GUEST BLOG: Four things young entrepreneurs need to know

By Rob Straathof, CEO of Liberis

With young people nearly three times more likely to be unemployed than the rest of the population, the number of self-employed 18 to 34 year-olds has risen dramatically since the start of the economic crisis.

Start-ups are all the rage right now with new ideas, logos and website domains being registered every day.

But besides the usual market research and business plans there are less well-known responsibilities which young entrepreneurs need to get to grips with to have any hope of getting their company off the ground this year.

1. KEEP CONTROL OF YOUR COSTS

A common mistake of new business owners is to focus too heavily on gross profit and not leave enough cash in the business for salaries and debts that they soon can’t afford.

Fortunately, there are many ways you can keep costs down in the early stages of your business:

Overheads – No one’s expecting you to take the world by storm overnight. Start by working from home and test your idea on a small scale, and don’t recruit anyone or pay for an office and other costly overheads until you really need to.

If you sell a product you may feel pressured to invest a lot of money into manufacturing and holding stock with the risk that you could get left with items you can’t sell.

Regularly calculate the minimum level of stock you can hold while meeting customer demand and try to arrange a delivery schedule with your supplier that meets your needs.

Digital assets – Take advantage of free resources to learn all the skills and information you need to know.

It’s no longer necessary to pay a developer or agency for a bespoke website. For a very reasonable sum you can choose a content management system like WordPress and install a ready-to-use theme from an online marketplace like ThemeForest for an instant, customisable website.

Some parts of setting up a new website can be a bit tricky, but there are thousands of tutorials online for every step of the way. Plus you’ll have the added benefit that you won’t get locked out of your own site every time you disagree with your developer.

You can obtain many other assets for free or very little cost. There are dozens of websites offering free stock photography under a Creative Commons Zero (CC0) license, while marketplaces like Creative Market offer free assets each week including icons, fonts and themes.

When it comes to funding your business idea, as a young person with little to no credit history and no trading history you may struggle to get anywhere with conventional lenders like banks

PR and marketing – You don’t need to hire an expensive agency in the early stages.

There are various social media channels you’ll find invaluable for promoting your business for free – just be sure to become familiar with the rules and etiquette of each network so you don’t put users off.

Besides using social media effectively, get proactive in approaching the media. Sign-up to journalist request services such as ResponseSource and work on building natural relationships with key journalists and bloggers.

Some websites and publications may require a fee or free samples to review your product or service, while others may be happy to promote your business for free if you can offer your expertise on a particular subject or your business has a USP that fits a feature.

Getting as much ROI out of any money you spend is crucial for a small business, but a large social following doesn’t prove an audience is engaging with the content, so be sure to scrutinise a website’s stats and metrics before agreeing to any hefty fees.

Depending on your target market you may of course wish to spend on straightforward advertising, so getting yourself clued up on the various options for each digital and print channel will help guide you in getting the most out of your budget.

Again, there are hundreds of free guides online to help you understand the jargon and data behind advertising with what to look out for.

You can also enter yourself for relevant awards as a way to build authority in your industry and appeal to customers should you win anything. If it’s relevant and affordable you could also have your products accredited by trusted organisations.

2. FUNDING WON’T COME FROM THE BANKS

When it comes to funding your business idea, as a young person with little to no credit history and no trading history you may struggle to get anywhere with conventional lenders like banks.

For seed finance, many entrepreneurs are turning to crowdfunding.

Once you’re up and running, short-term cash injections can then be covered by alternative finance arrangements like unsecured asset business loans.

3. BUSINESS STRUCTURES AND TAXES

There are a few business structures to choose from when you go self-employed: you can operate as a sole trader but other options include business partnerships or setting up your own limited company.

Each structure comes with its own benefits and limitations and decisions will need to be made as and when they are relevant to you, like whether to go VAT registered.

Depending on your business structure you’ll either need an accountant to sign your books off or send a self-assessment, so be sure to keep a meticulous record of everything.

It may seem pricey to take on an accountant, but a good one is worth it. If you’re not one for math, save you a lot of headaches.

In addition to income tax, corporation tax, expenses, NI contributions, benefits and tax credits, you’ll need to become familiar with any business rates, health and safety, insurance, employment and immigration requirements that are applicable to your business.

Even when you think you’ve got a handle on things, changes to tax occur regularly. Planning ahead for changes and consulting with an accountant who can help you offset increases to taxes will prevent you running into cash flow problems.

4. THINK GREEN

People are more aware of the effects of climate change than ever and millennials are the generation most likely to spend money with brands that support causes they care about.

As a new business owner in the millennial age group, you have the opportunity to launch eco-friendly products and services from the get go, enabling you to run a more cost effective business, tap into a rapidly growing market and make a positive impact in the world.

Not only that, changes to environmental policy continue to affect businesses and your legal responsibility for your business’ environmental impact will only grow over time. Learning to think creatively from the beginning will put you in good stead for the future.

As a starting point you can use one of the many free calculators online to work out the size of your carbon footprint, which often go on to suggest ways you can reduce your footprint.

Whether you provide a product or service, think of ways you can incorporate being ‘green’ into your daily operations, from switching to renewable energy providers and signing up to corporate recycling initiatives in your area.

You can even make carbon-offsetting part of your corporate social responsibility programme wherever your business can’t realistically afford to incorporate new technologies or make bulk orders.

From the distance and ethical credentials of the materials you source to your packaging and marketing materials, look for ways you can use non-toxic and biodegradable components.

Create clever ways your customers can reduce, reuse and recycle your product both to appeal to eco-conscious consumers and to educate others.