If you’re wondering if you should take the leap and put your years of experience and innovative ideas to work in a new venture that you control, ask yourself these three questions first:
- Is there a demand in the market?
- Can you do more for your customers than your potential competitors can?
- Are you willing to do whatever it takes to succeed?
If the answer is ‘yes’ to all three, you’re ready to join the exciting world of business ownership. Here are all the ducks you should have in a row before you go about setting up your own business.
Business Plan
It all starts with a business plan. Before you even get up and running the first thing you need in place is a business plan.
What is a Business Plan?
A business plan is a document that sets out your business’s mission, goals and targets and offers detailed information explaining how these aspirations can be achieved.
Typically, a start-up business will draft a plan outlining the strategy for the first 3-5 years and this can be revised when the business hits a new stage in its growth. A business plan helps you:
- Sell your business to investors
- Differentiate your business from competitors
- Plan for a move or expansion of premises
- Guide managers in their duties
- Set and amend budgets if unexpected overheads or income streams occur
Enterprise Ireland have uploaded a sample business plan for budding entrepreneurs that helps you to fill in the essential information for your business in a single document. You can download it here.
Setting Your Start-Up Salary
The autobiographies of the world’s leading CEOs, entrepreneurs and other industry disruptors are littered with tales of meagre beginnings, humble livings and most importantly the acceptance that their new ventures will make a loss in their first two years of business before breaking even in the third.
These losses will obviously effect your remuneration in the early days.
Choosing Your Wage
There are two approaches to paying yourself that are frequently discussed in self-employment and start-up culture: A living wage or paying yourself what you are worth.
The first is self-explanatory. You pay yourself enough to get by, including basic living expenses and what you need to get to work every day. People choosing this method are purposely keeping their overheads as low as possible so that there are no capital drains on the business. This seems straight forward, so why do the other?
Those that wish to pay themselves what they are worth from the start are building in their realistic salary into the business plan from the very start. By doing this, the entrepreneurs are painting a genuine picture of what their operating costs really are from day one, as opposed to having to reassess once again once the business are out of the red.
A cut in wages, is one of the biggest barricades for those about to ‘make the leap’ and set up their own business. Someone might have the willpower, the talent and the business acumen to succeed on their own but they may have family commitments or other responsibilities that require a stable cash flow. This is one reason why funding is so crucial.
Sourcing Funding
You’ve no doubt heard the phrase ‘don’t use your own money’ in popular culture based around the investment scene or stock trading, but this is of course a luxury that not everyone is offered.
With the constant media coverage devoted to start-ups in the fast-paced tech world and mentions of IPOs and share prices, one can be forgiven if they think that there is a non-stop stream of cash out there. In reality, business loans, savings and second mortgages can all sometimes come into play to help entrepreneurs get up and running.
A successful entrepreneur must use every possible resource and opportunity that’s available to them to their advantage in order to raise funding.
We’ve put together a list of funding resources for SMEs together in our article Best Assistance Schemes for Start-ups and SMEs.
How Much Funding Do You Need?
‘How much money do I need?’ is a difficult question to answer as the overheads would be different for each business but if you have a business plan in place it’s a lot easier to put a picture together.
These three basic steps can be helpful:
- Estimate your overheads for the first 2-3 years
- Project your revenues as accurately as possible for the same period
- Now determine the shortfall in cashflow you would need to keep the lights on
Be sure to project revenues conservatively, consider every minor and major expense when it comes to your overheads and ensure your business is capitalised to handle lower than forecasted revenue.
Knowing Your Strengths and Weaknesses
When you are putting together your business plan and mapping out your business roadmap it’s likely that you will notice that some of your ambitions will require you to upskill or outsource for certain operations.
While drawing up your business plan, investigate and explore the training resources that are available to start-ups in Ireland. For example VOOM contestant Niall Moloney recently spoke to Virgin Media Business about how his business Pow Cow benefitted from the Foodworks programme run by Bord Bia, Enterprise Ireland and Teagasc, describing it as “being the closest thing to an MBA in food”.
Some skills can be learned on the go, especially those to do with admin, dealing with retailers and suppliers but other more specialised skills such as web development, accountancy or aspects of creative digital media may require additional resources. Whether it’s investing in a part time course for yourself or taking on someone else, this needs to be factored into your budget.
Conducting A Competitor Analysis
Before you set out on your own, conduct a competitor analysis to create an accurate picture of who you are going up against in your chosen market.
Conducting a competitor analysis involves the following steps:
- Identifying your competitors, direct and indirect
- Analyse competitors’ sales and marketing channels
- Examine competitors’ strengths and weaknesses
- Identify areas that your business can do better
Competition is an Asset
Competition keeps you on your toes and can inspire you to add new and exciting direction to your business plan. You may feel inspired by the digital strategy taken by the current number one business in your field, or have a brainwave to add complimentary features to your product offering after studying the performance of an indirect competitor.
When you conduct your competitor analysis and find that your chosen field is bustling with competition, don’t see it as a deterrent. Instead, see it as a sign that there is profit to be made in the space and that you’ll have to work hard to get in front of your customers. As marketing guru Seth Godin writes: “Competition validates you. It creates a category. It permits the sale to be this or that, not yes or no. And this or that is a much easier sale to make. It also makes decisions about pricing easier, because you have someone to compare against and lean on.”
Choosing Your Workspace
Many budding entrepreneurs will work from a home office during the initial phases of their start-up to keep costs low.
Another option, especially for teams of two or more is to move into a shared space or incubator. Because of the growing popularity of shared office spaces in Ireland we recently put together a guide on dealing with the dynamics of a shared office space to help you and your business thrive in this environment.
When Should You Move?
Simply put, the right time to upgrade your office space is when your financial situation allows you to and if your business is experiencing the adequate growth to facilitate the increased resource.
Current trends in flexi and remote working and developments in software like Skype, Google Docs and Adobe Creative cloud allow businesses to take on staff and freelancers that can assist the business from anywhere in the world. This can help avoid the need for an abundance of tables and chairs in a small space starting off and put off a big move for longer.
Get to Grips with Tax
Tax compliance is an important requirement for every business and a keen understanding of Irish tax laws can be rewarding for start-up organisations and give your business the breathing space it needs to get off the ground.
Corporate Tax
Businesses in Ireland pay a tax rate of 12.5% on trading income and 25% on non-trading income (this could be rental income from property owned by the organisation etc.).
The Irish corporate tax rate is one of the key factors driving foreign direct investment in the country, and thankfully indigenous business can also benefit from the advantageous tax terms.
Sole Trader or LLC
One of the first things that a business must do is decide if they are going to be a sole trader or set up a limited company. There a are a number of pros and cons for both options.
One of the main reasons that people chose to register as a limited company with the Companies Registry Office is to reduce their level of liability if things ever went wrong. In this case the company (and not the individual shareholders) is the appropriate person to be sued if debts are incurred by the company which remain unpaid, despite demand. You can learn more here.
Knowledge Development Box
One of the most valuable resources regarding taxation, that is available to businesses operating in Ireland, is the Knowledge Development Box. This is a special tax rate of 6.25% that applies to profits derived from patented or similarly protected inventions and copyrighted software.
This means that for new technology and intellectual property that is developed by companies in Ireland, the new low tax rate applies. R&D must be undertaken in Ireland to generate the qualifying asset.
Virgin Media Business is proud to support the extraordinary individuals that underpin the prosperity achieved by the many success stories coming out of Ireland every day. To learn more about the services that we offer Irish businesses visit https://www.virginmedia.ie/business/.