A start up or new company is usually a new project or business undertaken by an entrepreneurial entrepreneur to seek, define, and test a realistic scalable business model. The term ‘start up’ is widely used these days to describe any new venture. The word ‘start up’ was first used in 18hyde to refer to new ventures launched in a city; the word was later used in a more formal sense referring to new projects launched in a city or country. In the UK, start up companies are regulated by the Companies Act of 1994.
A start up company is normally a new or small company and has very little capital or resources to run its operations. This type of company needs to apply for a small business loan from a lender to fund its operations. If a start up company has its initial public offering (IPO) held within a one year period, then all shareholders will receive dividend payments from the company on a regular basis i.e. once a quarterly or annual event. The IPO is usually funded through the sale of either underwriters’ books or company shares.
The size and nature of the start up company often preclude it from borrowing sufficient funds from a bank or other financial institution. To bridge the funding gap, start up companies can apply to borrow money from specialist small business finance companies. However, this is typically only possible if the company is able to demonstrate that it has a strong future prospectus for growing to a size where it can generate sufficient revenue and/or trading profits to justify such a big outlay. To do this, a start up company needs to undergo a series of steps to demonstrate its ability to achieve such growth.
The business plan is the core document of any start up. It should be comprehensive in covering every aspect of the start up such as description of the company, purpose, listing of the company, valuation of assets, liabilities and trading plan. This is particularly important in that start up companies need to be able to prove that they have sufficient financial resources to operate for at least the period leading up to their first full year of trading. A well designed business plan will be one that is flexible and can be updated as business conditions and industry trends change. It will therefore be vital to analyse the viability of the business plan as various factors can affect the long term viability of a start up.
The business plan will also need to be able to show how the company intends to spend its assets and / or generate a return on its capital. This is not as simple as providing a series of financial projections. Firstly the company must have in place an effective cash flow projection (also known as an income statement) which takes into account all cash inflows and outflows, looking specifically at projected profit margins over the course of the year. More importantly the business plan will need to demonstrate the company’s strategic planning and implementation of strategies. It should be able to show clearly the expected scope and size of the company’s activities, both consumer and enterprise, as well as the company’s plans for future expansion and development.
The start up company should consider its operational infrastructure carefully. This may include purchasing and / or leasing equipment that is necessary in order to start operating. In addition to the start up company should have the necessary management in place to manage its logistics effectively. These aspects are particularly important in view of the fact that the start up company will most likely spend a lot of money on starting up and maintaining its infrastructure.
The start up company should consider what legal and regulatory requirements, it will need to comply with. For example, should it be required to hold up any trademark, licensing or registration applications? What documentation should it produce in order to register its trading activities? What planning processes does it need to undertake prior to trading? While it is unlikely that any start up company has ever run afoul of the law, it is important to ensure that legal and regulatory obligations are well understood before undertaking business in this niche and that these are followed through rigorously during the start up phase.
Finally, the start up company must undertake a detailed marketing and advertising strategy in relation to its product or service. This includes identifying target customers. As part of the start up planning process a marketing and advertising manager should sit down with its marketing agency to develop a suitable advertising campaign. The business plan will then be developed and implemented.