Considering starting a business in Ireland? Here’s a seven step guide on what you need to know, courtesy of Accountant Pages.
Research your idea and get advice
Starting a successful business requires a lot of hard work. Before making any serious commitments, it’s important to test your idea and get advice from those who have experience. If your business is a new concept, understanding if people will actually pay for your product before you make any significant investment is critical. If this service already exists and people are paying for it, your focus should be on how to sell the product.
A lot of people think when starting a business they need to bring a new initiative to the market. Duncan Bannatyne, whose net worth is estimated to be £280m, started off selling ice cream. He bought a broken van and fixed it up. He also bought generic ice cream and made his own ice creams as the margins were higher than branded ice cream. He bought just enough ice cream to last the weekend to test his idea. He discovered what sold and what didn’t and then began stocking up properly. It went well, and he expanded his ice cream van to a fleet. He invested the profits from selling ice cream into other ventures such a retirement home business and gyms.
If you are starting a business in Ireland, you are in a very fortunate position. Ireland is one of the top countries in the world to start a business. There are a lot of resources available to you. One of which is the local enterprise office. For a small fee of €20, you can book an appointment with an advisor. These advisors are often business consultants who can provide good advice to help you get your business started. They can also give you very useful advice on what funding is available to you.
Understand what funding is available to you
As a business in Ireland you have a number of different types of funding available to you. You can find a more complete list here but the below will be specifically related to start-up funding.
This voucher was developer to establish greater links between the business community and knowledge providers i.e. universities. The voucher allows companies to test a potential business opportunity. The voucher can be redeemed at registered knowledge providers. You must have a limited company in order to qualify for the funding.
The feasibility study is designed to help with researching market demand for a product or service. The maximum grant available is 50 per cent of the costs up to a maximum of €15,000. You don’t need to have a company to be eligible for this.
The purpose of the grant is to accelerate new sustainable business which can contribute to job creation in the economy. It is a programme which is split into three phases: Test, Development and Implementation.
The initial test phase is 8-10 weeks part-time. Phase two, development, is six months full-time and phase three is three months full-time. If you qualify for phase two, you get a support package valued at €30,000 which includes €15,000 tax free and no equity is taken in your business.
Sole trader vs limited company
One important factor you must consider before you start your business is your legal structure. Most new businesses will either be a sole trader or a limited company. There are advantages and benefits to both and a more detailed article is available here. It’s important to note that you don’t need to have a limited company to start a business. You simply register as being self-employed with revenue. You also need to register a business name with the CRO if you are using a different name to your own.
For some funding, you need to have a limited company. If you do not need funding or additional founders, it’s better to be a sole trader until you start generating significant revenue. You can change to a limited company at any time. There are significant costs in setting up a company and also hiring an accountant to complete your annual return (€1,000 – €1,500). As a sole trader you still need to file an annual return with revenue.
The main disadvantage of being a sole trader is the fact you are personally liable for the debts of your business. There are also significant tax advantages to having a company particularly if you’d like to keep funds within the business to reinvest in future years.
Branding and getting online
Be very careful when getting advice on your branding as you could end up wasting a lot of money unnecessarily. Speak to people who are impartial like other business owners and get their opinion. When I tried to hire a graphic designer to design a logo he told me, “The success or failure of your business depends on your branding. I could spend a month working on a logo.” I ended up hiring someone from Elance (now Upwork) for $60. The logo was perfect, and my client was happy and still uses that logo to this day.
There are additional grants available which you can access online. There are grants available for up to €2,500 to cover 50 per cent of the cost. Even if you don’t qualify for a grant and are willing to do DIY with the help of YouTube, you can get something basic online yourself for less than €180 + VAT. Tools such as WordPress, websites which provide themes such as ThemeForest and outsourcing websites such as Upwork have drastically reduced the barriers to getting online.
As part of getting online make sure you build up your credibility as much as possible. Get as many customer reviews of your product or service as you can. Video reviews are ideal but often the most difficult to get. You may need to provide free sample products or a free trial to get a customer video review. You could also try targeting influencers. For example, popular youtubers are always looking for products to review or products for their followers to offer as part of a competition. The cost of giving the products to influencers is often much less than the cost associated with generating the same level of sales through paid advertising.
Finding an accountant and your legal requirements
The type of accountant you need will vary greatly based on the type of business you have. It’s very important that you find the right accountant for your situation. You don’t want to overpay for services you don’t need. At the same time, you don’t want to hire an accountant who doesn’t have the right experience and the necessary team to help you run your company.
If you are a start-up and you need accounting advice, your focus should be on cost. The services you may need could include company formation, VAT returns, CRO return and a tax return.
These are generic services which can be done from anywhere in the world with an internet connection. Often, the ideal accountants are the ones who:
- Are working by themselves or with max two other people
- Are working from home or in a small office outside the city
- Can provide at least 2 references from long term clients
These accountants are difficult to find. They can often have a terrible website but don’t let that deter you. They have all the necessary skills and experience. They have a very low-cost base and they can pass the benefit of that low-cost base on to you in terms of lower fees.
The other extreme is if your start-up has multiple founders, you are trying to raise funding for your new start-up and have 20 staff members, then you will need to hire someone with a bit more experience than your average accountant. If you are raising funding, you will need to have a very detailed business plan with cash flow and free cash flow projections. It may require details on the cost per unit and possible economies of scale and how this will impact the cost per unit as well as your profits. You will also need details such as payback period, weight average cost of capital, discounted cash flows and IRR calculations. Not all accountants are the same so select the right one for your situation.
It’s important you’re aware of your legal requirements. Three things to consider are:
- CRO return and loss of audit exemption if you fail to do so
- VAT thresholds
- Registering a business name
If you set up a limited company, you have a requirement to submit an annual return each year to the CRO. If you fail to submit a return, then you lose your audit exemption. If you need to have your accounts audited, you need to pay an accountant over €2,500 to audit your accounts even if it has no transactions.
If you start a business, you don’t need to charge your customers VAT until you reach a certain threshold:
- €37,500 supplying services only
- €35,000 for mail ordering
- €75,000 for supplying goods
If you trade under a different name to your own or your company’s name, you need to register this business name with the CRO. You can do this through their website. You only need a PPS number to register and the fee is just €20. You complete a form, pay online and post the form back to them. The process is very efficient and easy to do.
Bookkeeping – Set up a process that works for you
It’s very important that you stay on top of your bookkeeping. Little and often is advisable. There are a number of benefits to having a good bookkeeping system in place.
- Reduced accounting fees
- Keep track of people who owe you money
- Track your monthly sales targets
Before you start spending money or making sales, it’s highly advisable you have a separate bank account. It is not a legal requirement, but it does make this process far easier each month. You don’t need to invest in anything too expensive. You can start with Google Sheets (which you can save as an excel file) or excel. Speak to your accountant and ask them what format works best for them, but most can work with excel. Ideally you should record the following which should be supported by invoices or bank statements:
- Type: Expense, revenue, new asset, disposal of asset
- Category – Used to group transactions into buckets
It’s really worth your time to get advice on setting up a good bookkeeping system that works for you. Please note it is also a legal requirement to keep proper books of record.
The last step in the guide is to build your network. Your network can offer you advice and recommendations to future customers. In the past I’ve received very useful advice from those in my network. I’ve also been introduced to clients through my contacts. It can be difficult to find the time to network. You can attend one of the networking events or start your own with meetup.com or LinkedIn events. I also found it useful to connect and message people on LinkedIn. I emailed the person and offered to bring them for a coffee. Often you will find people who are good at what they do love to talk about it. Other people are just incredibly helpful.
Try to do as much as you can to validate your business idea before starting. Get a better understanding of what sells and what doesn’t. You do have a lot of support so find out what is available to you. Your local enterprise office is a very useful source of information, and a great place to start. You don’t need a limited company to have a business, you can operate as a sole trader initially. Getting a website and logo created is cheaper than you think and there are grants available to help you get online. Beware of any legal requirements and try to build up your network. LinkedIn is a great place to start networking.
If you’d like to talk about your business, how you started and what you customers have to say about your products or services then email email@example.com.
By Accountant Pages team
Published: 27 January, 2020