So, you’ve decided that you want to take the plunge and start a business. But how do you go about sorting out the necessities from the nice to haves when there seems so much that you have to consider?

Well, as with many things in life, concentrate on keeping it simple. For most businesses, the essentials can be broken down into three easy to remember areas:

• Management
• Marketing
• Motivation

This month we’re going to look at Management which, broadly speaking, comprises process management, financial management and people management.

Process

This refers to managing the entire process of conducting your business, including premises, equipment, raw materials, stock, systems, etc. Here, many people think big too early. All of these things represent cost so aim to start on a shoestring and grow gradually. For example, many consultants make the mistake of thinking they need an office. It makes them feel great but contributes nothing to their business. Similarly, don’t be lured into buying huge amounts of materials because it seems cheaper. It will be a false economy if you can’t sell your products or services as quickly as you’d hoped.

Key to good management is a good business plan and there’s plenty of advice around from banks and Business Link (www.businesslink.gov.uk) on how to write one.  Even if you don’t need to apply for finance it’s an exercise worth doing as it makes you examine realistically and in detail the viability of your future business.

Part of this exercise will also involve you deciding the structure of your business – sole trader, partnership, limited company? Here again, depending on your business type it’s often best to start as a sole trader and see how it goes. The important thing to remember is the degree of liability associated with each. As a sole trader, you and the business are the same which means that you are personally liable for all debts or claims. If in doubt, seek legal advice. And don’t forget insurance. It can be expensive but may be invaluable if things go wrong.

Finance

In terms of financial management, your start-up essentials comprise sufficient capital to invest in your business and keep it going until you start to make money from sales. You also need a good cash cushion to tide you over in terms of expenses (business and personal, as appropriate) until the money starts coming in. And at this stage, be warned. For most people the time it takes before they start making money is far, far longer than they ever anticipated.

Other financial essentials are a good cash flow forecast and a realistic understanding of pricing. Most people start up their businesses on a basis of ‘cost plus’ pricing i.e. what it costs you to produce or deliver your products or services, plus a profit margin. This is rarely ideal. It overlooks the key element of competitor pricing (and you will rarely establish a flourishing business on the basis of being the lowest cost provider), and the costs of doing business over time. Remember, you can always reduce prices. It’s hard to put them up.

As soon as you start your business you must notify the Inland Revenue, Customs and Excise - if you are going to be charging VAT, and any other agencies whose regulations may apply to your type of business. Of course, you must also start keeping good financial records of income and expenditure.

People

Finally, people management. Many start-ups comprise just one person, working alone which means that you don’t have to worry about all the employment rules and regulations which now apply to even micro-businesses (check these out in fine detail, well in advance, if you will be employing people). However, there are other key people upon whom the future success of your business depends. You (and we’ll deal with motivation in a later article) and also your family and friends. You’ll need their emotional and practical support and understanding more than you might realise, so don’t overlook the possible impact on them.

[Published on Sixtyplussurfers, February 2007]