How to start a business in 2016: Client Relationship Manager David Reed gives his insight. Part one of a two part feature.

The appeal of starting your own business is clear; you get to be your own boss, reap the dividends of your hard work and strive within a field which, presumably, you are familiar with and enjoy exploring. Mention ‘Entrepreneur’ and the average person will probably conjure forth images of one of the ‘Dragons’ from ‘Dragons Den’, climbing out of a helicopter, lounging on the deck of a yacht or otherwise looking extremely rich and, it has to be said, not particularly hard working.

The reality of starting your own business, of course, is that it requires huge reserves of effort, the right idea, product or service in the first place and a healthy dose of good luck. It also means attending to a thousand and one details, each of which may seem trivial in its’ own right but which, taken together, will form the framework via which your business is a success or failure. If you’re planning on starting a business in 2016 then you’re not alone; according to the think tank Centre for Entrepreneurs, which runs the government backed Startup Britain campaign, business start-up rates in the UK rose from 440,600 in 2011 to 581,173 in 2014 with more than 600,000 businesses confidently predicted to have been launched during the current year.

The down side of this vision of drive and industry, of course, is that more than 50% of those businesses are statistically likely to fail within 5 years, particularly amidst a financial landscape in which, post the crash of 2007/8, funding for a start-up or newly established business can be hard to come by. What this means is that anyone eager to start a new business in 2016 has to think long and hard before doing so, and has to sit down and draw up plans which are as detailed and cover as many different aspects as possible, from the day to day minutiae of running the business through to the long term strategic vision.

The following are just a few brief issues to consider before you cut the yellow ribbon and declare your business open:

Funding

The crash of 2007/8 changed the financial landscape in ways which are still working their way through the system, and nowhere is this more apparent than in the difficulties which businesses can have accessing ‘traditional’ forms of lending. In the past, the first choice of credit stream for the vast majority of businesses tended to be the overdraft, the flexibility of which was particularly welcome given that cash flow problems are one of the chief causes of fledgling businesses going under. When the rules on capital controls within the high street banks changed, however, so did their willingness to advance credit, a perception which is backed up by the facts. Statistics released by the Bank of England in 2015 showed that the level of overdraft lending had dropped by 17% during the previous 4 years, down from £197 billion to £163 billion. The fact that this change in lending habits appears to be entrenched and perhaps even structural is underlined by the fact that this rate of decline has stayed at 5% during the last 12 months.

Businesses in need of seed funding, help with cash flow or just simple investment therefore need to be more imaginative when it comes to sourcing funding. The options now on offer include:

  • Asset based lending along the lines of invoice financing
  • Trade finance
  • Private placements
  • Self-issued retail bonds
  • Online invoice trading platforms
  • Peer-to-peer and crowd-funding
  • Supply chain finance
  • Private equity
  • The Business Growth Fund
  • Business Angels
  • Public equity markets
  • Venture capital
  • Corporate venturing

Explore all the options on offer in terms of funding and, while you may sometimes have to take no for an answer, don’t take it as a final answer, and take full advantage that the alternative finance industry is the fastest growing source of funding in the UK.

Utilise Technology

Examine every process which forms part of the service you deliver, and ask yourself if it couldn’t be streamlined via the use of technology.  The uptake of automation may well require investment at the front end but it will more than pay back in time saved, overheads cut and value delivered to your customers.  The clearest examples of the use of automation can be found within the manufacturing sector, with the use of automated production lines and manufacturing equipment. This doesn’t necessarily mean you have to invest in a fleet of robots, of course, since something as simple as a short conveyor belt shifting goods from one part of a workshop to another could shave off seconds for each item produced, a saving which will build incrementally to make a huge difference to your bottom line.

Beyond the field of manufacturing, the computing power on offer to even the smallest business makes it possible to shift whole swathes of the working week into the virtual realm or, at the very least, to take advantage of the massive speeding up of processes. Tasks such as bill paying and invoicing, ordering, inventory, customer support tracking and cloud storage could be handled by a variety of on or offline programmes, freeing up members of your team who are spending large amounts of their time working on vital but uninspiring activities. Alternatively, of course, a willingness to properly exploit automation may well lead to needing to employ fewer people and thus reducing both overheads and unavoidable HR headaches.

Another option to be grouped alongside automation, in terms of what it could do for your working processes and the time which you have to spend every day dealing with the minutiae of your business as opposed to the longer term strategic issues, is outsourcing.

Look around your business and come up with an honest evaluation of how much of what you do absolutely has to be handled by the people working for you. Matters such as accounting, any legal issues and even your marketing and advertising could be outsourced and dealt with by specialists. Not only will an outside firm probably be able to take advantage of economies of scale and the expertise of long established practice to perform the tasks in question for less than they cost in house, but they’ll also free you to put together a team of specialists which is designed to tackle only matters which are quintessentially part of your business.

Structure

An advantage of making the most of both outsourcing and automation is that it will allow you to simplify the structure around which your business operates. Structures tend to grow organically, over time, and after even a short while it can be easy for the structures supporting your business to become far more complex than they need to be, with chains of command and decision making processes ossifying purely because they’ve been allowed to do so.

If you’re a smaller business, then allowing your working practices to become overly complex will throw away a huge advantage you have over larger business – namely the ability to react quickly to events, to make decisions and implement them with speed and to demonstrate a flexibility and responsiveness to the immediate wider environment which larger corporations struggle to match.

It boils down, above all else, to streamlining the hierarchy of your business in a manner which ensures that each individual has a clearly defined role and an easily understood position in the chain of command. That way, although you’ll ultimately remain in charge, opinions, ideas and decisions can be passed up and down the chain quickly and easily.

Hiring and Training

It would be very easy to write lengthy pieces of advice dealing with both the hiring and training processes, since both are equally vital to the success of your business. In simple terms, hiring the right people involves looking beyond the simple technical requirement s of any given role and trying to find the person who you feel will both slot into your way of doing things and has the capability to expand their portfolio of skills in the years going forward. One useful exercise to carry out before hiring new people is to analyse the strengths of the people you already employ to decide whether any of them could step into the role in question. Not only could this potentially save you the time, trouble and expense of the recruitment process, but it could also confirm that you’ve been hiring the right people in the first place, and are now in a position to tap into their full potential.

When training staff, always ensure that you train them in both the specific details of the task for which they’ve been hired, and the wider generality of the way in which your company works, thus creating a work force with both particular skills and a transferrable understanding of your overall aims and ambitions. Make sure that the person delivering the training, whether that’s you or someone who has been specifically delegated, creates an atmosphere within which the trainee feels relaxed enough to ask questions and admit if a piece of information, a process or a working practice hasn’t been fully understood. New members of a team will often feel reluctant to ask too many questions, for fear of appearing to not quite be ‘getting’ what is expected of them. By creating a two way conversation throughout the training process – recapping at regular intervals and at the end of each day, for example – you’ll empower new employees to be honest about anything they haven’t immediately grasped, and thus to move forward with a fully realised concept of what they need to do.