6 Aspects that can sink a new business

When setting up a new business, or trying to improve the working processes of an experienced firm, there are several key aspects that you need to consider to make sure your company is properly protected.

Cash Flow

The saying really is true, Cash flow is king and without proper regular income, a business can sink. It makes sense to have some kind of overdraft facility, however the interest charges alone can hurt your profitability. Depending on the industry you work in, asking for payment up front or a partial deposit can go a long way to cover your costs. It will also help to weed out any potential non-paying customers before you commit to start work for someone, potentially protecting you from significant loss. It will also act as a way to reduce your own personal liability as you won’t have to invest quite as much of your own money into any venture.

Legal Protection

Legal protection is an absolute must. Some industries such as solicitors or personal advisers are legally required to carry professional indemnity insurance. This product is designed to legally cover you and your customer in the event that your advice leads to a detrimental loss for a client. Most businesses that interact with the general public will be required by law to also have Public Liability Insurance as a minimum. Getting advice from a specialist is absolutely crucial, otherwise you could be under-insured which could lead to you being liable for any proceedings undertaken against the company.

Labour costs

Fixed staffing costs are the largest expense of most businesses. Zero hour contracts have hit the news recently and have come under fire for not offering staff the same benefits of rights as full time workers. Another way to reduce the costs of your staffing bill is to consider outsourcing short term work to a freelancer. There are a very good selection of freelancers available on sites like Fiverr.co.uk, this includes digital marketing, advertising, IT support, creative writing and graphic design. Whilst you won’t be able to physically see these workers, they work hard and tend to respond quickly to enquiries. A ‘gig’ usually comes with the option of revision, so you can be reassured that changes can be made to work that you are unhappy with.


Refunds can play havoc for any industry, having to pay back revenue that may have been invested elsewhere can be a big problem. You may want to consider setting aside a contingency pot of money that you can use for refunding business. This way, you will be able to reinvest revenue back into the company with a reduced risk of having to source finance to credit a customer.


Variable overheads such as energy, telecoms and insurance can often catch businesses by surprise. In all three situations it pays to shop around. Energy prices can fluctuate on a daily basis, so making sure you are on the right tariff is essential. When your business insurance renewal comes around, it’s really important to go back to the market and try and get a better deal. Insurers rely on new business, so you can leverage this to get yourself a great deal. Old insurance policies tend to stagnate with out of date terms & conditions and offer poor value, so it makes sense to change insurer. Speaking to a specialist adviser can also ensure you have the right level of protection for the industry that you are in.

Marketing Budgets

marketing budgets are on the rise and are recognised one of the most difficult elements of a business to get right. For some, this can be the expense that sinks a company. Advertising effectively can end up costing a fortune, especially if you are looking into open ended methods such as Adwords. Digital campaigns can quickly generate significant costs, as they are usually dependent on how many ‘clicks’ you may get on chosen keywords that a business may target. You may want to ensure that you place an upper limit on any campaign, a cap on advertising spend is the only way to advertise safely. Other more predictable options such as display marketing would be worth considering. In more recent years, facebook advertising has proven to be very cost effective, you can also join local sales groups just like Daisy and Baby did, they started their business purely by posting in local for sale groups on facebook.

It can take months of trialling various options and strategies to find out what works for you, every business is different so make sure you don’t waste too much money during this testing phase – work out an affordable budget and stick to it.