Many people dream of setting up a new business and being their own boss. For those who succeed it can be a hugely rewarding experience that changes their lives forever.

For those who fail, however, it can prove costly and demoralising.

You can improve your chances of success by doing your homework before starting work or investing any money.

Test your great idea

You may think you have a great idea for a new business but are you sure other firms haven’t had exactly the same idea? Check out the competition before you start. It may be that there are several firms already offering the same product or service.

If that’s so, you may have to modify your idea to make it stand out in the market place. However, be wary of trying to compete on price alone, as that may prevent you making the profits needed to enable your business to grow and become established.

It’s also important to tread carefully if you find that no other business offers the service you want to provide. It may be that you’ve spotted a gap in the market, but it might also be that there is no demand for your new idea. Again, you need to do your research to make sure that you will be able to find customers.

Check out the costs

It’s not unusual for people to underestimate the money required when setting up a new business. For example, you will need to consider the cost of equipment, premises and staff. There may also be marketing costs. Do you have already have a list of potential customers, or will you have to pay for advertising? Make sure you don’t put everything in place for your new venture and then find you have no money left to promote it.

There may also be unexpected costs you haven’t considered. For example, you may want to import products from abroad to sell, but have you factored in such things as import VAT or customs duty?

Patents and copyright

Does your new venture involve selling or using existing products and designs? If so, you need to make sure you are not breaching other people’s intellectual property rights over trademarks, patents and designs. Remember that design rights apply to companies all over the world, not just those based in the UK.

Investment money

How will you finance your new business? Many people use savings or redundancy money. Some may re-mortgage their homes or get a bank loan. Be careful if you decide to borrow from friends or family. Make sure you draw up a written agreement so that everyone is clear on how and when the money will be paid back. This can avoid disputes in future, which can be particularly uncomfortable if they involve people close to you.

What kind of business will you be?

Before starting off, you will need to consider what is the best structure for your business. Should you be a sole trader, or would a partnership or a limited company suit your purposes better? There are other alternatives, all of which have different advantages to offer depending on your needs. The differences can be subtle, yet very significant so it would sensible to get legal advice before making a decision.

Please contact us if you would like more information about the issues raised in this article or any aspect of setting up a new business.