Launching Your Business: Business Infrastructure
Continuing with our tutorial series on entrepreneurship for young people, today we are going to talk about the final steps you need to take to get your business off the ground and ready to launch to the public.
However, before we do so, it's important to check out part I and part II where we covered how to turn your idea into a reality with market research, a business plan, and a marketing plan as well as covering how to build a website and how to set up social media for your digital marketing.
Once you’ve completed these tasks, you’re ready to begin thinking about your business infrastructure and how you will scale your business.
It may seem counterintuitive to begin considering how your business will grow before it's even launched, but this forms a crucial part of your business health.
This is because considering how you will grow and setting out a plan to do so will help you to scale your business and knowing this information beforehand will mitigate as many risks as possible before they crop up.
Grants and Funding
One of the most important incomedicators of a business's health is its financial health, if you are not making money, are you really a business?
However, money can seem like a taboo subject to many and while some may not be open to discussing this, it's very important to consider how your finances will flow to know what your expenditure is and what your profits are.
While we’ll cover managing finances in our next article, as managing your finances is an important step in registering your business with companies house, it's only key at this stage to consider where you are going to source funding for an initial cash injection into your business, after all, to make money you need to spend money.
There are many methods you can use to raise funding for your business. The most basic one is your personal investments. This can be any money you put into the business from your own pocket.
However, because these are personal finances, it can seem silly to include this in your business finances… but this is not the case.
Any cash you invest into your business should be included on your finances sheet under “income.” This is because you want to track this information to (1) register your business and (2) be able to pay yourself back once you have made profits.
Although, as a young person, you may not be able to use your own personal finances to fund your business. This is where accessing business grants come into play.
Business grants are a specific amount of money that funding bodies give to individuals for the purpose of business expenditure and often start as an initial “ideas phase” grant to further an idea and prepare for the future development of a business.
In Cumbria, if you're between the ages of 18-25, you can access grants of up to £300 through the Copeland Borough Council.
Successful applicants will also receive 1-2-1 business tuition and mentorship.
If you're interested in accessing this support you should email business liaison officer Jenny at jenny.brumby@copeland.gov.uk.
As part of this, you can be a part of the Young Entrepreneurs Market which allows a space for young people to showcase their business and sell any products they may have.
There are lots of other sources of funding available aside from this. These include The Princes Trust, Innovate UK, Grants for Unemployed Entrepreneurs, and The National Lottery Business Grant as well as many more which can be found through private funding bodies.
When it comes to applying for grants, it's important to use the information included in your business plan which you made in part I of this tutorial series. This is because much of the information you wrote in your business plan will be applicable to these grant submissions.
Just remember to read exactly what these funding bodies are asking for in their grant applications as they will have different funding qualifiers for different types of funding. For example, the grants for unemployed entrepreneurs ask that you are 18 or older and are receiving universal credit to apply.
Legal Structure
Another key element to building your business infrastructure is to consider the legal structure of your business. This means how the government will view your business and dictates how your business can be managed.
To set up this legal structure, you need to register your business with the company's house. However, there are several different types of businesses you can register your business under.
The most basic form of legal structure is a sole trader, this means that you are the sole owner of your business and is most applicable to businesses with 1-2 employees. However, as a sole trader, you are personally liable for any debt the business incurs and will have to pay back on that debt with your own personal finances.
As such, many businesses are more attracted to registering as an LTD company. This can be defined as a “limited liability company” and means that the company, NOT YOU, takes responsibility for any debt incurred.
This means that if you fall into debt with your business, you do not have to pay back this debt with your personal finances.
It's important to understand the background of LTD companies. They were set up in the 20th Century to allow entrepreneurs with ambitious ideas to explore those ideas without the worry of falling into personal debt.
As such this means that a loophole exists within this system. Individuals can set up an LTD company business, raise funding and then go into debt meaning the business has gone bust and then they set up a completely new LTD business without taking any responsibility for this debt - don't be one of these people.
Lastly, there are two other types of legal structures you can register your business as. These include a Private LTD and a public LTD. The difference between these two is that a Public LTD has gone “public” as allowed private investors to invest in the company by purchasing stocks.
Majority stockholders then become board members of a company and can dictate how a business is run as they are the ones who want a return on their investment and want to see the business lament extreme profits for this.
However, a Private LTD is the exact opposite of this in that an individual has taken their business off of the stock market by buying back their stocks and therefore regaining control over their business.
Organisational Structure
Lastly, the final element of your business infrastructure is the organisational structure of your business. This means how your business is run from a day-to-day level and outlines the different departments of your business and how this may grow into new departments.
The most common form or organisational structure is the functional structure. This is the structure used by many big businesses such as Starbucks. This structure is based on one leader or “CEO” who builds different departments to run different sections of the business which all work together towards one main goal - to sell products or services.
The functional structure looks like this:
As well as this there also exists a structure for sole traders. This is called the network structure and acts very similar to the functional structure. However, instead of having a leader which manages different departments, it has a sole trader who contracts out admin and non-core activities to other businesses.
This structure provides the perfect template for many small businesses and SMEs as it allows you to retain overall control over your business while leasing out certain activities that you don't have time for to different businesses.
However, a shortcoming to this structure is that you will have increased overheads (expenditure) as you will be paying for services instead of completing these services in-house.
The network structure looks like this:
Conclusion
In conclusion, setting, up your business infrastructure can be a tedious task, but it is an important one. Knowing how you are going to raise funding, registering your business and deciding on an organisational structure can mean the difference between a successful business and an unsuccessful one.
This is because knowing how your business will grow before you launch will allow you to set up the necessary elements to scale your business, instead of being stuck once you have launched.
In part IIII we’ll be talking more about running and managing your business with branding, finances, and more
If you would like any more advice on starting a business, let us know in the comments also and we’ll cover it in another article.
Sources:
- Joshua R F Murphy: https://joshuarfmurphy.com/ Having launched several businesses and engaging in an enterprise placement year where I won quarter-finalist in the Santander Young Entrepreneur Awards, I have gained a deep knowledge of business development and entrepreneurship and now manage my own music management business “Joshua R F Murphy”
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