“OK thanks for the advice on motivating my non-existent employees and optimising my theoretical product mix, but can someone please explain to me how I actually start a business!?” I have found that despite the overabundance of literature on entrepreneurship, most of it doesn’t give you much practical advice on starting a business.
In fact, the first time I launched my start-up, I had no clue what I was doing and what a learning curve it was! The process has since been demystified, so I thought I’d share...
In fact, the first time I launched my start-up, I had no clue what I was doing and what a learning curve it was! The process has since been demystified, so I thought I’d share...
If it’s any consolation, they don’t even teach this at business school. At best, you come out being able to write a stellar business plan and recite the 4 P’s of marketing, which are price, product,... USELESS!
Below are the 12 basic steps you’ll need to follow to start your business. I’ve used an e-commerce retailer example in order to give you something concrete but the principles are usually very transferable to most types of businesses and industries. I have tried to prioritise these, so that you know where to focus your time and energy:
1. Website
Your website provides many functions from being:
No, a Facebook Page alone will not suffice, you need a website. Yes, a Facebook page is easy to setup and maintain but it is for that exact reason that it’s not as credible and professional. Times have changed and in any case, these days you can create a great website in 4 hours flat.
Seriously though, check out the recently launched Weebly 4.0. It sounds like something out of the Die Hard movies series but is actually cooler and right up in the realms of the DJI Inspire 4K filming drone which you can use to film your homepage video BTW. Some people say an entire background video is distracting but a smaller video is a must as people are fed-up reading and far prefer sitting back and letting you do the hard work.
You’ll obviously need to register a domain i.e. www.mywidgets.com which you can do easily online. There are lots of providers so the things you need to watch out for are:
www.namecheap.com is a pretty good all rounder and in South Africa, I rate www.texo.co.za .
Often the registration is really cheap for the first year and then it starts approaching normal levels in year two. You can also do it via Weebly. When choosing a domain, don’t use any symbols, especially hyphens or creative spelling, not only does it make you look like an amateur but your search engine optimisation (SEO) rankings will likely be penalised. Despite what Google says, a domain name that directly relates to what you are selling always seems to play a big factor in SEO value.
Always try find a “.com” because although they are like hen’s teeth nowadays, they carry a premium status. If you go local, for example, co.uk in the United Kingdom, then you are probably limiting the scalability of your business. Obviously customers from other countries will still be able to buy from your website but it’s all about the perception. Consider how many Continental European customers will want to buy from a co.uk domain following Brexit... Probably far less than if it were a “.com”. Oh, and BTW, a “.com” is far better than calling yourself “widgetsinternational.co.uk” when you clearly are not international – a warning sign to any experienced business person.
If don’t decide to use a template-based design tool like Weebly (I’ll need some convincing as to why) and want to use a website designer, then remember:
Whichever option you choose, YOU will need to generate good content – what you put in is what you’ll get out so spend time creating something your customers will want to read and you’ll be aptly rewarded. Remember that Google uses “time-on-site” as a key metric when working out your SEO ranking so you need a reason for customers to stay.
2. Payment Gateway
When considering which type of payment gateway to use, think about:
Now you may be able to skip building your own website if you live in a developed economy where you have luxuries like Amazon. By that I mean, you can simply list your products on Amazon, send your bulk shipment to one of their fulfilment agents and away you go. Simple. Ok, maybe it’s slightly more complicated and a website will help with credibility so I’ll write a full post on this soon, I promise.
3. Systems / Communication
For email, use G Suite (formerly Google Apps for Work). It was free but even though it’s now $5 per user per month, it’s well worth it. Also, this account will be your core identity to everything from YouTube to Google Analytics and Adwords. When you sign up for the email account it will show you how to connect it to your domain i.e. [email protected], which will make you sound far more professional than merely using [email protected]
For storage and file transfers, use Dropbox. It just works and does so on any platform so you have all your files available on your iPad, smartphone and PC. You get 2GB of storage space free which is more than enough for the near future. Google Drive has come a long way since it’s slow launch but I’m still a Dropbox fan.
For communicating with your suppliers (especially if they’re in Asia) and colleagues, use WhatsApp, especially now that they have the desktop-based version. Make different groups for suppliers, marketing, operations and general business.
For video conference calls, use Google Hangouts, it’s much more reliable than Skype and has great functionality.
With the above four systems, I believe you can run any business, and well at that. A prime example of how start-ups can increasingly compete with large organisations due to the technological advances levelling the playing fields.
4. Marketing
Let’s start with some basic marketing Q &A:
Below are the 12 basic steps you’ll need to follow to start your business. I’ve used an e-commerce retailer example in order to give you something concrete but the principles are usually very transferable to most types of businesses and industries. I have tried to prioritise these, so that you know where to focus your time and energy:
1. Website
Your website provides many functions from being:
- A marketplace – where buyers and sellers meet to exchange goods.
- A trust signal – if you have a website, people think you’re a real company. And I’m not joking, once some Swiss clients were reluctant to do business with us then following the launch of a free template-based website on www.weebly.com (of which I am a great fan), we were suddenly a reputable company to whom they sent loads of projects.
- A communication tool – not only will it force you to write and solidify what you’re about but it allows the world to find out about you.
No, a Facebook Page alone will not suffice, you need a website. Yes, a Facebook page is easy to setup and maintain but it is for that exact reason that it’s not as credible and professional. Times have changed and in any case, these days you can create a great website in 4 hours flat.
Seriously though, check out the recently launched Weebly 4.0. It sounds like something out of the Die Hard movies series but is actually cooler and right up in the realms of the DJI Inspire 4K filming drone which you can use to film your homepage video BTW. Some people say an entire background video is distracting but a smaller video is a must as people are fed-up reading and far prefer sitting back and letting you do the hard work.
You’ll obviously need to register a domain i.e. www.mywidgets.com which you can do easily online. There are lots of providers so the things you need to watch out for are:
- Poor user interfaces.
- Difficulty that they may cause when trying to move providers.
- That they track all your searches and then bump up the price of domains they know you want to buy.
www.namecheap.com is a pretty good all rounder and in South Africa, I rate www.texo.co.za .
Often the registration is really cheap for the first year and then it starts approaching normal levels in year two. You can also do it via Weebly. When choosing a domain, don’t use any symbols, especially hyphens or creative spelling, not only does it make you look like an amateur but your search engine optimisation (SEO) rankings will likely be penalised. Despite what Google says, a domain name that directly relates to what you are selling always seems to play a big factor in SEO value.
Always try find a “.com” because although they are like hen’s teeth nowadays, they carry a premium status. If you go local, for example, co.uk in the United Kingdom, then you are probably limiting the scalability of your business. Obviously customers from other countries will still be able to buy from your website but it’s all about the perception. Consider how many Continental European customers will want to buy from a co.uk domain following Brexit... Probably far less than if it were a “.com”. Oh, and BTW, a “.com” is far better than calling yourself “widgetsinternational.co.uk” when you clearly are not international – a warning sign to any experienced business person.
If don’t decide to use a template-based design tool like Weebly (I’ll need some convincing as to why) and want to use a website designer, then remember:
- Do not overpay for your first website – it just needs to be a proof of concept rather than a masterpiece. My first website cost £100 and although it was pretty rubbish, after about 2 weeks, the first sale came through and then I knew for sure that I was onto something!
- Use reliable hosting (the server where your website sits) because there is nothing more frustrating than having customers who are ready to buy your product and your website is down. Never again.
Whichever option you choose, YOU will need to generate good content – what you put in is what you’ll get out so spend time creating something your customers will want to read and you’ll be aptly rewarded. Remember that Google uses “time-on-site” as a key metric when working out your SEO ranking so you need a reason for customers to stay.
2. Payment Gateway
When considering which type of payment gateway to use, think about:
- Fixed vs variable costs – how long will it take you to start generating a significant number of transactions. If it takes 12+ months, do you really want high fixed costs eating into your limited supply of funding?
- Trust – sure you can always find someone to offer the service cheaper but will customers feel comfortable handing over their credit card details (read: hard earned cash) to someone they have never heard of? Michael Michalowicz who wrote the Toilet Paper Entrepreneur recommends PayPal and suggests that you take the short-term cost pain. In South Africa, I used Payfast which turned out to be a good life choice because they are well-recognised, have low fees and good service.
- Maintenance – you can usually set up a merchant account with your local bank which is cheaper but is often more effort than it’s worth. You are usually responsible for figuring out whether payments have been made fraudulently. Hassle. Remember, you are not in the business of online payments but rather selling things online so focus your energy on what you do well.
Now you may be able to skip building your own website if you live in a developed economy where you have luxuries like Amazon. By that I mean, you can simply list your products on Amazon, send your bulk shipment to one of their fulfilment agents and away you go. Simple. Ok, maybe it’s slightly more complicated and a website will help with credibility so I’ll write a full post on this soon, I promise.
3. Systems / Communication
For email, use G Suite (formerly Google Apps for Work). It was free but even though it’s now $5 per user per month, it’s well worth it. Also, this account will be your core identity to everything from YouTube to Google Analytics and Adwords. When you sign up for the email account it will show you how to connect it to your domain i.e. [email protected], which will make you sound far more professional than merely using [email protected]
For storage and file transfers, use Dropbox. It just works and does so on any platform so you have all your files available on your iPad, smartphone and PC. You get 2GB of storage space free which is more than enough for the near future. Google Drive has come a long way since it’s slow launch but I’m still a Dropbox fan.
For communicating with your suppliers (especially if they’re in Asia) and colleagues, use WhatsApp, especially now that they have the desktop-based version. Make different groups for suppliers, marketing, operations and general business.
For video conference calls, use Google Hangouts, it’s much more reliable than Skype and has great functionality.
With the above four systems, I believe you can run any business, and well at that. A prime example of how start-ups can increasingly compete with large organisations due to the technological advances levelling the playing fields.
4. Marketing
Let’s start with some basic marketing Q &A:
- What is the single most important thing that entrepreneurs forget about when starting their business? Customers!
- How do you get customers? Marketing!
- Is it easy? No
It’s a lesson hard-learned for many start-ups when they “LAUNCH” their e-commerce business and then realise they have five 5 website visits per day, 3 being from the Philippines, 1 from Uganda and 1 from the UK where they actually want to sell.
The reason that marketing is so high up this list is because it is incredibly important and in fact you should try get customers before you have even ‘started’ your business. These days it is pretty easy to test the waters and generate hype with social media. Rocket Internet are particularly good at this – their South African online shoe retailer Zando, executed a Facebook competition and with a minimal spend, somehow managed to get hundreds of thousands of followers before they even launched. Impressive.
Let’s start at the beginning however. Get a cool logo and slogan. While it is seemingly trivial, I think it helps you focus on what you are all about and forms the basis for your marketing efforts. Spend lots of time brainstorming ideas and change your company name if necessary. Better to do all this now rather than burn loads of cash marketing a brand you don’t believe in. NB, you might end up registering 5 different domain names by the time you decide on your final company name but this is all part of the fun!
I would suggest going onto a website like Fiverr.com and getting one of the talented designers on there to do you five or so different mock-ups. Then once you’ve selected the design that resonates most, pay them to do a few more iterations of that design until it’s perfect for you.
Remember, ask for customer feedback NOW because you are going to get it later whether you like it or not so rather use the constructive criticism now to your advantage. Remember to avoid ‘Mum bias’ which is the phenomenon that occurs when you ask your Mum ("Mom" was clearly a no no in my household!) whether she thinks you have a good company name, to which her natural reaction is, “yes Johnny, you are a clever boy and that sounds amazing.” Not helpful…. Instead, say, “my friend is considering calling his business x, do you think that sounds silly or it’s OK?” The feedback will be far more candid and useful.
Assuming you have a minimal marketing budget, like the majority of start-ups, what is the most cost-effective method of marketing to these illusive customers? Well, I’ll write a long blog post on this soon but the basic answers are:
- Google Adwords – if people are looking for your product, there is no quicker way they’ll find you. However, this should only be a short-term strategy to get you off the mark as it can be a good way to burn cash. Also, do your homework on creating a targeting adverts. Each advert is assigned a quality score based on its relevance to customers and poor quality ads hurt your pocket.
- A blog – websites need good SEO (search-engine optimisation) and Google has locked things down so there aren’t many clever tactics left to try trick your website into poll position. Google’s algorithms now only reward websites that customers will find useful. Funny that. Having a blog filled with relevant keywords and pictures will allow customers to find you and will create a sustainable source of traffic that builds over time.
-
Social Media – use the usual suspects:
- Facebook (it’s worth paying for some advertising);
- Twitter (apparently advertising doesn’t yield returns, just post lots of quality content);
- Instagram (don’t pay for advertising, just post cool pics);
- LinkedIn (advertising is quite effective);
- YouTube (post short engaging videos and they'll dramatically increase your search visibility)
- Snap - formerly Snapchat (I wouldn’t pay for advertising here but rather use the other channels to generate interactions on Snapchat).
Online marketing is a slow build however and I see social media as more of a brand-building exercise rather than something that will lead directly to a sale. I mean, who goes on Facebook with the aim of buying a set of dumbbells or a new hairdryer. Probably no-one. They’re on Facebook to look at what their friends are doing and laugh at funny videos. So create engaging content and a brand that people want to be associated with and then maybe, just maybe, they’ll buy from you later. P.S. A high number of “Likes” doesn’t pay the bills at the end of the month so focus on the right metrics!
- Print – I doubt you’ll be able to afford much print advertising and even if you can, I’m not sure I’d recommend it. The best way to attack print is to get journalists to write about you. The hard work here is therefore writing to the journalists and convincing them that you are an interesting story.
- Social Influencers – there are many people out there with millions of followers. Malcolm Gladwell, author of Outliers and The Tipping Point, calls these people social influencers and in a start-up, they are key to getting your message out there. The good news is that they usually have access to hundreds of thousands of eyeballs (who you want looking at your brand) but will charge a fraction of what a big corporate media company will. Contact these influencers and arrange a deal – they’ll probably be very happy to hear from you! Of all marketing options, I would say that this is one of the most powerful. I have recently been advertising on blogs with some amazing success. Note that these influencers can be used to build your interactions on any platform including all of the above social media channels.
Lastly you’ll need to get a bunch of boring marketing material such as:
- A letterhead – you’ll need these for the bank and other pieces of communication.
- Invoices – for those annoying customers who insist on offline purchases.
- Customer notes – to tell your customers how awesome they are and that they’ve made a good life choice by buying your product.
- Business cards – for that warm fuzzy feeling that you’re a real business ;).
These can wait until later but when you’re ready get your Fiverr designer to quickly do these for you.
5. Product
Now I assume you’ve already worked out whether you have a good product or not from my blog post on Evaluating Your Business Idea. Either way, for an e-commerce business it’s good asking yourself the following questions and give them a score out of 5:
- Is the product perishable? Yes being a good thing because customers will keep coming back
- Will it be predictably consumed?
- Can I offer better value for money than my competitors?
- Is it high-value?
- Is it low-weight/volume?
If your product scores low on any of the above questions, think long and hard before proceeding. To put it in context, a business that achieves nearly perfect scores is TheDollarShaveClub.com and they just sold for $1bn. Co-incidence? I think not. P.S. note their cool homepage video.
Anyway, let’s assume you’re onto something good. How do you go about getting your hands on your product?
You probably have two main choices when sourcing your products:
- Import an established brand from a developed market like Europe or the US.
- Work with an Asian supplier and create your own brand.
Option 1 will get you in business quickly as customers will already be familiar with the brand, however your gross profit margin will only likely be 40% - 50% at best.
Option 2 requires loads more work and upfront cost as you’ll have to create your own brand from scratch. However, it will mean that you can sell the product cheaper while maintaining a 70% - 80% gross profit margin.
The decision will come down to your budget, propensity for risk and your aspirations for the business. I started with Option 1 and switched to Option 2 once my business was stable and I had established my website’s brand in the market.
I’ll do a whole blog post on pricing but in the meantime you can use these gross profit figures to get an indication of what your selling price should be. Note: I ignored VAT to illustrate the point.
Now it may feel unfair that you are over-charging your customers for your own brand, however remember that you’ll need that extra £20 per unit to do marketing and brand-building, especially in the near-term.
How do you get hold of the products you ask? Simple.
The internet has made it as easy as emailing through an enquiry with a short piece on your business and what you want to achieve. Most suppliers will see it as extra revenue so will be happy to send you products and will often send some free samples.
If you’re looking to buy from Asia then Alibaba and DhGate are great resources and I have always found the suppliers extremely helpful and trustworthy. Simply pay via Paypal or AliPay and you have nothing to worry about.
A word of caution: place a small order first and test customer demand. You don’t want all your money tied up in stock meaning that you have none left to market and sell your product. Also, if there is a Bronze and a Gold version of the product and you want to buy 15 units in total then buy 12 Bronze and 3 Gold’s as this will likely be the sales mix when you start selling.
Lastly, you’ll need a warehouse to store your stock and business supplies – the old towel cupboard in your mother’s house works best I find. Your Dispatch Department can pack the orders on your bed and your office can be your living-room table, a coffee shop or hotel lobby if you need to conduct meetings.
6. Money
Money is probably the most cited reason why people say they can’t start a business. Ok, so where can you get money? Well, you actually don’t need very much and you can literally find money everywhere:
With all those options, if you can’t find money and don’t want to commit your own then think long and hard about how good your idea really is!
We’ll talk lots more about money when we look at Venture Capital and customer-funded businesses but above all else remember that having lots of money often clouds your judgement and you may end up focussing on the wrong things. When the money runs out and the tide draws back, you may find out you’ve been swimming naked all along. Right now, focus on:
If you want a big salary, get a job (working for someone else who followed their dream). Only be an entrepreneur if you want to change the world and are prepared to go to great lengths to do so. To summarise, too much money is a curse, not a blessing.
7. Transport / Logistics
Open a contract with someone like Fedex who will deliver your parcels. This is going to be an important touchpoint for your customers so choose someone who is fast and reliable. Tracking lost orders is not fun. Tim Ferriss from the 4 Hour Work Week says to use one dependable shipping company and charge a premium. I agree. My Master’s thesis on high-value product e-retail in South Africa showed that people usually don’t mind paying for shipping as long as they know how much it will be before they start the checkout process.
Import / Export License – depending on your country, you may need an import license. It is worth getting an export license at the same time in case you need to send shipments back. It usually doesn’t cost any more so just make sure you ask for both. Finding the right governmental agency is sometimes tricky but a smile often goes a long way!
8. Business registration
Loads of people get really hung up about business registrations. They think that once they’ve registered a business, they have started a business. Well, yes, technically you have but until a customer has given you money, all you have is a piece of paper. I digress.
If your country has sophisticated online systems then simply logon and register the business yourself. If it’s a little more complicated then ask a small no-name brand Law or Accounting firm to do the dirty work for you. The costs should be nominal and then you know it’s done right.
You’ll probably have to submit a form annually to show that you’re still in business and that your details are still the same. This is usually fairly easy and can usually be done online.
9. Bank Account
You can probably start off by using your personal account but I would advise to swiftly move onto a business bank account. Not only is this more professional but makes life much easier when you’re reconciling your accounts. Beer, beer, Kit-Kat, customer payment, Nandos, petrol, supplier payment.... It gets confusing!
To open a business bank account, you’ll need your business registration documents and a bunch of personal documents. Anyway, it’s not too difficult and banks should be keen to help as it means more business for them, especially if/when you become successful.
10. People
Starting a business involves a fair amount of work and energy so “phone a friend.” Not only will they help you run the business but they’ll be an understanding shoulder to cry on when things get tough.
Personally I think you need an Operations Guru (my Mum – the master of process and detail) who takes care of the day-to-day while you and your Co-founder (my Brother – the master of tech and godfather of seed capital) handle the website, ad-hoc business items and focus on strategy and business development.
Here’s a list of the main things that will need doing:
Orders and Suppliers:
Information Systems:
Marketing:
Accounting and Finances:
Strategy and Business Development:
11. Tax Number
I read a comical quote about tax the other day, “I’m so glad I learned about parallelograms instead of how to do taxes. It’s really come in handy this parallelogram season.” Maybe the education system will get there one day! Anyway, moving forward…
Once you have your business registration sorted then simply go along to the tax office and register – you may be able to do it online depending on your country. It’s not that scary, I promise! In the UK you need to register after three months of doing business so it’s worth getting it out the way early. Also, you will appear like more of a legitimate company when dealing with payment providers etc.
Value-Added Tax (VAT) registration rules:
How do you get hold of the products you ask? Simple.
The internet has made it as easy as emailing through an enquiry with a short piece on your business and what you want to achieve. Most suppliers will see it as extra revenue so will be happy to send you products and will often send some free samples.
If you’re looking to buy from Asia then Alibaba and DhGate are great resources and I have always found the suppliers extremely helpful and trustworthy. Simply pay via Paypal or AliPay and you have nothing to worry about.
A word of caution: place a small order first and test customer demand. You don’t want all your money tied up in stock meaning that you have none left to market and sell your product. Also, if there is a Bronze and a Gold version of the product and you want to buy 15 units in total then buy 12 Bronze and 3 Gold’s as this will likely be the sales mix when you start selling.
Lastly, you’ll need a warehouse to store your stock and business supplies – the old towel cupboard in your mother’s house works best I find. Your Dispatch Department can pack the orders on your bed and your office can be your living-room table, a coffee shop or hotel lobby if you need to conduct meetings.
6. Money
Money is probably the most cited reason why people say they can’t start a business. Ok, so where can you get money? Well, you actually don’t need very much and you can literally find money everywhere:
-
Founder (yourself) – please don’t ruin yourself financially in an effort to get rich, I’m just saying that you have more access to money than you think. Also remember that you won’t give away any equity using this avenue:
- Salary – stop drinking for 3 months and use that cash.
- Savings – there is no better ROI that investing in your own business.
- Credit Cards – be careful but many a business was started like this. You can roll the debt between banks and never pay any interest if you’re clever but don’t try this at home kids.
- Mortgage – don’t go crazy and please consult your spouse first. Know that you might lose every cent – are you OK with this? And can you afford to do so?
- Overdrafts – this money can be expensive and you don’t want to dig yourself a hole but it’s a decent short-term solution.
- The other 3 F's (friends, fools and family) - although they say not to take money from fools and to be sure to treat loans from your friends and family very seriously so as not to ruin any relationships.
- Your boss – this is fairly common actually, despite the conflict of interest. Although your ex-boss is probably a more likely candidate – providing you didn’t burn the bridges upon your departure.
- Your suppliers – if they give you 90 days to pay for example.
- Your customers – if they buy before you give them the product. More on this later.
- Kickstarter – what better way to raise money and not give away any equity, simply magic.
- Crowdfunding – Crowdcube, Seeders etc. Although they say the problem with crowdfunding is that you need to bring the crowd...
- Angel Investors – although I would wait until you’ll gained some traction.
- Venture Capitalists – again, hold off for as long as you can and only use VC money when you know it will catapult your business to the next frontier.
- Companies in the trade – think about how much money companies waste on failed projects. If you present an attractive growth avenue and they believe you can pull it off, it will be an easy approval. My friend spent about eight month’s courting numerous South African VCs to fund his start-up mining venture, then suddenly the Marikana massacre happened and all the VCs ran away. About two weeks later he received $800k from an Australian mining company who felt like a punt.
With all those options, if you can’t find money and don’t want to commit your own then think long and hard about how good your idea really is!
We’ll talk lots more about money when we look at Venture Capital and customer-funded businesses but above all else remember that having lots of money often clouds your judgement and you may end up focussing on the wrong things. When the money runs out and the tide draws back, you may find out you’ve been swimming naked all along. Right now, focus on:
- Getting money from your customers (because it means they actually want what you are offering).
- Keeping your cost-base lean.
- Keeping hungry by not looking forward to a cushy salary at the end of the month.
If you want a big salary, get a job (working for someone else who followed their dream). Only be an entrepreneur if you want to change the world and are prepared to go to great lengths to do so. To summarise, too much money is a curse, not a blessing.
7. Transport / Logistics
Open a contract with someone like Fedex who will deliver your parcels. This is going to be an important touchpoint for your customers so choose someone who is fast and reliable. Tracking lost orders is not fun. Tim Ferriss from the 4 Hour Work Week says to use one dependable shipping company and charge a premium. I agree. My Master’s thesis on high-value product e-retail in South Africa showed that people usually don’t mind paying for shipping as long as they know how much it will be before they start the checkout process.
Import / Export License – depending on your country, you may need an import license. It is worth getting an export license at the same time in case you need to send shipments back. It usually doesn’t cost any more so just make sure you ask for both. Finding the right governmental agency is sometimes tricky but a smile often goes a long way!
8. Business registration
Loads of people get really hung up about business registrations. They think that once they’ve registered a business, they have started a business. Well, yes, technically you have but until a customer has given you money, all you have is a piece of paper. I digress.
If your country has sophisticated online systems then simply logon and register the business yourself. If it’s a little more complicated then ask a small no-name brand Law or Accounting firm to do the dirty work for you. The costs should be nominal and then you know it’s done right.
You’ll probably have to submit a form annually to show that you’re still in business and that your details are still the same. This is usually fairly easy and can usually be done online.
9. Bank Account
You can probably start off by using your personal account but I would advise to swiftly move onto a business bank account. Not only is this more professional but makes life much easier when you’re reconciling your accounts. Beer, beer, Kit-Kat, customer payment, Nandos, petrol, supplier payment.... It gets confusing!
To open a business bank account, you’ll need your business registration documents and a bunch of personal documents. Anyway, it’s not too difficult and banks should be keen to help as it means more business for them, especially if/when you become successful.
10. People
Starting a business involves a fair amount of work and energy so “phone a friend.” Not only will they help you run the business but they’ll be an understanding shoulder to cry on when things get tough.
Personally I think you need an Operations Guru (my Mum – the master of process and detail) who takes care of the day-to-day while you and your Co-founder (my Brother – the master of tech and godfather of seed capital) handle the website, ad-hoc business items and focus on strategy and business development.
Here’s a list of the main things that will need doing:
Orders and Suppliers:
- Liaising with your suppliers.
- Receiving and checking stock.
- Answering customer emails and phone calls.
- Processing orders from customers.
- Packing and sending products.
- After-sales support – don’t underestimate how time consuming this can be.
Information Systems:
- Maintaining and enhancing your website.
- Adding specials to your website.
- Fixing stuff when it breaks.
Marketing:
- Doing social media posts – this is extremely time-consuming.
- Writing blogs – also very time-consuming.
- Liaising with magazines, bloggers, advertising agencies.
- Managing a designer – if it’s not you. Photoshop is easy when you have a reason to learn!
Accounting and Finances:
- Recording expenses.
- Recording income.
- Doing the physical banking.
- Sorting out tax-related matters.
- Paying suppliers.
- Treasury – looking after the money!
Strategy and Business Development:
- Is your business working?
- Are you making money?
- Do you need new products?
- Are you keeping your investors informed?
- What are your competitors doing?
- What should be your next move?
11. Tax Number
I read a comical quote about tax the other day, “I’m so glad I learned about parallelograms instead of how to do taxes. It’s really come in handy this parallelogram season.” Maybe the education system will get there one day! Anyway, moving forward…
Once you have your business registration sorted then simply go along to the tax office and register – you may be able to do it online depending on your country. It’s not that scary, I promise! In the UK you need to register after three months of doing business so it’s worth getting it out the way early. Also, you will appear like more of a legitimate company when dealing with payment providers etc.
Value-Added Tax (VAT) registration rules:
- B2B businesses: Register because businesses do care if you charge them VAT as they claim it back and by not registering you can’t claim the VAT back on your input expenses. So the net result is that you will save money. Point of detail – if you are asking the VAT Man for more money than you are paying him then realise that they will scrutinise your business so make sure your affairs are squeaky clean!
- B2C businesses (that’s us!): Don’t register because the price your customers will see will be your selling price + VAT (20% in the UK and 14% in South Africa) so by not registering, you will appear cheaper than your competitors. Yes, you could claim back on some input expenses but you’re a start-up so your expenses should be low (mostly products and online marketing which is often exempt from VAT) and so you will pay the VAT Man more than he’ll give you back. Let’s use the figures from our gross profit example on our own brand (Option 2) above:
I don’t know about you but, £9 or 19% more gross profit per product sounds like a good deal to me. This also means that you can sell your product for £75 and still make more money than your VAT-registered competitor!
Once you’re making more turnover than the legislated threshold (between £40k and £85k for most countries) then you’ll be forced to register but this is a very nice problem to have and when your turnover is that high then your input costs will likely be greater so registering may in fact save you money anyway.
12. Accounting System
No, you don’t need SAP or something else that is expensive. You don’t want to burden your business with overheads. Initially just use Excel and religiously keep track of all of your expenses and income.
If you don’t have Microsoft Office then you can simply use Google Docs, Sheets and Slides – they’re free and cloud-based so you’ll be able to access them from anywhere and they’ll always be backed-up.
Once you’re making money and can afford something fancier then consider moving onto something like Xero or QuickBooks.
Remember that while accounting is important, it is all about counting the past and right now, you want to focus on driving your business into the future.
If your business survives a full year and you need to submit some statutory accounts then find an accountant friend to help you do your year-end financial calculations. Do keep good records throughout the year so that they don’t hate you by the end of the process.
Closing Thoughts
I really didn’t expect this blog post to be this long and all I set out trying to do was show you how simple it really is to start a business. Upon reflection, I still think it is super easy but what is clear is that starting a business involves a considerable amount of work and energy. So, make sure the juice is worth the squeeze and only start a business that you believe will do well.
OK so now that you know how to start your business...Ready, steady, GO!
If you have any questions, please leave a comment below and I’ll happily answer away.
Next up I’ll give you my list on why I think most start-ups fail so that you can avoid the most common pitfalls.
Chat soon,
Alex @thetippytopblog
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