You must first decide whether your business will need to have a physical presence somewhere or will it exist only in cyberspace. For the majority of small business start-ups today it is unnecessary and counter-intuitive to pay for office space when it is easier and far less expensive for you to work from home instead. Regardless of where you decide to base your workplace, this checklist will be useful.  

Things to remember:  

• Office Space – Whether you are working from home or in an office, it is important to feel as if you have enough space to get your work done comfortably. A poorly designed workspace will hamper your productivity and stop you from performing to your potential. Think carefully about the design of your office and experiment with different layouts in diagram form. The best offices are often ergonomically designed to create a streamlined workflow. If you opt for premises outside your home, choosing the best location will be a big decision to make. Consider your needs at work both now and in the future.
• Home-working – It is important to separate the work space in your house from the living space if possible. Noise may be an issue if you have pets or small children so make sure you can close off the workspace if you need to make phone-calls or avoid distraction. If you do not have space for a home office, consider some form of collective shared workspace with other individuals that you may know who do not need a large office to themselves.
• Office Equipment – Make a list of all the office equipment needed in order to ensure you will have all the tools to be successful. Although it may be tempting to buy cheap equipment when you first start out, you may end up spending more in the long-term if it is unreliable. Having said this, it is easy to overspend when equipping your office so try to allocate an acceptable budget in the beginning and stick to it. Make sure your equipment is insured to protect against damage and theft as this will reduce downtime if something goes wrong.
• Production Space – If you intend to produce a physical product yourself then consider the space you will need to do this. Some businesses will need both an office and an additional space – for example, if you are running a gardening business you will need somewhere to deal with paperwork and have a secure location for your tools.
• Production Equipment – The same rules apply for production equipment in that you must weigh the cost against the benefits of the money you will spend. If purchasing a new machine will significantly increase your production then you can justify the expense. Maintenance of production equipment is even more crucial than your office equipment because it will effectively close down your business until the problem is sorted, whereas if office equipment fails you can probably keep working.
• Daily Tasks – It is helpful to have a list of the workplace procedures that must take place at the end of the day such as cleaning tools, backing up hard drives or locking doors and windows. These are small things that can easily be forgotten but could make you lose work or even invalidate your insurance.
• Suppliers – You will likely need to have some form of supplier relationship, even if it is just with your Internet Service Provider and website host. You may also require stationary supplies or even parts if you assemble a product yourself. Compile a list of potential suppliers through research and narrow them down – you will likely be able to find reviews online. Once you decide on the best supplier for you, keep the details of the best alternatives in case you are disappointed by your current supplier or they go out of business.

For the previous stages of this checklist look here  

A common barrier that a lot of people feel prevents them from starting their own small business is how to generate enough capital to get things up and running. A large number of SME owners end up working two or more jobs because they cannot afford to give up their previous employment whilst their new business is in its infancy. Although this is a necessary evil, it can only harm the performance of their start-up if they are unable to give it their full attention.  

These are the most common methods of financing a start-up:  

• Personal Savings – The majority of entrepreneurs finance the bulk of the cost from their own savings. This has the benefit of needing no repayment but also could leave them without any further money to inject into the business
• Banks – Nearly half of all start-ups take some form of loan from a bank. In recent years, banks have been handing out money very easily but this looks set to change in the current economic climate. Borrowing money is probably best avoided at this time, but if you decide to then think carefully about which bank to choose. A bank will probably expect you to risk some of your own funds before they give you anything. A strong business plan will be crucial in securing a loan
• Friends and Relatives – Almost a third of start-ups have some contribution from family and friends. This group of people are - for some entrepreneurs – the only people who will have enough faith in you succeeding to actually invest. Their contribution may come in the form of a loan or possibly for some share of ownership. The main disadvantage to this sort of arrangement is that if your business fails it could also damage your personal relationships
• Individual Investors – There are people who are willing to take a gamble and invest in promising start-ups. About a tenth of new businesses have had contributions from outside investors, usually in exchange for some percentage of ownership. These agreements can sometimes be very flexible depending on the individual and may need only last for a fixed term i.e. until the money is repaid
• Government Loans – Although hard to get in the UK , it is common practice in many countries for Government’s to provide small business loans and grants to start-ups. This helps nurture the development of industries or can help re-vitalise one that is flagging
• Venture Capitalist Firms – A very small amount of new start-ups opt to receive financing from venture capitalists. They are unlikely to invest unless they are guaranteed a big return and will be extremely demanding

If you are still unable to generate capital through any of these methods it can be helpful to attend a business school. At the school you will get to know like-minded people and they may be interested in going into business with you. In addition, most schools run business plan competitions that award funding to the best entries. 

For the previous stages of this checklist look here 

Deciding upon the price of your goods or services is definitely one of the most important decisions you will make at the start-up of your small business. It will be essential that you sell at a price which is attractive to your target market or else you will really struggle. You must also make sure that the price you decide upon is adequate enough to cover the combined total of all the costs you incur (e.g. production and labour) or else you will lose money over the long-term.  

Things to remember:  

• The first step in deciding upon a price is calculating your break-even point – this is the price at which you would not lose or make money when selling your product
• Conduct a break-even analysis to work out your fixed costs (figures that will not change greatly such as rent, insurance etc.) and variable costs (figures that will vary based on output, such as having to pay extra wages to staff for the additional hours needed to finish a big order on time)
• Use this method to work out the minimum price you can charge without losing money on a sale
• Sometimes businesses sell products at below the break-even point for a short while in order to damage competitors
• With products that cost a large amount of money to develop and bring to market, the common practice is to charge very highly for them initially to re-coup the development cost whilst demand is high
• Some business owners (such as venture capitalists) may have a desired return on investment and will price their products accordingly to reach that profit level
• Use what your competitors charge for their products or services as a rough guide
• Be prepared to lower prices or offer discounts as part of your marketing efforts
• If you are selling a product with high perceived value such as luxury goods then your target market will be prepared to pay over the odds for it because they are purchasing a status symbol – this is known as the “price the market will bear”
• You can raise the perceived value of your company over an extended period of time by excelling in various aspects of your business, from the packaging of your product through to the attitude of your salespeople

In general, the best price for your product or service will fall somewhere between the break-even point and the price the market will bear  

Here are some legal requirements to bear in mind when starting your own business:  

• Health and Safety – Legislation such as the Health and Safety at Work Act 1974 means that you have a responsibility to protect the ‘health, safety and welfare’ of your employees
• Data Privacy – In the UK there are strict rules governing how personal data is managed, these were set out in the 1998 Data Protection Act
• Insurance – There is a minimum level of insurance required by law, but it would be prudent to insure everything because the risks of not doing so are great (e.g. damage to stock)
• Minimum Wage – In 90% of countries there is a minimum wage required by law that workers cannot be paid less than
• Recruitment – There are strict guidelines about what can be done during the recruitment process in regards to advertising for employees and deciding who to select, in order to guard against discrimination of any form (age, race, sex, disability etc.)
• Industry specific requirements – Depending on which industry you are entering there may be specific legal requirements (e.g. opening a nursery would require an inspection of premises and employees would need a criminal record check)
• Import / Export – There are country specific rules regarding import and export of products and these should be researched if you plan on doing this
• Copyrights – Make sure you are not infringing copyright as part of your advertising or with the products you sell
• Taxation – You must follow stringent guidelines relating to value-added tax and corporate taxation

For advice on any of these issues, it is advisable to consult a legal professional  

There are numerous legal issues that arise with the formation of a small business. It is likely that you will need the help of a lawyer at some point early on, whether you are in the process of determining the legal form of your business or choosing a name. You may also find that you need their help down the line when dealing with complex issues like leases, contracts and intellectual property or if you are subject to litigation.  

Your lawyer may be one of the key people that you turn to for advice and therefore it should be someone you can talk to comfortably and exchange ideas. It may be necessary for you to change lawyer if your business needs change, although this could be an expensive process. Here are some helpful things for you to remember when recruiting a lawyer:  

• Get recommendations on good lawyers from people you know and whose opinion you trust
• Try to find lawyers who specialise in small business affairs
• Consider interviewing more than one lawyer (although some may charge for this)
• Do not ask for legal advice during the interview, the purpose of it is to determine how well you get along with the lawyer
• Find out about the types of fees they will charge (hourly charges / flat fees / monthly retainer / contingency fees)
• Ask the lawyer for references (preferably some small business owning customers)
• Use the knowledge you have gained from the interviews to make an informed decision about which you would rather work with on a regular basis

Before making a major business decision or starting something new it can often be beneficial to have a quick telephone consultation with a professional. At the very least, you will benefit from hearing a second opinion about what you are choosing to do as it may help highlight some issues you overlooked. 

There are experts in many fields available to help you – for instance, accountants will help you to set up the payroll and bookkeeping structure, lawyers can help with contracts and insurance agents will help make sure all your business assets are covered.  

The best time to speak to a professional is to discuss issues before they develop into problems. This is especially true concerning legal disputes or tax queries that could become quite serious if mishandled.  

Here are a few points to remember when dealing with a professional:  

• Choose someone you are comfortable talking with and who will always make time for clients
• Find out the best way to get a message to them (phone, fax, e-mail or snail mail)
• Make sure you find out the billing rates and payment processes straight away so you do not get a nasty surprise later on
• At the end of your first meeting have a mutually agreed list of things that you want them to do for you and a time-frame in which they will be completed
• Check if they will consult with professionals in other fields on your behalf when dealing with complex issues like incorporation
• Finally, if there is something about the process you do not understand get them to clarify it for you

As a small business owner you are likely to develop a close working relationship with a number of financial institutions. It is advisable for you at the beginning to think carefully about which ones would be best for you in the long-run. Banks can vary greatly on the type of products, services and interest rates they offer. Some financial institutions are less strict than others regarding their criteria for lending and some will charge more for their services.  

Certain banks specialise in different areas, so your priority is to find one with allowances and initiatives that benefit small business start-ups. For example, NatWest offer 2 years free banking to all start-ups while Barclays put on a number of free seminars for their members in which they dispense business advice from experts. Both those banks also provide business customers with their own personal Business Manager available day and night. A Business Manager will be able to assist you in many areas such as loans, cash management and investments plus provide you with financial information on your industry.  

The relationship between your business and the bank is likely to be long-term. It is therefore advisable for you to get to know your bank manager in the early days of your start-up so that they will be personally aware of your situation, rather than meeting them for the first time after a few years in need of money.  

Small business owners often overlook the value of taking the time to write a comprehensive business plan at start-up. At first glance, it can seem like a daunting task but there are a number of reasons why it is worth the effort. A bank or venture capitalist will likely require that they see a detailed business plan before lending you any money, to make sure that you are a safe investment. A plan will also give you clear objectives to strive towards and you can use it as a kind of ‘roadmap’ to refer back to during troubled times.  

Things to remember:  

The business plan has a number of essential steps:  

• Executive Summary – the first section of your plan, but should be the very last thing you write. This is because it will serve as a summary of the rest of the plan, so that a prospective reader will know whether they should keep reading. The summary should be very brief.
• Market Analysis – a description of the industry you will be entering, information on your proposed target market and the results of any market testing you have conducted. There should also be some data about your major competition.
• Company Description – detailed information about all the elements of your business, including the factors that will help make it a success.
• Organisational Information – this should contain data about your company structure and management team.
• Marketing Strategy – a description of the type of strategy you will adopt. This will include how you plan to initially penetrate the market and how you will distribute the product. In addition it will state how you will communicate with your target audience and how you propose that the business will grow in the future.
• Product or Service – you are now ready to talk about your product or service. The benefits of it must be stressed here, along with any patents or research & development activity. Realistically evaluate your product life cycle.
• Funding – this is the part where you ask an investor for money. Make sure that you can justify the amounts requested and make it clear the timeframe in which they will begin to receive a return on investment.
• Financial Data – these are the figures which will back up your request for money. This should include realistic forecasting and projections – investors or banks will be able to tell if your predictions are wildly inaccurate.
• Appendix – this will include statistical data that will be provided on an as-needed basis. For example, you may not want every person who reads your plan to know your credit history but a potential lender will likely demand it. You can place data like this (resumes, legal documents, leases, studies etc.) in the appendix and only give it to the serious investors.

An important early decision that will have long-term consequences for your business is to determine the legal form it will trade under.  

Things to remember: 

• The legal form that your business takes will affect numerous aspects of your business trading. Areas affected include how much control you will have over its operations, the amount of tax you will pay, how much money you can take out of the business for yourself and your own level of personal liability if the business fails.
• If you are running the business by yourself you will be a sole trader. You benefit from having an easily organised business that you are in complete control of. All of the profits go directly to you and it is not very difficult to dissolve the business in the future if you so require. The main disadvantage of this form of business ownership is that you will be personally liable for any debts the business accrues and you could lose any assets you own to in order to pay them off, including your home. It can also be hard for a sole trader to raise funds other than their personal savings or taking out a loan.
• If you want a similar type of business, but there are more people than just you involved, then you will likely want to draw up a partnership agreement. It is important for a partnership to have a formal agreement in place that clearly sets out the parameters of the business relationship on matters like decision-making, profit sharing and dispute resolution. It also deals with issues that may be important in the future such as what would happen if the partnership is dissolved or if one partner needs to be bought out. Without the agreement in place it could cause chaos down the line. Partnerships benefit from finding it easier to raise capital and drawing on the combined skills and knowledge of all partners. However, there is still unlimited liability in most partnerships and profits must be shared between partners.
• Other forms of partnership are a Limited Partnership (which is more complex to set up and gives limited input in managerial decisions, but limits liability) and a Joint Venture (similar to a normal partnership but lasts for a limited period of time or for the duration of one project).
• If limiting personal liability is your main concern, you will probably wish to become a corporation. This makes the business a separate legal entity from you. The owners of a corporation are its shareholders and their only liability is their investment in company stock. The corporation itself is able to quite easily raise capital by selling off stock. However, the initial process of incorporation can be lengthy and expensive. It also can result on income being taxed twice, because the dividends are not deductible.

This is the first of a series of weekly posts focusing on some of the key issues that a small business startup faces.

One of the first things that you will wish to do once you have decided what your business will specialise in (see Small Business Ideas if you are struggling for inspiration) is to decide what it will be called.

Things to remember:   

• If you are struggling to come up with a name it might be helpful to use a mind-mapping tool like Freemind
• Try to come up with names that will be descriptive of the service you offer or are unique and catchy in some way. However, it is possible that a vague name with no relation to your business activities will only serve to confuse your potential customers
• Bear in mind that your business name will form the basis of your corporate image and will be the focus of many of your marketing activities. The name should not be so specific that it restricts organisational changes you may need to make in the future relating to products or strategy
• Investigate the names of the businesses that will be your future competition. You may be inspired to come up with a name that is similar but differentiates you in some way
• Be aware of the legal issues that surround naming a business. Some words may be illegal or infringe copyright so you will want to avoid using them in your business name
• Ask your friends, family and potential clients about the name you are considering as their opinions will be a useful gauge of how much they like that it and what message it conveys to them. You may wish to go further than this and conduct full market testing on the name
• If you going to be trading internationally, check whether your name has a different meaning in other languages or cultures in order to avoid offence or misunderstandings
• Check to see if the domain names relating to your favourite choices are already taken. It is important that you have a website address that is easy for your customers to remember. If your name is complex to spell you may wish to register the most common misspellings also
• Try designing some logo’s using your favourite name to see if you would be happy with how it looks
• When you make your final decision to register and possibly trademark your business name it is probably best to trust your own intuition as to which one is the most appropriate. It may help you to imagine your business being reported on in the press and how you would feel if you saw it in a headline