The New Year often means a review of what we want out of life and whether the time has come to take a risk and start that business you've often dreamt of. The recent recession saw record numbers of entrepreneurial start-up launches and this trend shows little sign of slowing down. What are the key statistics you might want to look at before taking the plunge?
Statistically, if you think you have found the perfect concept and formulated a sound business plan, and are in your thirties, then your start-up is more likely to succeed. That's what figures from a range of sources including Companies House, The Telegraph and Barclays tell us.
Whatever lies behind this age bias, be it energy, financial resources or simply enough experience of success and failure, the stats seem to favour this stage of life. Don't be disheartened, though, if you're younger or older than this - there are plenty of examples of success outside this peak bracket too.
Global figures published by Mashable indicate that the majority of the most successful new start-ups are launched by former CEOs and business founders. So, if your last concept didn't quite come to fruition or you have been burnt in the past, the figures indicate that you certainly shouldn't give up. Tenacity and an ability to learn from past mistakes could stand you in good stead.
Although the financial rewards of going alone may seem appealing, going solo can be hard work.
As well as sharing resources, having someone else to bounce ideas off and conceptualise plans gives you a fantastic alternative perspective. Even Bill Gates and Steve Jobs had business partners. If you are launching a start-up in 2016, don't let your ego get the better of you - two heads may well be better than one.
Our final tip for anyone contemplating their own start-up in 2016 is to think about location very carefully. On straight numbers, the majority of successful businesses hail from London, Birmingham and Manchester.
However, if you want to make your start-up as successful as it can be, then you really need to be in front of your demographic wherever that is. Do your research and find out exactly where the largest proportion of your target audience is going to be and then make sure you have a physical or online presence that can reach that audience.
Blog provided by Sage One online accounting and payroll software.
If you’re thinking about starting up, you must carefully consider whether to form a limited company straight away or hold off for a while and become a sole trader.
You may think forming a limited company will save you tax and must therefore be the best route. However, many start-ups incur considerable costs in their initial months. And even if you do not have sizeable initial outgoings, you should still factor in a realistic margin for error in your budgeting.
You will more than likely have a “learning curve cost” if this is your first time in business or if you’re going to be operating within a sector of which you have no prior experience. In either case, you should not expect the same return straight away as your more experienced competitors.
If you make a loss as a sole trader, it can be set against your employment income for previous years, which in all likelihood will give you a handy refund after the first tax year. If you make a loss as a limited company, it can only be carried forward and set against future the company’s profits. If the company never makes a profit, it will be wasted.
Even if you’re more confident that your business plan will be a success, you may still profit from waiting until you form a company. As a sole trader, you can build up custom, contacts, brand awareness and reputation in the business. From a tax point of view, this goodwill can be sold to the company. Future drawings from the company can be taken in the form of a director’s loan repayment, which will be especially beneficial if you expect to be paying tax at a higher rate.
You can set up as a sole trader by simply telephoning HMRC or registering online, whereas the route for a company formation is more complex. Ongoing accountancy costs are bound to be higher and Companies House will publish your company’s financial results for anyone to see – including your competitors, suppliers and potential clients.
Yes, if your salary and dividends are organised properly, a company can save you considerable tax. It can also limit your liability to company debts. But the decision is not so straightforward. If you want to protect your trading name, you can always form the company and leave it dormant at Companies House until you are ready to start trading.
A limited company can save you tax in certain situations, but it is not always the best way to start out. A brief review of the options with your accountant could save you time and money in the long run.