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How to start your own business

Preparation and planning

“Fail to Prepare……….Prepare to Fail”

Lack of research is a common cause of new business failure, so before you start make sure there is sufficient demand for your product or service. Make sure you know the strength of the competition and that you are sure you can run the business profitably.

Some companies fail to get off the ground because they have an inadequate plan. Your plan should build on the initial research and explain clearly to potential backers, including the bank manager, why YOU are a viable business proposition.

Your presentation should ideally include projected cash flow, expenses, fixed costs, profit and loss projections etc.

Rules and Regulations

All businesses must meet legal and regulatory requirements. So make sure you have:

• registered with the appropriate tax authorities
• complied with health and safety regulations, including fire prevention and
• complied with all statutory pension and medical insurance registrations.

It is also important to check:

• you are not infringing the intellectual property rights and same company name of anyone else
• you have obtained the necessary Visa employment approvals and permission
• you have appropriate insurance and
• you have systems in place for keeping business records.

Running out of cash is perhaps the biggest danger for any new business. You should keep control by setting budgets, monitoring expenditure closely, chasing up debtors in good time, keeping accurate records and taking advice from your accountant or small business adviser on how to look after your cash.

Most importantly, make sure you and/or your partners have the commitment, energy and time to keep the business going.

Writing a business plan

The business plan captures the strategic direction, operational and financial aims of the business. You need to ensure you have a good business plan to present to potential investors and the Bank - this will be the foundations of your development.

A good business plan will contain:

• an initial executive summary, summarising the details of the business proposal
• a written overview of the business' aims
• details of its product or service
• proposed management team
• financial forecasts and appendices, such as the CVs of key management members, market research data or technical product information.

The body of your business plan should cover several areas in detail.

Give the reason for the business being established - include business goals e.g. whether ambitious growth is desired or a regular, steady trading income.

Explain what your business will do in simple terms, highlighting any Unique Selling Propositions (USP’s) that set it apart from competitors.

Include market and rival information, outlining what part of the market you are targeting, key competitors and what differentiates you from them.

Financial forecasts

Consider your sales and marketing strategy, include information on how the product or service will be priced, channels to market, advertising and marketing plans.

Details of key personnel and their relevant experience are also important, as is operational information like office location, special equipment and expected employee headcount.

State the financing you require (if any), based on your financial forecasts. Include details of any finance provided by the founder or management team and indicate the key risks to the business and any mitigating action you can take.

Your plan should also include a sales forecast, cash flow forecast and a projected profit and loss account for up to five years' ahead - Larger businesses should also draw up a projected balance sheet.

The figures used must be reasonable - avoid being over optimistic (Turnover is Fantasy….Profit is Reality).

Choosing a Company Name

The right web address is crucial to getting your online presence right but is too often left until the last minute. It is advisable to check the availability of a domain name prior to officially registering your company name.

The most popular domains end in .com (short for 'company'). The address was intended to be used by companies with a global presence but has become highly sought-after and is fast running out of recognisable and usable combinations.

There are other options available including .net (internet), .org (organisation) .info (information) and .hk (a local Hong Kong company) - which name you pick is up to you (as long as someone else hasn't got there first), but as a general rule try to avoid hyphens and complicated combinations. If someone already owns a domain that you think your company is entitled to, then you can appeal.

If you have a trademark, then you can ask the World Intellectual Property Organisation to arbitrate, but be aware that owning a trademark in one country may not be enough to claim a global domain name back.

Funding your new business

You will need to be able to inform potential investors:

• what you need the capital for
• the nature of your business
• opportunities and potential competitors
• your plans and aspirations.

As an entrepreneur you need to balance the desire to retain control of the business with your appetite for external funding. Retaining control is often important and some funding sources can dilute your own return on the business.

For those of you who want to avoid such dilution, it is possible to issue different Classes of Shares to potential investors e.g. Class A and Class B Shares. Both can receive dividends but one Type of Share may NOT have voting rights. In order to maintain control of the company, you may wish to appoint a majority of Directors who are likely to follow your instructions.

THE IMPORTANCE OF LOCATION

The right location can have a big impact on business success, so it is important to choose wisely.

The main point to consider is cost. Money is always tight when you are starting out in business and office/work space can take up a major chunk of the available cash.

A virtual office provides all the benefits of a permanent office without the need to actually be there, our Virtual Office service provides you with a local point of contact in Hong Kong for your customers and all the benefits of a permanent office without the need to actually be there.

A Virtual Office is ideal for:

• Having a requirement to hold meetings in the city but no requirement for a full time office
• People who often travel and therefore do not have the need for physical office space
• Individuals that work from home but require a city identity
• Those who require an office identity but do not have the budget for a physical office
• New business start-ups who wish to test a new market and cannot yet justify the cost of setting up a permanent office.

More information regarding our different Virtual Office packages can be found at the following link on our website http://www.cmshk.com/virtual-office-service

MARKET RESEARCH

Market research is the collection and assessment of data on a target market with a view to increasing business understanding. Commonly it covers customer information, including the drivers that trigger sales and the groups in society most likely to become customer.

But it can also cover other valuable topics like key competitors and drivers for change in the industry, such as impending regulation or technological development. Effective market research can deliver significant and immediate benefits to a business.

Market research can take several forms. It may simply involve the collation and review of data and reports published by third parties such Nielsen, Frost and Sullivan etc

The right type of research campaign can help to improve a product or to meet the emerging needs of the customer base.

Increased knowledge will provide you a more accurate targeting of marketing activity at the most valuable customers, more sophisticated customer service and more effective sales promotions tailored to meet demand.

It can also reduce the risks surrounding a new product launch, improve brand strength by building on areas which are popular with customers and provide greater awareness of concern over issues such as green and ethical business activity.

An effective public relations can boost your company image and help to improve brand awareness, generate sales and attract new employees.

Generating PR takes time and patience. Be prepared to employ a freelance PR specialist if you don't have time to develop your PR activity yourself on a regular basis.

Although PR is valuable, you don't want to let it distract you from the actual business of running the company.

Taking care of your customers

As a small business you won't have national advertising campaigns to boost your image, so you need to make sure that any word-of-mouth publicity is positive.

Attracting new customers is costly and unpredictable. Gaining business from existing customers through positive referrals is far easier. Customers who have received a good service will recommend you to others but customers who feel badly treated are likely to moan about you instead.

Creating and maintaining a positive reputation is vital.

Customer Service

Develop a service promise, and deliver against it. Set achievable and realistic delivery dates and try to deliver early – look to exceed your customers expectations.

If you claim to offer personal service at affordable prices, make sure that you do.

Try to accommodate your customers' needs - going the extra mile can be a big distinguishing factor, so use your size and flexibility to your advantage.

Remember that little things - such as a friendly approach - can make a big, positive impression. Ensure that all staff who deal directly with customers are trained appropriately.

Determine which are your most valuable customers:

these are the ones who buy most from you over the longest period, taking into account any costs involved in servicing them.

The most valuable customers should receive the highest degree of customer care – 20% of your clients will normally contribute towards 80% of your income

Knowing when to call it a day

Going it alone is one of the biggest decisions that you will ever make and ensuring your venture is a success is definitely hard work, but can be very rewarding.

However, there will come a time when either you wish to leave the business or the business reaches the end of its trading life.

It is important to have an exit strategy for yourself and a plan for either the continuation or closure of the business.

Research shows that after six years, eight out of 10 start-ups will no longer be trading but surprisingly only 27% of those are due to financial failure.

If you plan to sell your business, an accountant will help you prepare a set of financial statements for presentation to potential buyers and explain the tax implications of making the sale.

Before you put your business up for sale it is also important to take advice from a valuer, with knowledge and expertise in your sector, as they will be able to give you impartial advice about the real value of the business.