT before you reach the threshold which changes each year, check HMRC’s website for this information.
For each of your products you need to work out profitability, taking into consideration all materials, time (often a big cost with craft related businesses), and distribution e.g. cost of delivering by hand, by courier, via Royal Mail.
Remember, cash is King! You need enough cash flow to keep your business running from month to month in order to survive. You must also keep a careful eye on profit – it’s very easy to become a busy fool.
Your business name – carefully consider your business name – is it clear, does it tell customers what you offer, is it easy to pronounce and spell and can you cheaply purchase the domain name (.co.uk and .com) for your chosen business name? Are there many other companies with the same name? Does your proposed business name begin with a letter early in the alphabet? If so your business will be more visible when listed alphabetically.
Your customers – who are they? Whilst you may have a brilliant product, if no one sees it or if it’s not aimed at your target audience then you are unlikely to succeed. If you’ve already been crafting as a hobby, you’ve probably sold your goods to friends and family and tested the market a little. Consider how you can upscale these numbers to achieve your target turnover. I have met many entrepreneurs who think they’ll launch a website and will gain thousands of pounds worth of sales in year one – sadly it rarely works like that. For every 100 visitors to a website, around 3or 4 of them will make a purchase – if you’re lucky! Work out who your target market is and the best way to reach them; is a website the best way to go…or a shop….or a market stall? After testing my products on friends and family I started with a market stall, this gave me chance to gain lots of feedback about my range, what customers really wanted and what they were prepared to pay. This information helped me to build an ebay shop, and then a website, allowing me to learn along the way before committing too much finance.
Pricing – working out how much to charge for your products will be a challenge – friends and family will be less price sensitive than the general public – try to test your product to a wider audience, get feedback, and tweak your product and price accordingly.
Operations – how will you produce goods Think carefully about the logistics of your business – if you’re hoping for a turnover of say £100,000 in a year, and say each card sells at an average of £2 each, can you make 50,000 cards in a year? Will you be awake into the early hours of every morning to produce them? Is it a realistic target? Will you require staff and if so, at what stage of your business plan? If you’re needing to work flexibly due to personal or child commitments, you will need staff / a team to support your business.
What type of business will you set up – think about the advantages and disadvantages of being a sole trader or limited company. The latter requires registering your company but gives you security if things don’t go to plan.
Support and advice – I was amazed by how much help was out there when I started my business and that help, plus more, is available to you today. Before you dash in, feet-first, investing lots of time and money, spend some time at a business start-up exhibition, visit https://www.gov.uk/starting-up-a-business/start-with-an-idea for local contacts, attend some networking sessions and talk to friends and family. Feeling like you’re on your own when setting up your business won’t be an issue if you ask for help and support.
Government run organisations such as the National Enterprise Network are there to help and support you and sometimes offer business grants and free training courses, covering marketing, finance and IT for example. It’s definitely worth contacting them to see what is available to you and being government run, they won’t be trying to sell you anything.
Hopefully you’re not too exhausted by all of the considerations above – turning your hobby into a business will be a challenge but you can do it. Now get working on your to do list!