The number of new business start-ups launched in the past year has risen sharply. This is largely due to the pandemic, which has created a new generation of entrepreneurs. Those who have always wanted to realise a business dream but haven’t had the confidence or timing, or those who have been furloughed and decided that working from home for themselves is a better fit. Whatever the reason, in *December 2020 new business registrations were up by 30% compared to the previous year. The annual growth rate has been in double digits since June 2020.
If you’ve been thinking of setting up your own business, but are unsure where to start, we’ve got some advice to get you off the ground.
How, what, where and when.
Set out an initial business plan by looking at what your business name will be, what its product or service will be and where you see your business in 5-10 years time. Where will you be based (assuming home at the moment), and what type of business you are launching?
When you start a business there are a few options on what legal form it can take. The three main options are to trade as a sole trader, a partnership or a limited company.
This is the simplest and the lowest cost option. Essentially you start trading and build up a customer base. You will need to register with HMRC as self-employed, complete a tax return annually and keep track of any income and costs related to the business. This is a good option for people who want to test the water, as there are no costs associated with it (asides from any marketing, branding etc you may decide to invest in). Later on, if the business does well, you might decide to turn the business into a partnership or a company. See more advice at Gov.uk.
This is very similar to a sole trader, however here there is more than one person running the business. You might decide if two of you are going into the venture together to have a 50:50 split, or if one of you is putting in more work or finances, perhaps one person will be entitled to more than 60% of the profits and the other 40%. This split can be set at whatever level suits you, but we would recommend that you put an agreement down in writing to avoid future arguments. All of the partners will need to register for personal tax and the partnership itself will also need to do a tax return.
A limited company (Ltd) is a legal entity in its own right. This means that it can take out contracts, or own assets in its own name. They are more costly to run than a sole trade or partnership, but there are some advantages. Potentially, a company can work out better in terms of the tax you pay on any profits generated and a company also offers more tax planning opportunities. Having a company will also give you limited liability in the event that someone takes legal action of the business. This means your personal assets, such as your home, will not be at risk.
Set up a business bank account
Whatever legal form you choose, we would highly recommend setting up a separate bank account for all transactions relating to the business. It can get extremely messy and confusing to try and run a business through your personal account! If you are struggling to open an account in the current environment, or just want something different to the ‘same old’ high street banks, we recommend you look at Starling Bank, Tide and Monzo.
As with any business, there is usually always competition and so it pays to write an initial marketing plan to give your new venture the best possible chance of succeeding. The plan should cover your unique selling points (USP’s) and a SWOT analysis looking at your business’ strengths, weaknesses, opportunities and threats. This is something that can be adapted over time as your business changes. Use the plan as an opportunity to really look at the industry you’re working in and how your business can excel. There are lots of great templates online – just have a look in your search engine.
Create an online presence
Living in the age of the digital, it’s even easier to get your business up and running within a month. You’ll need a website, which will of course take time (and money if not doing yourself), so shop around for a great website domain service and platform such as Wix or WordPress, or reliable IT expert. While your website’s getting ready, make sure you set up some social media pages to get your name out there. Each social media platform has its own type of audience, so do your research into which ones will work better for your business. There are so many today… Facebook, Instagram and Twitter are the giants at the table, followed by LinkedIn, TikTok and lots more!
Good networking spreads the word about your business quickly, and it’s good to get out there and get advice from likeminded businesses. While face to face networking isn’t possible at the moment, many networking groups are going virtual using Zoom and other services to regularly connect. They can be a great place to test ideas and get support. Setting up a new business can be tough!
Keep good accounts
What constitutes as good accounts you might say? You’ll need to keep track of your expenses (normally this is travel mileage, stationery etc) and overheads (electricity, cost of materials, labour etc). Once you’ve submitted your first year of accounts you’ll get a better idea of what will need to be recorded.
There is plenty of great accounting software out there including Xero, which we use and recommend to our clients. Anything that makes running a business easier is a plus! Alternatively many of our clients like to keep it simple using an Excel spread sheet for example.
Ultimately, unless you really know what you’re doing with accounting, do choose an experienced expert who can take all the hassle out of setting up and submitting tax returns for you. Take a look at our article on 5 Things Your Accountant Wishes You Would Do (And Wouldn’t) to get the best out of your Accountant.
Finally, determination and positivity in the face of adversity are two qualities you’ll need to launch and run a successful business. The pandemic has thrown quite a curve ball at UK businesses, but if you can adapt and thrive, not just survive, you will be a better business owner for it.
If you’d like any advice on launching your own business, do get in touch with our dedicated ‘Start Up’ team on firstname.lastname@example.org or call us on 01752 665134.
* According to FT.com – https://www.ft.com/content/3cbb0bcd-d7dc-47bb-97d8-e31fe80398fb