Starting your own business is an exciting time, but it can also feel a bit scary as you figure things out. In this article, we’ll explore what you should do before your business starts and after.
Why do you want to start your business?
Launching your own business can bring in more money and freedom, but it involves hard work. Sometimes, you’ll need to make tough choices and sacrifices. Understanding the reasons behind it will keep you motivated. Having clear goals will help you plan efficiently. So, ask yourself why you’re starting the business. Someone who wants to help their community will approach it differently from someone who aims to support themselves without a boss.
Choosing the Right Business Structure
Do you have a business concept and a name in mind? Fantastic! To make it official, you’ll need to decide on the appropriate legal structure to register your business. Don’t worry; it’s not as complicated as it may seem, but it does require some research.
Every business structure has its advantages and disadvantages, depending on your situation. If you’re uncertain, it’s a good idea to seek advice from a specialist. The most common business structures in the UK include:
- Sole trader
- Limited company
- Limited Liability Partnership (LLP)
Many low-risk startups opt for sole trader status because it’s the most cost-effective, quickest, and simplest way to launch a new business. You won’t need to be listed on Companies House. Registering with HMRC is all you need to do as soon as possible after starting your business to prepare for Self Assessment.
One significant benefit of forming a limited company is that, as the owner, you’re only responsible for business debts up to the value of your shares. In other words, unlike a sole trader, your business and personal finances remain separate. So, if the company faces financial difficulties, your personal assets are not at risk. However, operating a limited company can be more complex than being a sole trader because directors have specific responsibilities. You’ll also need to submit full accounts, pay Corporation Tax annually, and report any dividends in your own tax return.
If you plan to run your business with someone else, you might consider establishing a partnership. In this arrangement, responsibilities and decision-making are shared, so it’s crucial to clarify how profits will be divided.
Limited Liability Partnership (LLP):
An LLP is similar to a business partnership but offers the added protection of limited liability. Unlike general partnerships, forming an LLP creates a distinct legal entity separate from its owners. This separation provides greater protection for your personal assets in case anything happens to the business.
Do Market Research
The best way to really understand what your target audience wants and needs is by researching them firsthand. This also gives you a deeper understanding of your industry and competitors. Regular market research results will help you make crucial business decisions about pricing and product development, hopefully helping you avoid costly mistakes! A helpful tip is to ask as many different people as possible. Try approaching people you don’t know to reduce bias, and ask them to physically test your product or service if possible. Focus groups or online surveys are common methods. Additionally, check what your competitors are doing to see if there’s an unfilled gap in the market.
How to Fund Your Startup
When it comes to funding your startup business, there are various options available. The government offers small business loans and grants (you can start with the Finance and Support section). It’s also worth checking with your local council. You might consider pitching to investors or trying crowdfunding. Again, it’s essential to do your homework and ensure your business plan is solid. Whatever you choose, be sure you can repay any loans and avoid financial troubles that could sink your business before it even starts.
Starting a Business with Limited Funds
Launching a business can be expensive, but the costs depend on your specific business. Some businesses have lower startup costs than others. No matter what you’re starting, it’s essential to keep costs down (while maintaining quality) to reach the break-even point and start making a profit sooner. Here are some tips we’ve gathered from our years of working with businesses:
• Timing Matters: Launching your business at the right time can save you money. For instance, advertising sunglasses in the winter might not be cost-effective. Focus your marketing budget on the summer when more people are interested.
• Workspace Choices: Renting or buying space can be a significant expense for startups, but it’s often unnecessary. Consider starting your business from home unless specific premises are essential.
• Used Equipment: While you can claim tax relief on allowable expenses, it’s usually more efficient to keep expenses low, especially in the early days.
Create a Business Plan (and Keep Updating It)
Being clear about your business’s goals and objectives is crucial for investors and stakeholders. A business plan is the best way to communicate what your business is and how you plan to achieve your goals. It also helps keep your business on the right track. Your business plan should outline your business’s products or services, pricing structure, key personnel (partners and employees), and how customers can access what you’re offering (online, by phone, or in-person). Additionally, it should detail your long-term growth plans.
Prepare a Cash Flow Forecast
Creating a cash flow forecast is vital, even before your business starts. It’s part of the planning process and estimates how much money your business expects to earn and spend over a specific period. As you accumulate actual financial data, you can refine your forecasts. Maintaining an updated cash flow report is essential for informed decision-making and financial control.
Develop a Marketing Plan
Effective marketing is vital for your business’s success, even if you’re uncomfortable with selling. Having a plan is key to successful marketing. This involves strategizing for social media, content marketing, PR, marketing events, and SEO. It may sound complex, but even if you’re starting your business slowly and relying on word-of-mouth recommendations, that’s still a plan! Consider:
• Your target customers
• Your business’s branding (how it looks, sounds, and presents itself) and whether it conveys the right message
• The best way to inform people about your upcoming business
Understand Your Responsibilities
Running your own business means you’re responsible for nearly everything. Take your time to understand what needs to be done and when. Don’t hesitate to seek help when necessary! Determine Tax Return Deadlines Your responsibilities may vary depending on your chosen business structure, affecting the type of tax returns and deadlines you face.
Open a Business Bank Account
While it’s a legal requirement for limited companies, having a separate bank account is highly recommended for any business. It’s especially helpful when working with others to keep financial matters organized.
Learn About Financial Management and Record-Keeping
Maintaining accurate and up-to-date records is crucial, and as accountants, we can’t stress this enough. It’s because we’re accountants that we understand its benefits, which we witness every day. Keeping meticulous records:
• Is essential for compliance with HMRC
• Simplifies tax return and accounting preparation
• Facilitates better business decisions based on accurate information
• Increases the likelihood of claiming all allowable expenses.
Pause and Relax!
Starting your own business can be incredibly stressful, whether it’s a side hustle or a full-time venture. Remember to be kind to yourself! There will be many things you don’t know, so be ready to make mistakes.
Seeking support from the right sources can be a big help. You can often find mentoring opportunities through networking groups, your local Chamber of Commerce, and even from your bank if you have a business loan. You don’t have to handle everything on your own, so don’t hesitate to ask for assistance when needed. And don’t forget to take breaks – burnout is a real concern!