5 Things You Can Easily Overlook Your First Year In Business

Starting a business is one of life’s most thrilling experiences; the sense of anticipation, fear, and hope.

Photo: Russell Smith, founder and Managing Director of Russell Smith Chartered Accountants; Source: Courtesy Photo
Photo: Russell Smith, founder and Managing Director of Russell Smith Chartered Accountants; Source: Courtesy Photo

Starting a business is one of life’s most thrilling experiences; the sense of anticipation, fear, and hope.

However, whilst most entrepreneurs spend the days leading up to the inception of their new venture brainstorming ideas and seeking out investors, there are a few important things that really must be considered.

 

1. Nuances within your industry sector

Every industry has a different way of operating and every sector within that industry has its own practices too.

The best way to understand your industry is to talk to people who’ve already been around the block; experts in your chosen field with a wealth of knowledge and experience. The benefits of doing so are simple. It means it will take you less time to set up your business, you’ll have a better understanding of what circles you should be running in to find clients, customers, business partners, etc, and you may also learn about potential pitfalls to avoid.

 

2. Skills you need to be successful

Now that you’ve considered what the sector you are entering is all about, you’ll also need to consider what you can bring to it, and whether or not you have the skills. If you don’t have the required skills (yet), work out how you can acquire them.

It’s all well and good to have a great idea for a mobile app, but what if you can’t make it? Or what if you can develop an app, but you have no idea how to run or market a business? Unfortunately, business is not all about the idea, you need to have the skill sets to not only complete and manage the project, but also run a successful business.

Happily, however, there are options available, should you not have the skills to either build on your idea or compete in business. Many successful businesses are built on partnerships, take Steve Jobs and Steve Wozniak. Jobs was the business brains, Wozniak was the computing brains, neither could have succeeded without the other, but together they conquered the world.

 

3. The importance of accounting

It’s an age-old practice that comes complete with countless benefits that can help maintain a business, yet accounting is something many new business owners simply overlook.

Good accounting practices and well-maintained finances offer ways to monitor your financial situation, avoid mistakes, watch for issues when it comes to overspending/overinvesting, and ensure that your taxes are all correct and above board — to name but a few reasons.

Poor accounting, however, offers you nothing but nightmares, some that can have absolutely devastating results — an incorrectly submitted tax return, leading to fines, for example.

Considering accounting doesn’t mean you have to go back to college and qualify before you start your business, it just means you need to be aware of your accounts, follow some good accounting practices and be prepared to ask for professional help if you need it. If you don’t, and you get your accounts and finances into a bad shape, there is little that can save your small, fledgling business from being swallowed up by its money woes.

 

4. Legal obligations

Operating a business opens up a range of legal obligations that traditionally employed individuals simply don’t have to deal with. Of course, there is the responsibility of registering for and filing your own business taxes, but that’s just the beginning…

Owning a business may mean you have employees, which entails varying insurances and legal requirements. You must also consider what types of legal challenges you may face – and how to protect yourself against them. This includes issues with copyright, intellectual property, customer privacy and data protection.

Essentially, by owning a business you paint a target on your back. Every country has different laws regarding what business owners must do to ensure their business operates within regulatory and legal parameters, so it’s incredibly important to consider your responsibilities. Legal issues are incredibly damaging not only to finances, but to reputation and mental health too.

 

5. Staying afloat when times are tough

Every business is different, so this assumption won’t work for everybody, but it will for most: in the early days of business, you aren’t going to make much money.

Now, of course, this doesn’t mean your business is unsuccessful, it just means it takes time to get consistent, steady money rolling in (for some this can take years). However, while a lack of income isn’t necessarily a mark on the potential of your business, it will affect you directly.

New businesses need money and investment to move forward, but so do you. It’s all well and good saving a lump sum, or getting investment, to fund your startup idea, but how are you going to get by day-to-day before your idea becomes profitable?

Money, and unfortunately not dreams, is what keeps the lights on in the office and home, so you need to be sure you have enough to fund both. Without having that security, something with eventually give, and there is simply no way you can develop a business when you can’t pay the bills.

 

This article has been edited and condensed.

Russell Smith, founder and Managing Director of Russell Smith Chartered Accountants, began his accountancy business over a decade ago. Starting from the very bottom, he now has offices all over the UK and an expanding client base. Russell knows everything there is to know about accounting and the trials of being self-employed. Connect with @rsaccountancy on Twitter.

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