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Planning for business

Running your own business can be an immensely rewarding experience. Every year, approximately 400,000 new businesses start up in the UK. Decisions taken in the early years can be the most difficult as well as the most important, particularly for first-time entrepreneurs and those with no previous business knowledge or experience.

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When you have an idea for a new product or service, the impulse is to start sharing it with the world as soon as possible. However, the fact is that in the UK one in three new businesses ceases to trade within three years and, after ten years, only one in five is still in business.

Preparation is the key. This particularly applies to researching the market and testing your product or service. Getting the pricing right is a significant factor. Research shows that being under-capitalised is the most common cause of business failure. So it pays to get a business plan together with robust cashflow and profit forecasts.

Self-employment or Ltd Co

An ICAEW Chartered Accountant can offer advice that will enable you to confidently select the most appropriate format for your business. There are four main options available to you:

Sole trader

Setting up in business on your own gives you complete control and fewer administrative burdens, but has implications for tax and raising finance. Also, you have unlimited liability and could therefore risk personal loss if something were to go seriously wrong.


If two or more people run a business together as partners, they share profits, losses and unlimited legal liability. It is a common – and often very successful – formula, but it is essential to define the rights and responsibilities of partners and to set them out in a partnership deed. This complex process requires special accountancy and legal skills.

Limited Company

A limited company is a legal entity separate from its owners. Ownership can be changed or extra capital raised through the selling of shares, without necessarily affecting the management of the company. However, the number of statutes and regulations involved can substantially add to the time and money spent on administration, so the costs and benefits of this approach need careful analysis.

Limited Liability Partnership (LLP)

Unlike in a standard partnership, the liability of the partners in a LLP is normally limited to the amount of their partnership commitments. Requirements regarding accounts, audit, returns to Companies House, winding up and insolvency all follow normal company law rules, but taxation follows the rules for partnerships.

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Preparing your business plan

An ICAEW Chartered Accountant has the professional experience to examine your business ideas and evaluate profit potential. This will help you to set realistic financial targets, establish budgets, plan ahead and compare forecast figures with actual results. Whether you are planning to secure bank finance, raise equity finance or monitoring performance against your own benchmarks, a business plan is a valuable tool.

Your business plan must be exciting but credible, with clearly identified customer benefits and evidence of growth and future prospects. An executive summary is vital, clearly stating your financial objectives, the business idea and profit forecasts.

For a bank this may be all that is required but if you are seeking outside investment, in addition to the executive summary, you will need the following:

  • A history of the company.
  • Current and future products and/or services (including patents).
  • Sales channels and delivery.
  • How products will be produced.
  • How the business is operated and why it will be successful.
  • A description of the market and sector and details of the marketing strategy and sales and distribution process.
  • Full details of the management team.
  • Financial information (including debt finance already in place).
  • A risk analysis.

Your business plan is a crucial pillar of future success and the professional advice of an ICAEW Chartered Accountant, who is equipped to question, analyse and offer insight, can prove invaluable.

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Raising finance

If you are seeking a bank overdraft or loan or trying to attract new investors, you will need to present a convincing picture of your business’s financial condition and future prospects. An ICAEW Chartered Accountant will know exactly what information is required and how it should be presented. This will give you the best chance of success.

Popular methods of raising finance include:

  • Personal funding – savings, money released from the sale of other assets or from remortgaging your home.
  • Friends and family – it is always advisable to draw up a written loan agreement making it clear that this is a business investment and not a favour.
  • Bank loans and overdrafts – an overdraft may be a good way to finance a temporary or fluctuating cash shortage. A bank loan is a longer-term commitment more suited to a strategy for growth.
  • Government assistance – this may take the form of cash grants, tax concessions, funding of training or relocation or subsidised rents. Explore your options and be aware that the financial landscape is constantly changing.
  • Other sources of finance – these range from debenture loans to venture capital provided under, for example, the Enterprise Investment Scheme or Regional Venture Capital Funds. Alternatively, it may be possible to arrange finance from a venture capitalist, some other financial institution, or perhaps a research institution.

The advice of an ICAEW Chartered Accountant can help you to assess the possibilities, choose an appropriate source of finance and prepare a convincing proposal.

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When looking for business premises, it pays to be practical and flexible. Take advice from an ICAEW Chartered Accountant with sound judgment and relevant experience, and bear these key considerations in mind:

  • Location: is it convenient for you and your customers?
  • Parking: is there enough space for staff and customers? What are the parking costs?
  • Local transport facilities: how will everybody get there?
  • Are there shopping facilities nearby for staff?
  • Access: does it meet the requirements of the Disability Discrimination Act?
  • Terms of lease: how important is stability, or is flexibility more important?
  • Availability of services: reception, kitchen, toilets, cabling for computers, etc.
  • Size of accommodation: will furniture and equipment fit? Is there room for expansion?
  • Crime: does the area have a high crime rate? This could affect your insurance.
  • Image: will the premises enhance the business image with existing or new customers?
  • Would serviced accommodation be a better solution?

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