Starting a new company is an exciting but daunting prospect. Small and medium-sized enterprises (SMEs) account for 4.8 million businesses in the UK and employ over 23 million people but research suggests that one in three businesses fails within 3 years of commencing operations, with 20% of those failures occurring in the first year. However, The Financial Times Guide to Business Start Ups reveals that “20% of failed businesses would still be in business after 2.5 years if they had sought advice at the outset”, highlighting the importance of conducting research, planning and consulting experts before launching a new venture.
Understanding the market
A strong business plan is not only attractive to potential investors, it is vital to the company’s success. Once the goods or services to be rendered have been identified, the business plan will require: a mission statement containing brand objectives; financial projections allowing for several contingencies; a breakdown of start-up costs and their funding source(s); marketing strategy; an introduction to the management team; and an executive summary outlining the gap in the market and how the company plans to fill that niche.
In addition to researching the availability of products provided by competitors, it is important to recognise the strengths and weaknesses within each organisation. By profiling existing and emerging competitors, new business owners can anticipate their rivals’ strategies and subsequently predict the future market, giving them ample time to adjust their business plan and goods or services accordingly.
A thorough company profile will contain its history, details of key personnel, target demographic, product range, pricing, turnover, patents, company objectives, the structure of the business both internally and externally (for example if it is a subsidiary) and accounts. This information may be obtained from a company’s website and through its public records which are lodged in accordance with UK legislation with such organisations as Companies House and the Intellectual Property Office. It is also prudent to investigate suppliers and other commercial contacts (e.g. distributors or sales agents) in this manner.
Complying with business formalities
Companies have obligations to file periodically certain documents, accounts and reports with Companies House and HMRC, some of which then become publicly accessible. Regulatory compliance extends to other organisations, depending on the nature of the business, and a company may also be liable to report to, for example, the Financial Conduct Authority (FCA), Environmental Agency, Food Standards Agency or insurance providers. It is imperative, therefore, to seek the guidance of experts, for example accountants, solicitors, formation agents, venture capitalists, business angels and mentors, in order to ensure that all legal requirements are met in full and on time and good business practice is adopted.