Digital Waves

Starting a new business can be one of the most exciting times you experience – even in the current economic climate – especially if you have the entrepreneurial spirit within you. All too often though, some of the more boring and basic tasks that need to be done at this stage are overlooked. For example, to avoid any future problems with the Government, you must register a company within 3 months of it being formed, or risk a fine.

You should also make sure you appoint an accountant from day 1, and keep your books filed so that when it comes to tax returns and audits, everything is ready. Take it from one who knows, failing to do this can cause a whole world of hurt and stress you just do not want to even know about!!!

Its also very important to have a clear business plan and marketing strategy before you begin to trade. All too often people have a great idea, they start a business and then wonder why they are not making millions of pounds. It is so important to be clear on how you are going to reach people, let them know about your product or service, and then, how you are going to increase the business over time.

Having a good grasp on your budgets and cash flow is also exceptionally important. All business is a fluid situation – by this I mean that the state of play on the Monday may be vastly different to close of trade on a Friday. Make sure you have an understanding about what cash is actually live in the business and you also know what that cash has to cover. I have seen more businesses fail due to a lack of cash flow management than any other single reason.

In the current economic climate, it still surprises us that thecompany formation statistics have been reasonably resilient.

Pronouncements from Companies House over the last few months have suggested that the numbers of companies being formed have fallen considerably and this has been latched onto by some parts of the media.  However, the reality is different.

We have carried out an analysis of the formations from the first week of January to the end of May.  Whilst the year on year figures for the early months are showing a decline, the overall position is not so poor.  In fact, between 4 January and 24 May, 146,167 new companies were formed compared with 153,238 in the corresponding period for 2008, a fall of 4.61%.  However, if one reworks the figures excluding January, the fall is only 2.13% and seems to be improving all the time.  In fact taking the month of May alone, the figures are actually up by 6.8% with 33,685 companies formed in that period compared to 31,539 in 2008 for the corresponding period..

A four week rolling average also confirms the position with the statistics at the end of May suggesting an increase of 9.03%

So, is the credit crunch merely a storm in a media teacup. Probably not, but the future does seem alot less bleak that it did at the start of the year. The recession has undoubtedly had an impact across many sectors, but as our investigation suggests, not all.

We will be watching this data and updating it regularly, but if the company formation figures are anything to go by, there are definitely some encouraging signs.