Setting up a business in six easy quotes

Last year, more than 523,000 new businesses were formed, according to Startup Britain. That’s up from 484,000 in 2012 and 440,000 in 2011.

The financial crisis has, of course, helped swell the number of new businesses. But it’s also a healthy sign that entrepreneurial Britain is alive and kicking.

Indeed, SMEs account for a whopping 99% of all private sector businesses, 59% of private sector employment and 33% of turnover.

In Scotland, 30,263 new businesses were set up. Best postcode for new starts was G2. Second and third were in Edinburgh – EH3 and EH6. Of interest, we have two offices in Edinburgh, in EH3 and EH6 – and have helped many of those businesses get off the ground.

The number of active businesses in the UK stands at 2.82 million, up from 2.73 million, according to the latest Entrepreneurs Index report from Barclays and the Business Growth Fund.

Setting up in business is a huge step for anyone and, for the best chance of success, what’s needed are strong foundations.

“I find out what the world needs, then I proceed to invent.” (Thomas Edison) 

First, have a clear idea of what your business will be about. Most entrepreneurs start businesses in sectors they’ve worked in. From experience, they’ve spotted a gap in the market – an opportunity waiting to be exploited. 

At this stage, with a germ of an idea, what’s key is research. Your idea might be a good one, but does it add up to a viable business? Be honest, don’t assume. 

Also, ask yourself this: what does success look like? Is it a comfortable living? Is it to build a business that you can sell? Is it to only have to work part-time? In other words, set longer-term personal goals.

“A goal without a plan is just a wish.” (Antoine de Saint-Exupery)

Turning dreams into reality needs a business plan. An honest assessment of likely income, month by month, in the first years of trading and, of course, an equally honest assessment of likely costs.

The business plan should clearly set out the practical consequences of different trading levels. If the business is a roaring success, that might mean having to buy unbudgeted stock – a cash flow issue. 

Likewise, if turnover isn’t what you expected, but costs are fixed, that will also have an impact – and should be planned for from the outset.

While this crucial step is best accomplished with professional advice, you can get help and tips from government or more specifically from the taxman.

”About the time we can make the ends meet, somebody moves the ends.” (Herbert Hoover)

Okay, you now have your business plan. The next step is finding the capital to make it happen: to pay for equipment, stock and other outgoings (premises etc), and as a cushion against limited income while the business picks up. 

There are many sources of funding, not forgetting banks. Other sources include family and friends (but beware of emotional entanglements!), business angels and crowd funding.

This is where good advice can pay dividends, because what you need is the best deal possible. You also need to understand precisely the terms and conditions you’re signing up to.

As a first step, have a look at www.gov.uk which has helpful hints, or the National Enterprise Network (England and Wales), or Business Gateway (Scotland). If you’re under 25, there’s also the Prince’s Trust.

George McKenzie is senior partner with Edinburgh accountancy firm Gillespie LLP.

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