Starting a business: Everything you need to know - Times Money Mentor - The Times

Summary

Starting a business can be an exciting time: you get to be your own boss and watch your dream become a reality.

We will run through the key things you need to consider before setting up a business in the UK, including the legal stuff, hiring staff, and marketing yourself.

Starting a business can be an exciting time: you get to be your own boss and watch your dream become a reality.

We will run through the key things you need to consider before setting up a business in the UK, including the legal stuff, hiring staff, and marketing yourself.

This article looks at:

Weigh up the pros and cons

Around 600,000 new companies are registered in the UK every year, according to government figures.

However, after one year, 20% will have failed, rising to 60% after three years.

That doesn’t seem to be putting people off and neither should it.

While nothing can guarantee success, solid foundations and careful business planning will give your new type of business the best chance to survive and thrive.

But the first thing to do is to get out a pen and notepad and write down:

Your personal finances

Your business ideas

All the pros and cons you can think of.

Then talk to your friends, family and trustworthy colleagues in your industry and get their honest views.

Do your research before you take the plunge and start your own business

Come up with a business plan

Now that you have come to the conclusion that the rewards outweigh the risks, it’s time to get more serious.

OK, so writing a business plan may feel like all the joy and romance is being sucked out of your grand scheme.

But it will give you a better idea of what you want to create and how to do it.

It is also necessary if you are hoping to attract external investment or get certain types of funding, such as start-up loans.

Remember, it doesn’t have to be set in stone, but should be something that you regularly return to, review and update. You can download a free template from the Prince’s Trust website.

You need to do your homework. Do a market research of your industry, your competition, other business owners, and your potential customers/clients.

Market research will help identify where those potential customers are, and which social networks they use. Free apps like Survey Monkey allow you to talk directly to them.

What a business plan should contain:

Business outline: aims, objectives, brand, business ideas, vision, targets and practical considerations such as location, management structure, staff

Financial analysis: your personal finances, how you intend to raise finance, make and spend money, grow and develop your business

Market overview: what is the state and size of your industry; current and future trends; where will you fit in the market; what product and service

Competition analysis: what will set you apart; what are your competitors’ strengths and weaknesses; how will you improve on what is out there

Customer insights: who are you aiming your business at; where can they be found; what do they want. Be specific

Marketing strategy: how you plan to attract potential customers/clients; what your business brand will look like; budget

The legal considerations when setting up a business

Next, there are legal considerations. You can’t just say that you have started a new business and off you go.

First you need to pick the type of business you will become. There are a number to choose from, although the vast majority opt to register as a:

Sole trader

Limited company

Partnership

Check out our Guide on becoming a freelancer for more on this.

How, when, what and where you register, depends on the type of business you want to start.

For example, sole traders do not need to register with Companies House.

Which business structure you choose impacts:

When and how much tax and national insurance you pay

The type of rules and responsibilities that must be adhered to

If you plan to open a coffee shop with music and food, check the licences or permits needed.

There are also rules around:

Selling goods online

Buying from or selling abroad

How you store or use personal information.

Make sure you thoroughly research all of these and regularly check that you are still compliant. The government has an online checker tool.

There are rules to consider around the name you give your business too.

For example you can’t choose one that has already been registered to another company, nor can it be offensive. We’re not being prudish, that is the law.

The law also demands you get certain types of business insurance:

Employers’ liability insurance: to compensate employees who become ill or injured through work

Commercial motor insurance: for any vehicles your business has

Professional indemnity insurance: if required by certain industries, professional bodies or regulators

Other types of insurance may not be required by law but would be useful to have. This will need to be factored into your business planning and budgeting.

There are also responsibilities with regards to where you work. If you rent or buy a property you may have to pay business rates although small businesses could be entitled to a discount.

Check what can be claimed as business expenses, as even if you’re working from home, you may be able to claim a proportion of your bills for things like heating and internet use.

If you rent your home, though, you will need to check the lease to ensure you are allowed to work there.

Co-working spaces, where you can rent a desk for a few hours, days or monthly, have been cropping up in greater numbers in recent years, thanks to providers like WeWork.

They come at a cost but offer greater flexibility and help to combat loneliness, build up networks and instil routine and discipline into your working life – something that’s especially useful when starting out.

Come up with a budget

The area that consistently trips up small businesses is money management.

But careful business planning at the start can help avoid disappointment, unnecessary borrowing or expensive panic buying:

Budgeting: be realistic about what you need to start your business. Shop around for IT equipment and office furniture. Does it need to be first hand? Prioritise your spending and keep it as tight as possible until you are making good money.

Setting and maintaining targets: regularly review your cashflow forecast and use it to stay on budget

Monitoring income and expenses: you need to be organised so as to avoid a tax deadline headache, and to be comfortable chasing up invoices

Investment: how do you plan to get money to grow your business

You may choose to employ a professional to do your accountancy and bookkeeping work, although there are a number of software alternatives that will cost a lot less.

Whatever you decide, it is important that you are on top of and fully understand all the finances.

You’ll probably need to set up a business bank account to separate your personal and business spending as much as possible.

Most business accounts come with a monthly fee, so make sure you shop around to find one that best suits your needs.

There are also a number of online offerings that sometimes don’t charge monthly fees, like Coconut and Tide.

For those on a really tight budget, we have lots of tips in How can I start a business with no money?

Create a brand

Now comes the fun part.

You have your:

Business plan

Budget

And you’ve finally chosen your (inoffensive) name

You know the type of business you want and may have even registered it

Now you need to think about how to get your brand out there, so choose:

A logo design

A business strapline

Business cards

An email address signature

Stationary

Your logo needs to be instantly recognisable on your website and social media and reflect what you do.

But again, don’t blow your budget on the Saatchi-designed, gold-embossed, lavender-scented, bells and whistles version.

Simple can be just as effective, and will be a lot cheaper.

You can build your website yourself free of charge using sites such as Wix or Godaddy. If you’re planning to trade online, your website costs will probably be higher.

Don’t forget to include contact details and your relevant social networks.

And make sure your logo, brand identity and “tone” are consistent so you come across as professional.

Social media can be overwhelming and time consuming, so if you do need to do a lot of marketing this way, use a tool like Crowdfire or Hootsuite to schedule and manage your accounts.

Find the staff

Setting up a new business doesn’t only mean becoming your own boss, but potentially other people’s too.

If you are planning to take on staff, whether as full-time employees or freelance contractors, there are strict rules and regulations to follow:

Building a team: once you have decided who you want to hire, you need to send job details to them in writing, including terms and conditions, as well as a written statement of employment if the role will last for more than a month.

Insurance: you will need to buy employers’ liability insurance in case any of your staff become injured or ill because of the work that they do for you

Pay: the national minimum wage applies to anyone of school leaving age, while those over 25 must be paid the national living wage.

Legal checks: it is your responsibility to ensure any staff can legally work in the UK. They also need to have a background DBS check if they will be working in security or with children or other vulnerable people.

Pensions: it is compulsory for employers to automatically enrol eligible workers into a workplace pension scheme to which you, the employer, must contribute. There is lots of information on the Pensions Advisory Service website.

Payroll: angry staff do not make a happy workplace. Nothing makes people more upset than not getting paid correctly and on time. You need to set up a payroll that complies with HMRC regulations. You can employ someone to do it or contract it out to an external company. If you are keeping costs down, do it yourself using software like Sage or Xero.

Launching a business will involve good days – and seriously demotivating ones. Make sure you have a support network in place, whether friends, family, a good mentor or business adviser, to celebrate your successes and help you overcome the obstacles, so you and your business can have a happy ever after.

We’d love to hear what you think about Times Money Mentor. Please contact us with any thoughts or suggestions.

Starting a business: Everything you need to know - Times Money Mentor - The Times
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