Digital technology, and the internet in general, have made it a lot easier to start a business than ever before. Not only do online businesses tend to come with much fewer costs to cope with, but the availability of information on the internet has helped democratise the process of getting started, somewhat.
In that vein, we’re going to look at a few tips to help you learn how to start a small business in the UK, and how to make sure you start it off on the best foot possible.
Research your business idea
All businesses begin with an idea, but once you have that idea, you have to make sure it can stand up in the modern market. To that end, you’re going to have to do a little research. This can involve looking online, looking at local business records, and even carrying out focus groups and questionnaires. You need to make sure that the market has a need for the particular services/products you offer, that the market is sizeable enough to support it, and that you’re able to fit in alongside or opposite any competition.
Write a business plan
You can’t run a business off an idea alone. To see the route ahead for the idea, you need a business plan. The business plan serves many purposes. It’s a tool that helps you project costs and profits for the sake of showing potential funders the viability of the business. It’s a “list of ingredients”, showing what assets you need to set the business up. It’s also a roadmap, looking at the goals you need to hit to make the business sustainable, as well as the steps that will lead to its growth. There are plenty of template business plans available online that you can look at to get an idea of what’s required.
Crunch the numbers
The business plan will, in some part, cover this, but you need to spend some time putting together a spreadsheet looking at all of the costs of the business. This can include the property, the equipment, any research you had to pay for, inventory, trademarking, licenses, permits, and so on. Add to them the recurring costs you anticipate for the first year, from utilities to marketing to supplies and so on. These are your startup costs, what it takes to keep the business up and running for the first year until its making enough money to keep itself running instead.
Find your funding
Once you have a good idea of how much you’re going to have to spend to keep the business running for a year, it’s then up to you to get the funding to make it all happen. If your business could be started with less than, say, £5,000, then a loan from family members or friends, or saving the cash yourself over time could be the best option. Otherwise, there are small business loans, grants, investors, and crowdfunding opportunities. You may also be able to finance the business off of assets you already own, such as your home or your car, but this does put a lot of the risk of business on your shoulders directly so take care to consider your options.
Pick an appropriate structure for the business
There are different ways to structure your business. Freelancers, when first starting out, often structure themselves as a sole proprietorship, which effectively means they are the business and are wholly responsible for it. A partnership is much the same, but for multiple people. An LLC, or limited liability company, is often recommended because it offers some distance between the business and its owners, especially when it comes to financial liability, but this does require a lot more organisational effort. Lastly, a business can be registered as a corporation. There are no right or wrong answers, it’s more about finding the structure that best fits your needs, so be sure to do your research.
Establish your business
When you’re deciding on the structure of the business, it’s time to register the company at Companies House, which you can find on the gov.uk website. Providing you have the details you need, this should take you no more than half an hour and should cost you no more than £12, which you can cover with a credit or debit card, or a PayPal account. You’re going to need a company name, which needs to follow a few legal requirements, such as not being owned by another company, not having profanity in it, and not being the same name as any trading name you have registered. Besides the name, you also need an address, details of at least one shareholder, a Memorandum and articles of association, and details for anyone who holds an interest in or control of the company. The Companies House website can help you learn a lot more about what’s required when registering your business.
Setting up finances
Every business owner is going to have financial and tax obligations and responsibilities they have to live up to. It’s recommended you open up a business bank account, even if you’re a sole trader and you don’t legally need one. Choose a bank account that’s low on transaction fees, and offers complimentary services such as insurance or accounting software to make sure your cost of doing business with them isn’t too high. Make sure you record all financial transactions and keep them organised as, every year, you’re going to have to file annual tax accounts to see how much the business owes in taxes. Accounting software can make the process a lot easier. As the business grows, you should also consider hiring an accountant. Besides helping you keep the books tidy, they will also offer advice on how to structure your tax returns, so you can retain more of your money or avoid the risk of an audit.
Protect your intellectual property
Next, you will need to trademark the name and the brand to stop other businesses from copying it. When you trademark your company name and brand, you legally own it. But it doesn’t protect everything the business does. For any innovative products, services, or processes, you might also want to consider patenting it. Businesses apply for patents to stop their ideas being stolen by others, retaining the exclusive rights to it. To that end, it’s recommended you get a lawyer on your side who is familiar with copyright law.
Protect the business with insurance
Small business insurance is going to help you protect the business financially. Whether you have to recall a product or an employee is injured at work, insurance is there to cover the costs that can come with these events to stop you from having to dip into the business’s finances. Without the right insurance, an unexpected cost could force you to sell business assets, which can endanger the whole company. Work with a business insurance broker to figure out what kind of protection you need, and try to find the right deal, one that doesn’t cost too much but doesn’t leave you underinsured against potential threats.
The tips above can help you start a business, and from opening your doors to getting it up and running consistently can be one of the toughest challenges it will face. However, it’s not the only one. After a successful start, you must look at how you’re going to scale and grow it, as well as the other challenges that might come your way. The start is only the beginning, after all.
In need of a helping hand? Aurora Capital has several business loan options available for a small business like yours – get in touch today and we’ll get you on the right track. Call us now on 020 3355 7462.