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The UK’s Biggest Ever Rescission & The Opportunity It Provides

This week, I wanted to have a quick chat with you about what we’re doing more in our business at the moment, which is supporting startup businesses.

In the news this morning, it was announced that the UK is now officially in recession. I think we’ve all known that for a few months now, but the figures now officially support that we are in a recession. Earlier this week, we also had the headline figures for job losses of about 220,000 people. What we’re experiencing, though, is that this recession and loss of jobs is creating a pause in time where people are starting to evaluate what they want to do and how they want to do it. They’re evaluating their lifestyles.

Every recession we see, we always see an upsurge in startup businesses. They normally do very well during recession, and then they’re strong enough once the recession is over, to carry on trading. We’re seeing this in our practice already. We’ve got lots of new clients inquiring about how they need to start … what they need to consider doing to start their business, but we’re seeing, more than normal for a recession, and we think that’s very much down to that people have been working from home for the last three months. That’s a certain lifestyle that they’ve grown accustomed to. Psychologically, it takes up to three months to form a habit in our heads, and for it to become memory. Well, we’ve had three going on four months, if not longer now, actually, of creating a habit of lifestyle, and being able to flexibly work around family, friends, et cetera.

There’s a lot of people that are facing going back to normality, in a way, for work, which they’re not overly keen on, because it means that they will have to sacrifice that lifestyle that they’ve built up for the last period of time, but we’re also seeing a lot of people that are being made redundant, unfortunately, and losing their jobs. There’s lots and lots of people out there now that are looking at how they want to live their life for the next five to 10 years. There’s lots of them that are turning to running their own business. I just wanted to go through with you this morning, some of the more regular questions we’re getting and the points we raise to help people that are coming in inquiring about what they need to do to start a business, so that you’re all aware.

The first big question that we get asked is, should I be sole trader, or should I be a limited company? This is really down to your own personal circumstances. It’s down to the type of business you’re going to be doing. It’s down to how quickly or how much you want to grow. If your plan is to work three days a week as a window cleaner, and you don’t plan on employing anyone, et cetera, then it would make sense to be a sole trader. If, however, you’re going to be recruiting a team of 10 people to go out and clean windows while you’re out doing the selling, then it would make a lot more sense to be a limited company. What I’d suggest is having a chat with an accountant or a bookkeeper about the pros and cons, and the tax implications of both the sole trader and the limited company, and your own personal situation.

It might be that you’re better off tax-wise to be a limited company rather than a sole trader. It’s worth just having that conversation about how it suits you and your plans for your business. There’s no definitive ‘you should do this or you should do that’. It’s more about getting the right advice and taking it into account for your circumstances and considerations, so that you get the right fit for you. Another regular question we get is about cash flow planning and business plans. About 10 years ago, the small businesses were bombarded with this concept of business plans. You’ve got to write a business plan. You need to have all these things written down. Personally, I don’t put much stock in a business plan.

For a small business, I find the problem is, your business plan is out of date before you finally finish writing it. If I was to write a business plan every time we decided we’re going to readjust and pivot our business slightly or add a new service in, I’d spend my life writing a business plan and not actually growing my business. While businesses plans are great for bigger businesses, because it takes them a lot longer to move and to change, and they’ve got a lot more people to communicate those changes and plans to, so a written document is ideal. For small businesses it’s really … I always advise it’s down to your mindset. Some people need a written down plan, so they’ve got a clear target.

Other people are quite happy just having a target set in their mind, or a vision in their mind, and working towards that, and by communicating that verbally with people, that’s enough to motivate them and keep them on track. It’s really down to you, whether you need a business plan or not. If you’re going to go for funding to get your business up and running, then the banks and the funding providers will probably ask you for a business plan, but if you aren’t looking for funding, and if you’re not a person that sits there and looks at a document, and needs it written down for you to drive your movie forward, then I wouldn’t waste time creating a huge business plan with all the complexities in it.

The one thing I would advise everyone to do, though, is create a cash flow plan. This could be something as simple as a spreadsheet, or you can go into QuickBooks and use their cash flow planning tool that’s now in QuickBooks on the QuickBooks Business Packages. That’s the simple Start, Essentials and Pro. Or, you can go even further and use a software such as Float, which will take all the data in QuickBooks, and help you forecast and plan a cash flow from there. As I say, a starting point can literally just be a spreadsheet. Now, what you need to do is at the top, put all the planned income, and then list all the expenses each month along the bottom. Plus, put in your starting balance of your bank, so how much can you afford to invest to get your business off the ground? Just work out how many sales and how much money you need to generate to cover your costs, and to be profitable.

Don’t worry about things like depreciation and all this accounting terminology. Just work out what’s actually going to be in and out of your bank account, because to start with, it doesn’t matter what’s on your balance sheet, and what’s on your profit and loss. What really matters is what’s in your bank account, and that cash, because it’s the cash that pays the bills. You’re not going to be able to take a set of accounts to someone, say, “I made £10,000 profit,” and use that to pay them, because if there’s no money in the bank, it’s not going to work. Cash flow is the real important part. As I say, there’s three stages to cash flow.

There’s a spreadsheet. Start using that. That’s great, but then, once you’ve started trading, start looking at a QuickBooks cash flow tool that will help give you a bit of a steer and guide into the right direction. Then once you’re needing a bit more in depth and daily management of your cash flow, have a look at the Float app, which is what it’s called. It’s what we use in my business. I don’t make a decision in my business that has financial implications without putting it through Float as a scenario first, so I have the confidence that I know exactly what we need to do as a business to take on a new staff member, to take on a new office space, et cetera.

Just as a recap, you need to decide whether you’re going to be a limited company or a sole trader, have a chat with an expert, explain your personal circumstances. They can advise you in the right direction. Business plans are all well and good, but actually, what’s more important is a cash flow plan. It’s not to be based on accounting terminology, it’s to be based on ins and outs of your bank account. That’s the main part you need to concern yourself with because that’s the blood of your business the first few years.

If you would like to talk to us about starting a new business then get in touch via our contact page

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