Once you have got your enterprise up and running, it is important to professionalise it as quickly as possible. This will not only help you to make things run more smoothly, but it will help you to sleep at night as well!
One of the first things I encourage you to do is to establish a limited company for your business. A lot of start-ups run as ‘sole traders’, i.e. out of their own bank accounts. Whilst this is very straightforward to do, it has its downsides as well. One of the main issues is that of liability. As a sole trader, you have unlimited liability. That is to say, if something goes wrong, and someone decides to sue you, then everything you have (not only in your business, but also any personal possession, such as a home) could be at risk.
Setting up a limited liability company is really easy to do. There are over four million businesses currently registered in the UK, mostly as a privately ‘Limited’ (or ‘Ltd’) entity. This means if something goes wrong, then your liability is limited. That means the business is sued, not you directly. Your business entity is also like a real person insofar the longer it exists, the more people trust it. It gains a credit rating over time, but you have to file your accounts each year to reflect your profit and loss. It takes a small amount of yearly admin to keep the business registered with Company House, but it is so worth the extra bit of time and effort.
As part of registering a Limited company, I would also advise you to invest into some good accounting software. There are a number of companies that offer this for a small monthly fee (Xero and Intuit QuickBooks being the most popular). Keeping on top of your finances from the get-go will save you a world of pain at the end of the financial year, when you need to reconcile your accounts and work out what you owe the tax man. Again, this takes a little bit of extra time and discipline, but it’s worth the extra time that it takes each day to complete. This software will also sync with your business bank account as well, meaning that from a single online dashboard, you’ll be much more aware of your financial situation and be able to plan accordingly.
Finally, hiring a solid team of outside professionals to help guide you and your business on the path to success is key. A good accountant and a good lawyer, although initially an extra expense, pay for themselves and then some. Accountants help keep your books in order, make sure all of your tax filings are correct and on time (saving you from getting fined) and generally find ways of making you more tax efficient. Lawyers get a bad rep, but when you’re drawing up contracts, having one looking over your shoulder can save you from making some very costly mistakes. Believe me – I’ve been there.
This is all of the less sexy, ‘grown-up’ side of running a business, but if you get into good habits from the start, then you’ll thank yourself later on. And remember, if you don’t know how to do something, then Google is your friend! Even now, I find myself searching for how to fix a foul-up on my accountancy software, or how to make a process recurring so that I don’t have to keep repeating it every month. A five-minute search online can often save you a lot of time further down the line.
Start as you mean to go on!