Tens of thousands of people who try to make a go of it on their own fail every year. But, according to recent research from business information group Dun & Bradstreet, the number failing is on the wane.
Nevertheless, setting up in business can be a daunting experience. The Daveys took it in stages. Huw Davey explains: "Charlotte was involved full-time for almost a year before we decided that the time and the finances were right for me to join her. Controlling finances is of central importance. The statistics say that many businesses fail because of poor cash flow rather than any other reason."
There are a number of ways to set up a business - as a sole trader, partnership, or as a company.
The advantage of operating as a sole trader or as a partnership is that there is no need for any formal legal documents. However, in both cases, the owner is personally liable for all debts incurred. By contrast, a company's affairs are governed by a myriad of rules contained in a series of statutes.
A company must file various documents at Companies House each year. These documents are available for public inspection. In contrast, the accounts of sole traders and partnerships are confidential. If a company fails to comply with its filing requirements, it may be struck off the register of companies.
In spite of the formalities associated with owning a company, it is easy to acquire one. An off-the-shelf company can be bought for as little as pounds 150. The main advantage associated with trading as a company is that in law it is treated as a separate legal entity. This enables the company's owners to operate secure in the knowledge that they will not be liable for all of the company's debts if the business should collapse.
But before choosing the appropriate business vehicle it is important to establish that there is a market to exploit.
Mr Davey stresses the importance of market research in developing a successful product. Having established that a market exists it is important to ensure that your product is a good one. The price paid must be competitive and represent value for money. It is very important not to under-estimate the need to establish the product firmly in the customer's mind.
Mr Davey comments: "Even after you have done all of these things you still have to rely on hard work and a bit of luck"nReuse content