You must register for VAT if your VAT taxable turnover reaches more than £85,000.
You may also find that a different legal structure is more suitable as your business grows.
Planning for growth
Once your business is established and you’re making a profit, you may want to start thinking about how to grow.
Business growth is usually achieved by increased sales. However, it’s important not to lose focus on profitability while concentrating on growth. If the operational costs associated with growth out way any additional revenue, you could end up with more work and less money. Therefore forecasting should be a key part of planning for your growth.
Things you can do to help grow your business include:
Increasing your sales, both to existing customers and new customers by:
improving your products and services in order to increase price
developing new products and services, and selling them to new or existing markets
Improving sales strategies
Increasing your output by:
taking on staff or training your current staff to increase efficiency
Purchasing new equipment
Increasing production / warehouse space
Get extra funding
Growing your business, whether through increased sales or improved profitability, often means you need to invest more money, this can be raised by:
investing profits back into your business
taking out a loan
selling shares to investors
looking for other sources of finance, including government-backed schemes
Taking out a loan
Before taking out a loan you should ensure that the business will be able to pay it back by reviewing the loan amount, loan term and interest rates
You should make sure that your business will be able to pay back the debt before you take out a loan. Repayments are often made in instalments over a number of years, and you’ll need to pay off any interest on outstanding debts.
If you’re a sole trader looking for a loan, a lender might ask you to provide a personal guarantee or promise to hand over assets like your house or car if you can’t repay the loan.
If you’re thinking of bringing in new investors, they’ll want to know how much your business could increase in value if they buy shares. To work this out, they’ll need to know how much their investment will increase your sales and profitability.
You’ll need to provide potential lenders and investors with a financial model showing:
how your business will spend the extra money to increase sales and profitability
how initial costs and increased ongoing costs will affect your cash flow
Increases in sales usually only happen after taking on additional costs like employing more staff, moving to larger premises or putting in bigger orders for raw materials. You’ll need to take all of these into account in your financial planning.