Building a business is no quick feat. It takes time, energy, and know-how to create a fool-proof plan for success.
Along your journey, decisions will need to be made, and some of these will make or break the future of your organisation. We’re not talking about small choices here. There are a few fundamental turning points your company will encounter, and it’s crucial to be prepared for them.
So, what are the biggest decisions you’ll have to make, and what should you do when they arise? Here’s some practical advice that will equip you to tackle any upcoming challenges head-on.
Structuring your company
We don’t want to dishearten you, but around 20% of businesses fail in their first year. And much of the time, these companies encounter challenges because they have not been structured correctly since inception.
Choosing your business structure
When starting a company, it’s essential to choose business structure that will support your circumstances and your wider ambitions. The government allow you to register as either a sole trader, a partnership, a limited liability partnership (LLP), or a limited company (LTD).
Let’s go into these in a little more detail.
Sole trader
As a sole trader, you will be accountable for running your business as an individual. You can employ staff members if you wish, but it means you are solely responsible for the business and any losses it makes. Any debts will need to be settled out of your own pocket.
However, you will have full autonomy over how your business runs.
Who would this work for?
If you are starting a business on your own without any partners and funding it yourself, this may be the right option for you. It makes the end of year submissions easier, and you have full control over where everything goes.
Partnership
As the name suggests, forming a partnership is where two or more people create a business together, with equal liability. Everyone involved will be responsible for making their own tax payments.
With a collaboration like this, there is more of a chance of higher profits, and responsibilities can be assigned to partners with different skills. However, partnerships also present opportunities for disagreements, which can slow progress.
Who would this work for?
If you know you want to collaborate with someone you trust, this is a great way of starting a flourishing business. Make sure to set out responsibilities and realistic expectations before you hit the ground running.
Limited liability partnership (LLP)
LLPs are often the best option when two or more partners wish to run a business together. Unlike a partnership, the individuals within the partnership are not personally liable for debts they can’t pay. An LLP agreement is drawn up at the start to issue profit shares and responsibilities.
You can have an unlimited amount of business partners within an LLP and can decide between yourselves what, and how, each partner contributes to the company.
Who would this work for?
If you want flexibility within your team, this may be the right option for you. The liability of the business is not the down to a sole person or two people – it is shared.
Limited company
There are two different types of limited companies:
- Public Limited Company (PLC) – Shares can be bought and sold through a stock exchange.
- Private Limited Company (Ltd) – Shares cannot be bought and sold through a stock exchange.
Limited companies are businesses that keep your assets/finances separate from you. This means you will not be personally liable for any debts a limited company accrues. You have the option to offer company shares to employees.
Who would this work for?
Limited company structures are best for larger start-ups that want to protect their assets. Hiring bookkeepers and accountants to keep on top of your limited company’s finances can eat into your budget, but it’s often worth it to know you would not be personally liable for any debts in the company’s name.
When to hire – and who to bring on board
Once you’ve paved the way for your business, you may get to a point where things are piling up. Guess what? It might be time to hire. But how do you know when to start recruiting, who to employ, and what kind of role to give them?
When do you need to source new talent?
There are a few tell-tale signs that you need to start building a team in your business:
- You are turning down new clients because you don’t have capacity to take them on
- The quality of your products or services is decreasing – and perhaps existing clients are starting to complain
- You’re lacking particular skills within your organisation
- Your company isn’t growing as fast as you’d like
If more than one of these applies to you, it’s time to think about bringing other people into the fold.
What do you need help with – and who has the skills to make a difference?
Once you’ve established you need employees, you need to know what kind of roles you should be advertising for.
Identify the elements within the company that are a sore spot and ask yourself what’s causing the sticking point(s). If there are tasks that are pushed aside, what are they? Which jobs do you find the hardest? Which jobs would you just rather not take on? Understand the gaps in your business and seek about filling them.
Create a financial plan to budget for hiring. You need to know what you can afford before you begin the recruitment process.
When to expand your business
Knowing when to level up your business is key to successful growth. You need certain things in place before you can even think about expanding. For example, you need to make sure:
- You have the right team around you
- You have a steady and loyal customer base
- Your cashflow is stable
- You have the means to take on more opportunities, be that because you now have new skills within the business; you’ve found a new gap in the market; you’ve developed a brand new offering; or you’re thinking about acquiring or merging with another company
If you think you’re ready to shoot for the stars, it’s time to get planning. Check out our top 4 strategies for business growth, or learn how to scale up your business effectively and sustainably.
Speaking of advice, the right financial guidance is fundamental to a profitable future. Our finance directors and consultants are here to support you at every turn. Contact us for more information.