What do I need to start a small business?
To start a business, you will need four basic requirements:
- Finance: This can come from your personal savings or investment from friends and family but having seed cash can be a must for starting a business. There are also other sources of financing, such business start-up grants and allowances for the unemployed.
- Human resources: a business required a mix of skilled and low-cost workers to carry out operations
- Technology: this includes product/service specialisation and the network that helps support the business
- Managerial expertise: the operational know-how and skills of the management is crucial to determine the fate of the venture
Before starting a business in Ireland, make sure that you know where you can get these necessary resources for your business. Some of them, like managerial expertise, will probably come from you. Anything out of your expertise – like accounting – can be outsourced to professionals. This will give you more time to focus on parts of the business that need your attention.
Do I have a profitable business idea?
The business idea defines the central product or service that your business will sell to others. It can be anything from a physical product, such as food or books, to a service like education or transport.
The business idea can even include something abstract, like the use of your brand name to others for royalty. Just consider celebrities. Many of them sell their name and collect royalties from businesses that put the celebrity name on their products.
You are probably not as famous as a celebrity, but there are bound to be some skills and talents that you can sell through your business. Find what you are good at and build a business around that idea. Have you thought about setting up an online business on the side of your 9-5 job? There are a lot of options you can take to make your business idea a reality.
Do I understand the market?
The next step is to assess the market demand for your business idea. You should do this before committing any substantial funds. Failure or incorrect assessment of the market at this stage will cost you a lot of money, time and resources.
Many business entrepreneurs thought that they had the next best product. They invested a lot of money into creating thousands of units of their product and launched it into the market to very low demand and zero sales. The businesses eventually had to file for bankruptcy within the first six months of operations. Research the market before you spend any major funds on your idea.
Suppose you have created the next best mousetrap, a new mobile app or the best home delivery service in Dublin. Test your product or service with friends, colleagues, neighbours and other businesses in your local area. Consider their feedback for improvement and assess whether there is a commercial demand for your services.
If the idea clicks with enough users and there is a recurring demand for it in the market, you can take the risk to commit some funds to it.
Thorough market research will give you a fair idea about the probability of success for your venture. You should even consider writing a business plan to help get your idea out on paper. The lean canvas model is a one-page template that will help you think through you business idea.
What business structure should I set up?
Option 1: Sole Trader
Easy to set up and shut down, a Sole Trader business can be a good business structure to start with. You are the business's sole owner, so you are personally liable if your business falls into any debt, and you must pay Income Tax on all your earnings, which can be up to 52% depending on how much you earn.
Option 2: Partnership
You combine your resources, expertise and knowledge with another individual to form a business. A partnership allows you to get more funds and better business expertise. The partner can cover your weaknesses while you cover theirs. Partnerships are generally two Sole Traders coming together. Both business partners are still personally liable for any business debts, and it could be risky to get into business with someone with no legal structure in place.
Option 3: Limited Company
A company is a legally created entity distinct from its owners, who are called shareholders. A company takes longer to set up and shut down but protects shareholders who have limited liability. Tax on the profits of a company in Ireland is 12.5%.
Need help choosing a small business structure?
Do I need a marketing plan?
The marketing plan is crucial to the long-term success of your business. It specifies how you will build your products, determine the price, target the regions, and market your products to customers.
When you start offering your products and services in the market, there will be three types of potential customers you will find.
- The first type will like your product as it is, and they are the core customers.
- The second type will like your product but expect changes, like a lower price, better availability, different varieties etc.
- The third type will demand significant product changes before they start buying them regularly.
The key to business success is to focus on the first and second groups of customers in the short term. If you have enough core customers, you may be able to run your business without making any adjustments to the products at all.
Once your core customers have been satisfied, you can introduce more varieties of products to grow your customer base.
How will I compete with competitors?
Wouldn’t life be so much easier if there were no business competitors? Sadly, that is not the case in the real world. If you are selling something with demand and making a good profit from it, someone else will start selling the same product sooner or later. Others could start copying your design if you don’t have a patent. Similarly, if you are selling a service, others will charge a lower price for the same service.
One of the biggest challenges for small businesses is to out-compete other businesses that are selling the same or similar products. As the business manager, you must continuously scout the market to see what your competitors are doing. Suppose they are undercutting your prices or selling better quality products and services at the same price as you. In that case, you need to improve your products and services.
Some competition is good for businesses. It incentivises us to improve products, find ways to cut costs, or train our employees better. Ultimately, it benefits customers.
However, aggressive competition is detrimental to the sector your business operates in. Avoid starting a business in an industry with significant competition, as it will bring constant headaches. Trust us when we say you don’t want that.
Do I have a support network to help me?
Creating a successful business is more than just building a great infrastructure or producing quality goods. It’s about establishing a solid support network that helps sustain the business through all the ups and downs.
The support network includes suppliers, producers, landlords, equipment leasing firms, delivery personnel, marketers and other stakeholders. These people and groups are not the direct employees of your business. However, they have a high stake in the success of your business because you are their customer. If you succeed, then they succeed.
It is important to build a good, strong relationship with these groups. Fostering good relations with your support network will allow you to get favourable discounts, better credit terms and higher customer service quality. Your support network is the most critical factor that helps your business move past its initial set-up stage and stabilise.
What do I need to do next?
Remember that starting a small business can be an exciting and rewarding experience. It can be a complex process, from selecting the proper business structure to navigating the legal and financial requirements. Feel at ease knowing that we are here to help entrepreneurs start and grow their businesses efficiently. If you want to start a business in Ireland or need assistance with an existing one, contact us today. We are here to support you every step of the way
Larissa is a Fellow Chartered Accountant (FCA) and is the CEO of Accountant Online, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland and the UK.