Top 20 questions to consider before starting a business
1. What goods and/or services will the business offer?
This is a fundamental question that should form the basis for a business plan.
2. What is the target market?
Again, this is something you should address in your business plan, especially if you're planning to offer goods and services for which there is no established marked.
3. How much money will I need to get started?
This is a threshold issue to address in your business plan. Many businesses fail because they are undercapitalised.
4. How will I finance the start-up phase of the business?
Even if the answer is that you are going to provide all of the start-up financing out of your own resources, you need to be honest with yourself about how much of your capital you're prepared to commit to the business.
5. How long will it take for the business to turn a profit?
Few start-up businesses are immediately profitable. You need to have a clear plan for how the business will pay its bills (and how you will pay your own bills) during the time that business is not turning a profit.
6. What name will the business use?
For at least two reasons, it is important to check your preferred name (unless it's just your own name). First, if you're going to set up a company or LLP, is the name you want to use available? Second, is someone else using the name in a similar business so that there could be a risk of liability for ‘passing-off' and/or trademark infringement?
7. Do I need to use a legal structure that will limit my liability?
In many circumstances, it will be desirable for you to limit your personal liability for the obligations of the business.
8. Are there other factors that might affect my choice of legal structure?
A company structure will usually result in two levels of taxation -- at the company level, and at the shareholder level. You will want to take this, as well as other factors such as industry norms, into account in deciding whether a company is the right structure for your business.
9. What advisors will the business need -- in the start-up phase and later on?
Will you be looking to form long-term relationships with advisors? What types of advisors will you need? You will want to select advisors who can best address your needs, and with whom you feel comfortable working. You will also want value for your money -- although value for money does not always mean that you simply select the cheapest.
10. What industry-specific regulation will affect the business?
Certain industries (such as transportation, nursing homes, and day care centres) are heavily regulated. You need to have a good understanding of the relevant regulatory scheme and the cost of compliance.
11. What physical premises does the business need?
Some businesses, such as retail shops, will be strongly identified with their premises. Others -- such as a machine tool fabricator -- will need specialised premises capable of handling their operations. What will your business need? Where are you likely to find the right premises, and how much are they likely to cost?
12. What will be the up-front costs of securing premises?
Landlords often require deposits and there may be a variety of fees. You will want to take these into account in budgeting for start-up costs.
13. What health and safety regulations will affect the business?
Virtually all businesses are affected by health and safety regulations to some extent. Labour-intensive businesses, and particularly those involving physical labour, will likely present a range of health and safety issues and may be subject to regulation compliance inspections. You will need to determine how you will ensure compliance, and how much it will cost the business to do so.
14. Will supplier relationships be crucial to the business?
Supplier relationships can be critical for several reasons. For instance, if you're planning to use a particular software package in a way that is central to the operation of the business, you will want to ensure that the supplier will stand behind the product and provide adequate support. In manufacturing businesses, the price and credit terms for raw materials may make the difference between a reasonable profit margin for your business and a loss.
15. How many employees will the business need during the start-up phase?
A new hire is a major commitment. Will you need to have lots of employees up front, or will you be able to take on employees in stages? What is the business' financial exposure at each stage? When will revenue begin to be sufficient to cover payroll?
16. How will the business handle PAYE and other employee-related compliance?
PAYE, pay cheques, direct deposit, etc., are potentially tedious and time-consuming tasks. Does the business have the capacity to take them on, or do you need to out-source?
17. What insurance does the business need?
If you have employees, you will be required to carry employer's liability insurance. What other insurance coverage is necessary or desirable for your business? What are the relevant industry norms? Do you have a good understanding of these issues, or do you need to consult an insurance broker as part of your planning process?
18. If the business will have intellectual property that requires protection, how will it go about putting that protection in place?
Protection for intellectual property can be a relatively simple matter (in the case of some copyrights, for example) or it can be a difficult and expensive undertaking (if, say, you want to obtain worldwide patent protection for a new product). To what extent is intellectual property a key feature of your business and how will you go about protecting it? Remember too, that if you're starting, say, a technology business in the hope of securing venture capital financing some day, you will need to be thinking about protecting your intellectual property from the very beginning.
19. Does the business need to register for VAT?
If turnover is likely to be above the VAT threshold you will have to register -- at least eventually. In addition, it may be sensible for the business to register even if its turnover is not likely to exceed the VAT threshold if it sells lots of zero-rated or reduced rate goods and services.
20. How will I, as owner/manager, get paid?
For a sole trader this may be an easy question, but if your business structure is going to be a company you will want to give it some thought, since you have alternatives (salary, dividends, repayment of loan capital, etc.).
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