Your step-by-step guide to setting up a business

Consultants and advisers talk to Heath Reidy about how to start a business from scratch,

Setting up a business is many advisers’ dream. The end result can be a profit-heavy, successful career and the chance to become a highly respected figure in the industry.

But going at it alone is no easy task and for many IFAs a scary thought, especially in light of the upcoming RDR.

Done right, with strong focus and good planning, the business can be a success. Done wrong and the ill-fated company could end in financial disaster.

So how should you, the IFA, go about setting up your own business and what are the key pieces of advice to remember?

Business plan

The best place to start, according to Chris Kilner, compliance consultant for SimplyBiz, is with a business plan setting out what you want to achieve with your firm and how you plan to achieve it.

Important decisions include whether or not you want to be directly authorised right through to your strategic goals for the next five years.

Kilner said: “A business plan will ensure the firm has direction. It’s a cliché, but failing to plan really does mean planning to fail. Without a business plan firms can find themselves drifting along from day to day without any real goal or focus.”

Steve Billingham, owner and director of Steve Billingham Consulting, said in your business plan it is important to establish a set of goals in your first 12 months.

These should be financial goals and goals in client development, such as client quality, numbers and acquisition.

Also, try to speak to other IFAs and people that you trust, who will be open and honest with you about your business plans.

Philippa Gee, managing director of Philippa Gee Wealth Management, set up her Shropshire-based business last summer.

She said: “You can become so focused and involved in an idea that you need a reality check. There are some brilliant IFAs out there so align yourself with the best.

“I spoke to key figures in the industry I respect and who I knew would talk frankly to me about whether my idea was complete lunacy or not.”

Capital

The next important consideration, according to Kilner, is to make sure you have strong financial backing to set up and support your business. Firms that start with a good level of financial reserves in their business are less pressured to having to rush setting up the business just to generate an immediate income after authorisation, he said.

With sufficient finances you will instead have time to develop your business and get the clients you want, rather than settling for anyone that comes round.

Brett Davidson, chief executive of transition business FP Advance, said: “You need to have capital behind you. If you don’t you’ll run out and you’ll sell anything to anyone because you have to. If you are under financial pressure you make poor decisions on a day-to-day basis about the clients you are trying to attract.”

When thinking about your finances it is also important to set yourself a budget around what you think your company costs are going to be.

Billingham said establishing a cash flow and a budget forecast so you know where you should be each week and month, in terms of money going out and coming in, is essential.

He said: “The best decision you can make is to set yourself a minimum fee level that you are prepared to work for and don’t go below it. If people say you are too expensive then it just means they are not suitable clients for you.”