The best parts about being a business owner are usually also the worst parts.
Owning and running a business can bring great rewards, but being your own boss can also cause stress and anxiety along the way. To help you meet the challenges as well as enjoy the benefits of business ownership, here are Hollingsworths' top tips:
Structure your business to suit you
From sole traders and partnerships through to social enterprises, limited liability partnerships and limited companies, businesses can be structured in many different ways.
Some of these structures offer tax advantages and costs savings at an early stage, which is why many start ups begin life as sole trader businesses. However, being a sole trader or a partnership brings with it personal liability - a liability which is limited for owners of limited companies, although they can face higher administration costs. So, before deciding how to structure your business you need to balance your potential cost savings against the security of knowing that your personal assets are not on the line.
Know your customer
When you provide goods and services to a customer, you invoice them for your work and may give them credit on the invoice. This is like loaning them money - not something you would be prepared to do for someone you'd only just met in the street.
So, before you take a customer's order, make sure you have their details. Find out if they are sole traders, a partnership or limited company and get their full name and address. You can then run some background checks or obtain a credit report to make sure that, on the face of it, they have the means to pay you. If you have concerns about their finances, think about asking for a deposit, getting your money up front or requesting payment on delivery.
Record your contracts
Although many verbal contracts are just as binding as written ones, it is much easier to prove and demonstrate what was agreed if a contract is in writing.
While your business might not be at the stage of needing terms and conditions for the goods that it buys and sells, all businesses should record the basic terms of their contract with the customer before an agreement is made. Even a simple email can help you to show what was agreed with your customer if proof is needed.
Review your customer's or supplier's paperwork
When you buy or sell goods or order or receive services, your supplier or customer may also want to try and impose their terms upon you.
You need to understand what those terms are and check, if reference is made to terms and conditions, what those Ts & Cs say. Your customer or supplier could be imposing unacceptable payment terms or limiting their liability. Just because you haven't received their Ts & Cs doesn't mean that that their terms will not be binding upon the contract, so do ask to see them first.
Get support from the right people
Whether you decide to talk to an accountant, solicitor or financial adviser, make sure you get professional help from the outset, whenever you need it.
With regard to legal advice, prevention is often easier than cure. Solicitors can help you set out your terms and conditions and draw up contracts before anything goes wrong and potentially expensive disputes arise. Ask people you know and trust which professional advisers they would recommend. Those professional relationships can make a big difference over the years to you and your business.
Maintain good records within your business
Limited companies must keep records about the company and its financial and accounting activities.
These must be kept for at least six years from the end of the last financial year they relate to, although in some circumstances records must be retained for even longer. Companies can be fined and directors disqualified if records are not kept. Although these rules apply to limited companies, we would recommend that all businesses, including sole traders and partnerships, also maintain and retain their business and financial records.
Issue employment contracts
If you employ people you must provide them with a document known as a Statement of Terms within eight weeks of them joining you.
Although you are obliged to give them this document, it will not necessarily protect your business from future competition if the employee decides to leave you and begins approaching and working with your client base. To safeguard your business, you should consider issuing detailed contracts of employment that include restrictive covenants - contractual commitments which limit the ability of former employees to approach or deal with your business customers for a set period of time. Protection can also be sought which prevents employees poaching other members of your staff.
Protect your confidential information and trade secrets
Your business may do something in a unique or special way that sets it apart from the competition.
This information is a trade secret and is confidential, as is your customer database, customer contact names and the terms upon which you deliver your goods or services to your customer. This information needs to be protected - both from third parties who might want to obtain and exploit it, and from staff who may be planning to leave you and want to use it in their own business or to pass it on to a competitor.
All businesses should maintain systems for protecting their confidential information from third party attacks, such as viruses or ransomware, and from removal by rogue employees.
Remember that cash flow is King
Many businesses fail because they overstretch themselves and cannot meet the demands of the work as well as fund it.
You need to think carefully about the payment terms you offer your customers, and, if those terms are exceeded, how you go about collecting your money while maintaining your relationship with that customer. Just because a customer doesn't pay on time doesn't mean that they are necessarily a "bad customer" and that you will not want to work with them again.
You need a credit control process which allows you to systematically record the sending out of your invoices and the subsequent follow-ups/reminders for payment. Often a simple telephone call asking politely for payment can result in an overdue invoice being settled that same day.
If you still haven't been paid after your process has come to an end, take professional advice on recovering your money. You can also consider putting a clause in your terms and conditions which allows you to suspend delivery of goods and further services when payments become overdue.
Get professional advice if you have a dispute
At some stage in your business's life it is likely you will fall out with a customer or supplier.
Things can go wrong for many reasons, and disputes can and do arise. We often see, when advising on disputes, that a number of mistakes have been made on the same project. This might be because there has been a rush to correct the original error, which hasn't worked, or the person managing the project is out of their depth or is too busy, or both.
When problems and disputes arise, address them. If you receive threatening correspondence from a customer or supplier - or from their lawyers - get your own legal advice. The correspondence that you exchange with the customer or supplier may form part of any subsequent court dispute and the statements and admissions you make could be held against you.
To discover how Hollingsworths can help, please call us on 0116 204 7260 or complete the form below