Set up your business
START-UP, SCALE-UP
In this stage
Set up your govenance and operations.
Identify, avoid and mitigate potential risks for your business.
Learn how to set up and manage your finances.
Remember to update your digital workbook
If you haven't downloaded it yet, then you can do that now. Otherwise open up the version you've saved and update the notes and activities as you learn.
Governance
Lesson takes: 10 minutes
- Identify the laws and regulations your business should follow.
- Know how to meet data protection rules.
- Know the documents you need to have in place.
Why it's important
Chapter 1
How long it takes
2 minutes
It’s not just about the rules
So, we know that governance is about making sure your business follows certain rules. Some of these rules are laws that apply to all businesses. Other rules apply to certain sectors.
But governance is more than just following these rules. It’s about how to run your business in a fair and effective way.
So it includes things like:
- Keeping your customers’ data safe – So you can build their trust.
- Having clear contracts with your suppliers – To build and keep good relationships with them.
- Setting out working conditions for your team – To help keep them safe at work.
It’s everything you do to show that you run your business with integrity. This can benefit you in many ways.
For example:
- If your products meet quality standards – This may lead to more sales.
- When you use patents – These can help stop others from copying your ideas.
- Having fair HR policies in place – These can help you retain staff and reduce recruitment costs.
Why is data protection important?
Data is valuable, and it’s in your interests to keep yours safe. This is data you keep about your company, your team and your customers. Some of the key business rules are about keeping this data safe. So in this module, we’ll explore these rules and give you tips on how to do this.
Which rules apply to me?
Whichever industry you’re in, there will be laws, regulations and data rules that you need to follow. Some of these will be just for your sector. Others may apply because of what you do, or where you (or your customers) live.
Here are some things to think about:
- Where you operate – Local or country-specific rules plus those on running your business from home, online or renting business premises.
- Where your customers are – For instance, the tax laws on exports outside the UK.
- The sector you work in – From childcare to construction, who sets the standards for your industry?
- Tools and equipment – Like the regulations on using PPE at work.
- How you advertise your products or services – Whether online or offline.
- What you produce or sell – There are different safety rules on food and non-food items, and rules on energy use for some products.
Be aware
You’ll find some rules and guidance in this lesson. We don’t list all the rules. So it’s up to you to find the ones you need to know.
Use this lesson as a starting point. Then follow it up with your own research.
Laws and regulations
Chapter 2
How long it takes
4 minutes
What are laws?
Laws are rules that apply across the whole country. They are there to protect us and our businesses. The government sets the laws, and our legal system enforces them.
What are regulations?
Regulations can be specific to certain sectors. Government agencies look after some of these rules. And there are other organisations who also set them. They aim to help and guide you, so it’s good to seek them out.
Some of these rules are there to enforce laws. And some are there to set standards – like the CQC for the health and social care sector.
Key business laws and regulations
When you apply governance, you’re working to meet these laws and regulations. There are certain key rules to follow. So here are some you need to be aware of.
Select each one to find out more.
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HMRC is the government agency that collects taxes.
As a business owner, there are various taxes you need to pay, including Corporation Tax and VAT. If you have people who work for you, you may need to pay tax and national insurance for them. And business rates could apply if you run from commercial premises.
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These laws apply if people work for you. They are there to protect you and your employees. These include rules on hiring and dismissals, working hours and equality.
Check out the Employing people page from the gov.uk site. This gives details of the laws that affect employers in the UK.
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IP laws cover patents, trademarks and copyrights. It's there to protect anything you design or create that is unique to your business. The Intellectual Property Office sets and manages IP law.
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The Health and Safety at Work Act sets out the rules around how to keep yourself, your team and the public safe. It's a detailed set of laws. Some of these may not apply to your business. The Health and Safety Executive (HSE) manage these rules. They have a useful guide on their website to get you started.
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The Equality Act aims to make sure everyone has equal access to goods, services and employment. This could mean making sure your shop has step-free access. Or designing your website with visual helper tools in mind. And it's for those who work for you, too. So you need to treat all your team equally in terms of pay, training and career development.
The government has advice for employers on how to prevent discrimination. And the Equality and Human Rights Commission site can help, too.
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The Advertising Codes are a set of rules for anyone in the UK who runs ad campaigns. They are there to check that ads are accurate, truthful and evidence-based. There are other rules, some just for certain products or services.
The Advertising Standards Authority (ASA) is the UK's regulator. Their aim is to make sure all ads stick to the Codes.
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There are many rules on topics such as Waste management, air, land and noise pollution. The Environment Agency set and manage some of these rules. Others work on a more local level, so you should ask your local authority for details.
Some activities may need an environmental permit. You can check if your business needs one on the gov.uk website.
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The Data Protection Act 2018 is the main UK law here. It includes General Data Protection Regulation (GDPR). These rules describe how you should handle personal data. The Information Commissioner's Office (ICO) looks after these rules. It's a good source of information, too.
We'll look at data protection in more detail later in this lesson.
Be aware
Laws and regulations can be quite complex. They may change over time. So it’s good to keep up to date with the ones that directly impact your business.
Why not save the links of any government agencies and regulating bodies to use later?
Data protection
Chapter 3
How long it takes
1 minute
Data protection rules
We’ve mentioned the Data Protection Act and GDPR. These are the main rules on data protection. These laws aim to give people more control over their personal data. If you ask for, store, use or share this kind of data, then they apply to you.
GDPR and your business
GDPR rules say you need to ask your customers, if you want to use their data. If they ask you to delete their personal data, you need to do this. And you need measures in place to protect data from unauthorised access, loss or damage.
What you can do to keep data safe:
- Encrypt sensitive data – This hides the data and prevents unauthorised people from accessing it.
- Limit access – Think about who needs to see or use it.
- Regularly update software – These often include security updates.
- Have a backup and restore plan – In case data is lost.
- Train employees – Make sure your team know the rules on how to use customer data.
- Use tools to help – For encryption, secure storage, password management and authentication.
What to do if there’s a data breach
- Track the source and extent of the breach – You may have systems to help with this.
- Work to fix the issue – Your IT team will need to take action.
- Report it – You can contact the ICO via their website to do this.
- Tell those affected – Be honest and act quickly to reduce their risk.
If you want to learn more, check out the GDPR website.
Be aware
Other countries have their own data protection rules. So if you operate outside the UK, you should research these.
Policies and documents
Chapter 4
How long it takes
2 minutes
Policies
Policies are what you write to show how you’re applying governance in your own business.
So they show that you’re following the rules that apply to you. They can also do more than that. Policies can build trust and promote a responsible and ethical way of working. When you write them, think about who you are writing for. Bear this in mind as you review your existing policies.
Write your policies for:
- Customers – They should know what to expect when they buy from you.
- Your team – New joiners should see what you expect from them.
- Regulators – Your policies should clearly show you are following their rules.
- You – Can you use these to help make decisions that reflect your core business values?
What policies does my business need in place?
You may already have some policies in place. As your business grows or changes, it’s good to review these. And you may be thinking of others that you need to add.
Here are a few suggestions. Some focus on your customers, others on your team.
Which policies do you need?
- Consumer rights – These include policies for delivery, refunds, faulty items and complaints.
- Privacy – For example, how you use and store personal data.
- Accessibility – Including how people with disabilities can access your business.
- Equal opportunities – To show that you treat all your team fairly.
- Code of conduct – Rules to set standards of behaviour for your team.
- Health and Safety – To state what you and your team do to keep safe at work.
- IT use – These say how your team should use IT in a safe and responsible way.
Activity
Make a list of the policies you think you might need to add or change.
Other key documents
These aim to protect your business. They help you avoid disputes with suppliers, customers and employees.
Some examples are:
- Employment contracts – For permanent and freelance / temporary workers.
- Shareholder agreement – Sets out the relationship between you and your shareholders.
- Partnership agreement – States the roles, rights and duties of each partner.
- Non-disclosure agreements – Can reduce risks when you need to share confidential information with third parties.
- Supplier agreements for goods or service – Lays out your terms of trading.
- Website terms and conditions – These can help to protect your content from misuse.
Next steps
Chapter 5
How long it takes
1 minute
What you’ve got so far
In this lesson, you learned how to:
- Identify key laws and regulations your business should follow.
- Know what you need to do to protect the data you keep and use.
- Recognise the governance documents your business needs.
Your changing needs
Be aware that your governance needs may change over time. Your business may grow or move into another sector. You may change or develop new products or services. And your day-to-day activities may change. All of these are good reasons to review your policies. And to check that you still meet the right rules for your business.
Here are some tips to help you move forward:
- Stay up-to-date – With the latest laws and regulations.
- Train your team – To make sure they understand their responsibilities.
- Review your policies regularly – This keeps them up-to-date and effective.
- Seek advice when you need it – From legal and compliance professionals.
Related learning links
Preparing your operations for growth
Lesson takes: 13 minutes
- List the day-to-day tasks that keep your business running.
- Start to research the tools that may help.
- Identify people who help with the different areas of your business.
The purpose of operations
Chapter 1
How long it takes
1 minute
What are operations and why do we need them?
What are operations?
This includes all the processes and systems that keep your business running. From how you run your finances to how you shape your marketing.
Operations bring every aspect of your business together. They help you to understand the impact of your decisions on different areas of the business.
For example, if you decide to increase production, you need to understand what each area of your business will need to do. From adapting your structure to paying for more tools and people.
Why do we need operations?
Some examples:
- Meeting goals – Your processes need constant review. This helps them stay efficient and achieve your goals.
- Future growth – Getting operations right now can help to avoid blockers to growth in future.
The role of logistics
Chapter 2
How long it takes
7 minutes
Identifying the logistics you need
Logistics – the ‘where and when’
Logistics are where you operate and when. The ‘when’ can also be linked to the ‘where’. If you operate online, for example, you’re open 24/7. If you have a physical location, you may only open at certain times of the day.
These are your overall logistics. But each area of your business needs its own systems in place. Plan how these will all work, and keep them under regular review.
Activity
Take 5 minutes now to think about and list the areas of your business. These could be whole teams, an individual or just you.
For example, Marketing, HR, Finance, Logistics, Sales and Procurement.
Next, take your list. Go through and mark the ones where you feel sure you have operations and processes in place. This leaves you with a list of gaps. These will become your focus areas.
Working with other businesses
As well as your own ‘where and when’, you need to think about the logistics of the companies you work with.
Together, the logistics of your business and your partners make up a key part of your operations.
As you look at the logistics of those you work with, think about how they impact your business.
Examples of impacts:
- A florist forced to waste expensive flowers because some components of their bouquet are delayed.
- A caterer whose food goes to waste after overheating in slow transit.
Activity
To avoid these kinds of impact, think about mapping the stages of your processes. For each stage, you can then begin to think about where tools, processes or people can help reduce these risks.
You don’t need to know what these tools are, at this stage. Just note where there’s an area for improvement. You’ll be able to return to this when you’ve learnt more about tools in Chapter 3.
Consider peaks and troughs
The final thing to note is time demands. Do these vary – do you have some busy and quiet periods?
Understanding your demand will help you manage your logistics. For example, ice cream shops may be busier over the summer than in winter. They should think about how to vary their processes based on the season.
What tools do you need?
Chapter 3
How long it takes
1 minute
Tools for an efficient business
What do we mean by tools?
Tools can be physical equipment or digital software. Most companies need both to operate effectively.
Tools are designed to simplify operations. They should also help you to meet your business goals.
Selecting the right tools for your business
There’s no such thing as the right tool. Only the right tool for your business. What works well for others might not work for you. But we can still learn from others.
What you also need to consider is your own set-up and needs.
What to consider:
- Cost – The initial and ongoing costs of the tools you use.
- Goals – What business goals are each tool going to help you with?
- Areas of work – Where each tool can help and how you’ll roll them out.
- Ease of use – Will you need training or are they easy to use?
Future-proofing tools:
- Repair and replace – You may need to do this over time.
- Needs may change – So continue to check the tooling needs of your business.
- Growing your business – You may need more equipment or more advanced tools as you grow.
Activity
In the last chapter, we asked you to list business areas and map your processes. This is to check where tools might help.
Now you have a list of things to consider too. You can begin to do your own research into tools that can help you fill the gaps.
If you don’t have time now, make a note to do this later.
Roles and responsibilities
Chapter 4
How long it takes
2 minutes
Team operations
Having clearly defined roles and responsibilities will help you manage your team. This is just as key to your operations as tools and logistics. Your people use the tools and manage the logistics. Plus, they make sure you reach your goals.
You might not have anyone else in your business with you right now. That’s okay. Knowing the role that people might play in your business one day will help you set your business up to grow.
Internal and external
Internal and external people have their unique benefits.
Keeping skills and people in-house means you have people who truly understand your strategy. This makes it easier for them to act on your behalf, so you can free up your time.
You may want to outsource certain tasks. Examples might be a graphic designer or accountant.
The roles you keep in-house or buy in will change over time. As demand varies and as your goals evolve, you can flex your team.
Skills for the future
Training will also play a key role in your people operations. Sometimes you don’t need more people, you just need more skills.
Think about the skills you need for your business now. Then consider the future. What can you put in place now, to cater for skills you might need later? You’ll need a programme of training to help your people grow over time.
Top tips and things to consider:
- Automation – Could you use software to automate specific processes instead of hiring extra people?
- Operational plans – Some companies outsource. Others prefer to have their own employees. Put whatever you feel is right for your business into your operations plan.
- HR processes – You may not need an in-house HR team yet, but you might later. Set up payroll structures that will work easily when you need them.
Policies and contracts
All new staff will need a contract. Work with an employment lawyer to draft these. You’ll need to keep them up to date with any changes in legislation.
Publish any policies in an employee handbook for your people.
The role of processes
Chapter 5
How long it takes
1 minute
Processes are key to operations
Processes help you to manage your operations. Clearly defined, they can save you time by empowering your team to deliver what you need.
Regularly review and update your processes. This makes sure they always reflect the way you want your business to run.
The benefits
- Continuity – Processes can reduce the impact of staff absences. Detailed guides mean others can pick up roles.
- Onboarding – New joiners can use handbooks instead of always having to ask someone.
Be detailed
Include detail. Pictures and careful explanations can make your processes easier to follow.
Key takeaways
Chapter 6
How long it takes
1 minute
What we've covered
In this lesson, you have learned to:
- List the operational tasks that keep your business running.
- Check you have the right operations in place.
- Make sure your team is clear on their responsibilities.
- Put processes in place.
If you haven’t already, you should take some time to:
- Complete the activities from the lesson.
- Research what physical equipment and digital tools could help you.
Risk management
Lesson takes: 20 minutes
- Spot different types of risk.
- Identify tools and techniques to help assess and manage risks.
- Create a plan for what to do when risks cause issues.
What are risks?
Chapter 1
How long it takes
3 minutes
Types of risk
Risks are possible events or situations that can cause harm to your business. These come from lots of different places and affect your business in many ways.
Here are some of the types you need to be aware of:
Operational
These come from how you run your business. For example, an employee leaving or a machine breaking down.
Financial
These are about money. The include examples like not getting paid by a customer.
Strategic
These involve decisions about the future of your business. Things like a lack of success in a new market.
Spotting risks
Being aware of risks like these can help you prepare. So, how do you spot them? Look at all parts of your business and think about what could go wrong.
It’s normal this may seem a little negative. Remember, preparing can help you, but ignoring risks can’t.
Let's start with some ways to prepare:
Look at past issues
Think about problems you’ve had before.
Talk to your team
Your employees may see risks you don’t.
Look at operations
Are there any areas where mistakes could happen?
Look at your finances
Are there any signs of trouble like cash flow issues?
Think about outside factors
Like laws, economic changes or natural disasters.
Use risk methods
To think through all possibilities. We’ll cover these next chapter.
Methods for spotting risks
Chapter 2
How long it takes
4 minutes
What are your options?
There’s a few different ways to start creating a list of potential risks. We’re going to cover two for you in this chapter - SWOT Analysis and The Delphi Method.
The Delphi Method
The Delphi Method is a way to get expert opinions on a topic. This includes topics like risks. It uses a group of experts who answer questions in rounds. This can be helpful as it makes sure you have looked from different perspectives.
Here’s how it works:
- Select a group of people who know a lot about the topic. These can be from inside or outside your business.
- Ask the experts to answer questions about risks. They do this on their own, without talking to each other.
- Collect all the answers and summarise them. Look for common points and differences.
- Share the summary with the experts. Ask them to review the answers. Provide more thoughts or changes based on what others said.
- Do more rounds of questions and summaries. Do this until the experts agree on the main risks and how to manage them.
- Create a final report with the experts' opinions and ideas.
SWOT Analysis
A SWOT analysis is a simple tool to help you understand your business better. It stands for Strengths, Weaknesses, Opportunities and Threats.
Strengths
These are the things your business does well. Things like having a good team or a unique product or service offering.
Weaknesses
These are the areas where your business could improve. Things like bad cashflow or limited product range.
Opportunities
These are outside factors that you can use for the benefit of your business. Things like a growing market or new technology.
Threats
These are outside factors that could harm your business. Things like new competitors or roadworks in front of your shop.
All of these link to risk. Strengths can lead you to a false sense of security. Weaknesses can cause risks. Opportunities can come with risk.
Threats are particularly associated with risk management. This is because they tend to focus on future potential issues – so are synonymous with risk.
So, let’s spend the last part of this chapter covering some potential areas of threat. This will help you when writing your list and starting to prioritise.
Start by thinking about:
New competitors
Customer needs
Economic changes
Rising costs
Technological changes
Changes to the law
Environmental disasters
Reputational damage
Prioritising risks
Chapter 3
How long it takes
5 minutes
Risk matrices
Once you have your risks, you need to manage them. You can do this on something called a risk matrix. A risk matrix is a simple yet powerful tool used to assess and prioritise risks in your business. It helps you map out risks based on their likelihood and impact. This means you can focus on the ones that matter most first.
You’re going to take each of your risks and score them on two things. First, their likelihood. How likely is it that your risk will occur? If something seems a far off possibility, you might mark it a low. But you might mark something high if it seems likely.
Here’s a scale you could use:
|
1 |
2 |
3 |
4 |
5 |
|---|---|---|---|---|
|
1 Highly unlikely |
2 Unlikely |
3 Possible |
4 Likely |
5 Almost certain |
The second thing you’ll score for is impact. If your risk did happen, how much harm would it create for your business.
Again, here’s a potential scale for you:
|
1 |
2 |
3 |
4 |
5 |
|---|---|---|---|---|
|
1 Insignificant |
2 Minor |
3 Moderate |
4 Major |
5 Catastrophic |
Take time to score all your identified risks using these two scales. At this point, a risk matrix will allow you to plot your risks onto a chart. It’s up to you if this is helpful. We've included one in the Digital Workbook. You can download a copy (PDF, 284KB), if you haven't already.
Another way could be to add together the risk and likelihood scores and order from high to low.
Let’s take low cashflow as an example. If you have good cashflow, you might rate this 1 for likelihood. Low cashflow can lead to business failure though, so you might rate it 5 for impact.
Compare this with the risk of a road closure outside your shop. if it’s happening now and having a major impact on your business then it might well score 9. This is because it would be 5 for likelihood plus 4 for impact.
In this scenario, you would plan to focus on the roadwork issue before even considering your cashflow, as it has a higher score of 9.
Using your risk matrix
Once you’ve mapped your risks, the job isn’t over.
You need to do three main things:
- Make plans – Start with high priority risks. Put plans in place to lower the impact or likelihood
- Track and review – Update the risk matrix as new risks emerge or risks change. This might change your priorities
- Share – Make sure your team is aware and actively using the matrix
If we take our road closure, for example. It’s unlikely you can change the likelihood anytime soon as it’s already happening. So, you might do things to lower the impact, like improve your online shop to reduce the need for your physical shop.
This might well become an opportunity to grow online. Once the road closure ends and the likelihood lowers, you’d change the risk and reassess your plans.
Reducing risks
Chapter 4
How long it takes
5 minutes
Lowering impact and likelihood
In the last chapter, we talked about likelihood and impact being the main measures of risk. Focusing on these can also help you to reduce your risks over time. To reduce the likelihood, you need to put in place actions that will prevent or lower the chance of the risk happening. With impact it’s about actions that can lower the harm if it does.
Ways to reduce likelihood:
|
Improving processes |
Make your processes as efficient as possible. Review and update them often to avoid mistakes. |
|---|---|
|
Maintenance |
Keep your equipment and tools in good condition. Regular maintenance can prevent them from breaking and expensive repairs. |
|
Training and education |
Train your employees well. Regular training updates can keep skills sharp. |
|
Quality control |
Put in place strict quality control measures. Check your products or services to make sure they meet standards. |
|
Health and safety |
Follow health and safety regulations. This will reduce accidents and health issues. |
|
Supplier management |
Select reliable suppliers. Review their performance often. Have backup suppliers. |
|
Using technology wisely |
Use technology to improve efficiency. Technology can also help reduce mistakes. Regularly update software and equipment. |
|
Clear communication |
Communicate clearly with your team. Misunderstandings lead to mistakes and increased risk. Encourage your team to ask questions. |
|
Risk awareness |
Keep your team aware of possible risks. They should report any concerns or issues they spot. |
|
Proactivity |
Identify problems early and take steps to stop them. This could include regular inspections and audits. |
Ways to reduce impact
|
Emergency plans |
Create clear emergency plans for different scenarios. Make sure everyone knows what to do if something goes wrong. |
|---|---|
|
Insurance |
Get insurance to cover losses. This can help you recover financially from unexpected events. |
|
Multiple suppliers |
Don’t rely on just one supplier. Having many suppliers can make sure you still get what you need if one fails. |
|
Build reserves |
Keep some money aside for emergencies. This can help you cover costs if your income drops suddenly. |
|
Strong relationships |
Build good relationships with customers and suppliers. Loyal customers and suppliers can help you bounce back more quickly. |
|
Flexible operations |
Make your operations flexible. This can help you adapt to changes or problems. |
|
Data backup |
Back up your data often. This makes sure you don’t lose important information if there’s a technical failure. |
|
Crisis training |
Train your employees on how to handle crises. This makes sure they can act quickly and effectively when needed. |
|
Reduce single points of failure |
Put back-ups and safety nets in place where you find points of potential failure in your business. |
Reducing risk in a crisis
Even with the best plans, things can still go wrong. Have a crisis management plan in place to handle unexpected problems.
Here’s 8 steps to help you create and execute one:
Step 1
Identify possible crises
Identify the risks your business faces using the strategies we've already given you.
Step 2
Make a plan
Write down what you will do in each type of crisis. Set steps for immediate action, communication, and how to get back on track. Make sure your plan is clear and easy to follow.
Step 3
Assign roles
Decide who will do what in a crisis. Assign roles and responsibilities to your employees. Make sure everyone knows their tasks and is ready to act.
Step 4
Prepare resources
Gather the resources you might need in a crisis. This could be emergency contacts, backup data, insurance and emergency supplies.
Step 5
Communicate
Set up a system for quick and clear communication. Make sure you can reach your team, customers and suppliers quickly.
Step 6
Practise
Practise your crisis plans with your team often. This helps everyone know what to do and makes the plan more effective.
Step 7
Stay calm
In a crisis, stay calm and follow your plan. Keep clear communication with your team. Give updates and stay focused on solving the problem.
Step 8
Review and learn
After the crisis, review what happened and how well your plan worked. Learn from what happened and make improvements to your plan.
By having a crisis management plan, you can respond quickly and effectively. This helps reduce losses, protect your business, and recover faster. A well-prepared business is able to handle crises and come out stronger on the other side.
The benefits of risk
Chapter 5
How long it takes
3 minutes
Focusing on the positives
Through the lesson we have touched on the impact of risk and have spoken of risk and the problems they can cause.
While risks can pose challenges, they are needed for growth. Embracing risk can create new opportunities. In this chapter, you’ll learn how seeing risks positively can help drive your business forward.
Risk as a part of change
Change is always happening in business. With change comes risk. Every time your business grows or tries something new, you face unknowns. These risks are natural and part of the journey.
If you never take risks, your business may stop growing. Sticking to the same ways and products might seem safe, but it limits your ability to improve. Taking risks means you are ready to move out of your comfort zone, try new things, and adapt to changes.
Knowing that risk is part of change helps you prepare. Instead of avoiding risks, learn to manage them well. This lets you use the good side of risk, while reducing the bad effects.
What are the benefits?
Taking risks can bring many rewards to your business. One of the biggest benefits is growth. When you try new things, you can find new markets, customers and ideas. This can lead to more sales and higher profits.
Others include:
Innovation
Risks can also lead to innovation. Trying something new can help you find better ways to do things. This can make your business more competitive.
Skills
Taking risks can help you learn new skills. When you step into the unknown, you get experience that you wouldn't get by playing it safe. Each risk you take teaches you something valuable, even if it fails.
Resilience
Taking risks can also build resilience. When you overcome challenges, you become stronger. You learn from your mistakes and get better at solving problems. This makes your business more adaptable and prepared.
Risk management in a nutshell
This lesson should have given you the tools and know-how to manage risks. You’ve learned how to spot, prioritise and reduce different types of risks. Plus, you learned how to use methods to do this.
So remember, risks are a natural part of growth. Proactive risk management is the key.
Plan and manage your finances
Lesson takes: 17 minutes
- Recognize the different financial records you need to keep.
- Start to build a financial plan.
- Know the different types of funding available.
Benefits of planning
Chapter 1
How long it takes
1 minute
Why plan?
You may be starting out or want to make a change. Whatever stage you’re at, you need to plan your finances.
Planning can help you to:
Be aware
What matters most is what’s right for you. This lesson will give you some ideas and tips to start. Then you can use these – and your own research – to work out what is best for your business.
Recording your finances
Chapter 2
How long it takes
2 minutes
Keeping track
This chapter gives you tips for keeping on top of your financial reporting tasks. It tells you what you need to record and how you can do this.
Record-keeping and bookkeeping tips
Here are some tips to help:
Keep track of your stock
Do you have enough stock? Too much? You want to be able to meet demand without being overstocked
What are your people costs?
These include things like wages, National Insurance, pension contributions, holiday and sick pay
Know your business assets
You can use things like your premises and tools to gain funding. So keep a note of them in your records
Write a cashflow statement
This shows how much cash you have at the end of the week or month.
You can use it to help answer questions like:
- Can I afford to pay my bills or invoices this month?
- Do I have the cash to fix the equipment that broke today?
- Can I buy these stock items that are on sale this week?
Be aware
Keep business and personal finances separate. It can be confusing when personal and business finances merge. You should have separate bank accounts and credit cards for your business. This helps you follow tax rules and manage your accounts.
Use accounting software
This can help you manage different parts of your finances.
Examples include:
- Spreadsheets – Record expenses, inventory and other metrics.
- Accounting software – Track income and expenses, create invoices and receipts.
- CRM systems – Follow customer sales and leads.
- Stock control systems – Keep track of stock, manage orders.
- Analytics tools – Spot trends and forecast peaks and troughs.
Write a profit and loss (P&L) statement
This helps you see if you’re making a profit. Looking for funding? An investor might want to see this too. While your cashflow statement can tell you if there’s money to pay your bills this month, your P&L statement shows if the business is profitable.
Say you buy extra stock from your suppliers to keep up with customer demand. So you’ve spent more than usual that month. You’ve also sold more products, but you’re still waiting for your customers to pay. So your cashflow may be low that month but you can see that your profits are high.
Set aside time each month
Spend a regular chunk of time with your finances. First, check your records are up to date. This will help keep everything under control. Then check key ratios – like gross profit margin and return on investment. This can help you track performance and spot areas for improvement.
Need more help? You can:
Buy in external help
Like an accountancy service who can prepare your financial reports and give useful advice.
Hire in-house expertise
This could be a team or an individual, with expert knowledge in finance and accounting.
Take on further learning
FutureLearn has free courses to start, while AAT offers well-known qualifications.
Be aware
Corporate tax law can be complex. To understand your tax liabilities, you might like to work with an accountant.
You can find out more on the UK government website.
Your financial plan
Chapter 3
How long it takes
2 minutes
Plan for growth
Financial planning is key to any growth plan.
A detailed financial plan can:
- Give potential investors a clear idea of your financial needs and growth potential.
- Show you’ve thought about possible risks and challenges.
- Support your bid for long-term funding.
Top tips for financial planning
Three things to include in your financial plan:
Growth projections
Look at peaks, troughs and patterns to work these out.
Equipment needs
This should include upfront and maintenance costs.
Team needs
From hiring costs through to training and development.
Unplanned financial decisions
It’s easy to plan for what you know is ahead. But what about those unexpected costs? Say you had to outsource some work to meet an increase in demand. Would you have all the information you need?
It's important to prepare so you can work out the costs and revenue linked to every decision. This will help you make choices that support your business and its growth over time.
Your product-price mix
Setting prices can be complex. You need to bear in mind your overall vision, mission and goals.
If you want to find out more about pricing, Startups has a useful guide.
Manage your debts
This could mean keeping up with any monthly payments and not exceeding limits on credit cards or overdrafts. It’s especially important where you already have funding in place. If you’re not managing your debt, it could affect your chances of getting more funding.
Need help to manage your debt? We recommend speaking with your financial services provider(s).
How to fund your business
Chapter 4
How long it takes
3 minutes
Types of funding
So far, we’ve looked at how to improve the financial health of your business. You’ve seen the type of records to keep and ideas on what goes into a financial plan. All this will be useful as you start to look for funding.
Now let’s focus on the funding itself. Some funding options need you to give others a share in your business. Some are loans that you’ll need to pay back. Others are free but need much more time to apply for. It’s important that you pick what’s right for you and your business. So, as you learn about each option, think about what’s likely to work for you.
The main types of funding are:
Equity
- Investors give you funds for a share of your business.
- Options can depend on what stage your business is at.
- Some investors can give advice and expertise too.
Lending
- Borrow money that you need to repay.
- Options differ by amount, term and interest rate.
- They may need collateral or a good credit score.
Grants
- Money that you don’t have to pay back.
- The process can be long and complex.
- There may be rules on what qualifies for this funding.
What type is right for you?
When picking a funding option, think about your growth goals. You’ll need something that aligns with these.
Here are some factors when looking at funding:
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Have a clear idea of where you see your business going. This can help you create a realistic action plan and list the steps you need to take to meet your goals. As you do this, you’ll start to see what needs funding, and whether you’ll need short-term or long-term funding.
Say you need to buy equipment or tools, you may decide to go for a quick, one-time source of funding. Does your new marketing strategy cover a long period of time? You may be looking for more of a drip-feed funding option.
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Have a clear idea of where you see your business going. This can help you create a realistic action plan and list the steps you need to take to meet your goals. As you do this, you’ll start to see what needs funding, and whether you’ll need short-term or long-term funding.
Say you need to buy equipment or tools, you may decide to go for a quick, one-time source of funding. Does your new marketing strategy cover a long period of time? You may be looking for more of a drip-feed funding option.
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What are the timeframes you’ve set for your growth goals? Some funding options may take longer than other to get. Think about the impact if you had to delay the progress of your growth goals.
Ask yourself how urgently you need these funds. How flexible are your timeframes when working out which option to pick?
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Some investors may want to take a more hands-on approach. Think about how much control of your business you are willing to give up. How could this impact your growth goals?
Your company’s ownership structure and decision-making processes could change too. So ask yourself whether each funding option will work with the long-term goals of your business. Will you still be able to meet these?
Top tips on picking the right funding option
Here are our top tips:
- Understand your funding needs – Work out how much you need to raise and what you need it for.
- Prepare your business plan – This should include your mission, goals, projections and growth strategy.
- Focus on metrics – Know key metrics such as customer acquisition, revenue and profitability.
- Network and build relationships – Go to networking events and speak with other business owners.
- Be clear and honest – Be upfront about any risks or challenges you know about.
- Prepare for due diligence – Potential investors might want to see detailed financial and legal information.
Be aware
Your personal credit record matters. Check your credit score and work to improve it. This can make the difference between securing funding or getting declined.
Equity funding
Chapter 5
How long it takes
4 minutes
Find the right investor
Looking for someone to invest in your business? In this chapter, we’ll explore the different types of investor. They key is to look for a good match with your own values and growth aims.
Business angels
Also known as angel investors, these can be individuals or groups. They often like to invest early on in the life of a business.
With them, you’re likely to get the bonus of their industry knowledge and skills. Some have first-hand experience of growing a business from scratch. So they’ll know exactly what you’re going through. They may have local knowledge too, including useful contacts. Above all, these people are not just interested in their financial return. They fund businesses that interest them personally.
Some famous angel-backed start-ups include Uber, Spotify and AirBnB.
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Think a business angel could help you? Do allow plenty of time to find one who shares your goals and values.
Check out the guides and resources from the UK Business Angels Association.
Crowdfunding
This is where many people invest small sums of money in your business. It’s all done through an online platform. They’ll look at your business to make sure it meets their requirements.
Unlike other types of investors, you may not be selling a share of your business. Instead, you may offer other rewards for their cash. This could be products or services.
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The UK Crowdfunding Association site lists platforms and sources of other funding.
Venture Capital (VC)
These funds come from a mix of business experts and investors. They’re looking for businesses with the potential for high returns. Some focus on a single sector – like IT or FinTech.
Usually the funding comes in cycles of 5-7 years. During this time, the investors will expect the business to grow enough to make a decent return for them. They may stay on after this time, to help further growth.
There are government schemes for both startups and growing businesses that mean your investors can get tax breaks.
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Interested in VC? It’s worth looking at other businesses who have this type of backing. This will give you a feel for what these investors look for, and what this form of funding looks like.
The British Venture Capital Association (BVCA) site has a handy FAQ section on this type of funding.
Private Equity
Here, one or a group of investors gives you cash for a share in your business. Say you need new £100,000 for new tools. A group of investors may give you this in return for 20% of your business. Some look to take over businesses where the owner is moving on to other ventures.
They’ll want active involvement in the business as they help it to grow. Then after a period of time, they aim to sell their shares at a profit.
Boots, Moonpig, Asda and the AA have all taken investment from private equity.
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Looking at private equity? It’s good to pitch high – and to look for funders who’ll bring more than just cash. Like networks and expertise in your sector.
Visit the Invest Europe site for more background on this option.
Seed funding
When you first start your business, where does the money come from? It could be from your own savings, family or friends, or maybe you have angel or other investors.
This early stage investment is called seed funding. It can be for anything from product development to hiring people to work for you.
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Just starting out and low on funds? Look for startup programmes in your area who may be able to help. You may find an investor who likes your idea and is willing to help fund your startup. Other options are available, depending on your business and where you’re based.
Loans and lending
Chapter 6
How long it takes
3 minutes
Business loans
You can apply for a loan to help your business from a bank, credit union or other lenders. Unlike equity funding, you won’t be giving up a part of your business.
Instead, you’ll agree terms with your lender that cover:
- How much you’ll borrow.
- The term – how long you’ll take to repay the loan.
- The interest rate they’ll charge.
Depending on the lender, you may need to pay a fee or meet certain criteria. All lenders will want to see what you plan to use the loan for, plus proof that you’ll be able to pay it back. You may need to offer up collateral. This is property or other assets that the lender could claim if you weren’t able to repay the loan in full.
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Lenders typically provide up to 10-15% of your business’ annual turnover in funding. Think about the security or assets you have that may help you to access to better lending rates.
Steps to getting a business loan
Step 1
Prepare
Make sure your finances are in good order, check your credit score and think about how much you can pay back and over how long.
Step 2
Apply
You can often do this online. Complete the form and attach any documents they ask for. Some lenders will want to see your business plan, too.
Step 3
Get a decision
If the lender accepts your application, you should get your funds within a few days. Read through the terms carefully before you sign to accept the offer.
Startup loans
The government also offers startup loans. These are personal loans and they’ll run a credit check for this. These loans come with free support and mentoring.
Be aware
Banks and other lenders look at your finances in detail to check you are a good risk (credit score) and can afford to make the repayments (cash flow).
The Funding Xchange site can help you prepare so you have the best chance of getting that loan.
Peer-to-peer (P2P) lending
Not sure about taking out a bank loan? You might want to consider P2P instead. Also known as social or crowd lending, online platforms match individual lenders with borrowers.
So what happens when you apply for this type of loan? The platforms can vary but the process is the same. They’ll check your credit history first. If they accept your application, they’ll match you with individuals willing to offer you a loan.
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Invoice finance
Ever found yourself short of funds, while you wait for your customers to pay? Invoice finance is when you use those as-yet unpaid invoices as collateral for short-term loans.
Your lender buys your invoices for a fee (called a discount). They usually pay you around 80-90% of the invoice value, less their fee. They’ll keep the rest of the invoice value, then release this back to you (again, less any fees or charges) once your customer pays the invoice.
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Asset-based finance
This option lets you buy new business assets, replace old equipment or expand your operations without having the means to pay for this upfront.
There are different types of asset finance:
Finance lease
- The lender buys the asset and leases it to you.
- You make monthly repayments to include asset costs and interest.
- You pay insurance and maintenance costs.
Operating lease
- Works to a fixed timeframe.
- You can upgrade during the rental period.
- The lender pays for insurance and maintenance.
Contract hire
- Often used for leasing commercial fleet vehicles.
- The lender maintains the vehicles you lease.
- Regular payments can make budgeting easier.
Hire purchase
- You rent the asset from the lender.
- You pay insurance and maintenance costs.
- At the end of the term, you own the asset.
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Credit cards
Although not appropriate for many funding needs, you may find credit cards are useful to meet short-term cash-flow needs. You do need to be on top of your card spending, though.
Smart tips for credit card use:
- Make sure you use your business card – not a personal card – to build up your business credit.
- Look out for deals – for instance, introductory 0% APR.
- Pay on time – keep track of when payments are due and make these promptly.
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Be aware
It’s important to manage any existing debt your business has, before you apply for funding.
Applying for grants
Chapter 7
How long it takes
1 minute
Business grants
There are grants for startups and more mature businesses. They’re a popular choice as there’s nothing to repay and you’re not giving away part of your business either. The Government or other organisations award these grants. Your local authority may be a good place to look for local awards.
As they’re so popular, grant awards are highly competitive. Some have very strict criteria. So read the details carefully, to check you meet these. You’ll need to spend some time and effort completing the application. Plus, the whole process can take a long time. The amount you get from grants can also be lower than you might raise from other options.
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The gov.uk grants directory and Innovate UK’s funding finder can tell you what’s available in your area.
Key takeaways
Chapter 8
How long it takes
1 minute
What we’ve covered
In this lesson, we’ve shared ideas and tips on:
- The benefits of planning and managing your finances.
- Tips on financial reporting.
- What goes into a financial plan.
- Funding options.
Next steps
At this point, it’s good to note what you’ve got – and plan what you need to do next.
Take time to:
Check your business plan
Do you need to add funding needs, projections or risks?
Prepare to apply for funding
Start this off by getting your finances in good order
Create a financial plan
One that is both strong and flexible to meet your needs
Review finance options
Think about what each one would mean for your business
Activity
Why not try this 3-step quiz to help you work out the funding options that might fit you best.
Looking to open a business bank account?
Find out more about the bank accounts we offer for small businesses and start-ups.
Related learning links
Making tax digital
Taking control of your revenue and cash flow
Receiving online payments
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