Being the cornerstone of economic vitality, the private business sector in the UK is showing improved confidence, indicating a robust entrepreneurial spirit and innovation.
Small businesses are proving resilient this year, with 99.2% of total UK businesses comprising small and medium enterprises.
The recovery in small business registration also comes with many challenges, including complex regulations, a competitive landscape, and the need for sound financial management.
Starting your own business might sound overwhelming, but you don’t need impressive funding and a big-league degree to make it a success.
You need a clear goal and actionable steps in a realistic time frame. We have curated this comprehensive guide that includes actionable steps and the main considerations you need while setting up your business.
1. Brainstorm and validate your business idea
Many budding entrepreneurs struggle with validating their business ideas. The reason is often that they lack the understanding to balance their desires and ideas with market needs. So, the first step should be to brainstorm and validate your business idea.
If you haven’t finalised your business idea, here are some of the important questions you should consider. This list is by no means exhaustive.
- Are you planning to sell your products or services online or in a bricks-and-mortar establishment?
- Do you want to start a full-fledged company or a side gig?
- What kind of support do you have to start your business?
- How fast do you need to scale your business?
- What type of business do you want to start?
- How much can you afford to invest?
- What are your skills and expertise?
- Are you partnering with someone?
2. Do your market research thoroughly
After validating your business idea, the next step is to conduct extensive market research to determine whether or not your target audience is interested in your offering.
In this step, explore business opportunities and analyse your competitors’ offerings. This will help you build your USPs. Below are the questions that you must consider:
- Who is your target market?
- How much is your target market willing to pay for what you want to offer?
- What products or services currently used by your target market will you compete with?
- What will differentiate your product or service from those of your competitors?
- What potential problems do you aim to solve with your product or service?
- What are the specific needs of your customers?
- The important one: is there even a market for your product or service? Consider market saturation. Look for a gap in the market that isn’t being filled. How will your business be different from what is already there?
With your target market identified, you can now focus on competitor analysis. Be sure to list the following details:
- Names of competitors
- Their locations
- Their target markets
- Business size
- Pricing strategies
- Strengths and weaknesses
- Whether they are direct or indirect competitors
- What they are offering and whether what you are considering is the same.
Laying the groundwork will help you determine your product positioning, market segmentation, product offerings, and pricing.
3. Create a business plan
Once you conduct market research, you need a comprehensive business plan outlining your objectives, strategic goals, financial projections, and operational plans. Include the following sections in your document:
- Executive summary: Introduces your company’s key offerings and business objectives and highlights how to achieve these goals.
- Company description: Describes your products or services in more detail. It includes the problem statement your brand wants to solve, target market details, location specifics, and more.
- Market analysis: Covers the company’s value proposition, details about the target market, market size, segmentation analysis, and competitor analysis.
- SWOT analysis: Showcases your company’s strengths, weaknesses, opportunities, and threats, helping you better serve your target market. Strengths and weaknesses consider the areas you have the most chance to influence; opportunities and threats are external to your business and where you have less control. Better informed than not though.
- Finances and projections: Displays your current finances and projections for the future. Calculating your finances realistically will attract investors to your business.
- Marketing and sales: Presents a realistic and strategic plan for marketing and sales of your products. The plan includes marketing strategies, budget allocations, actionable steps for reaching your goals, and revenue projections.
- Operational plan: Details the day-to-day operations required to run your business. This includes your business location, facilities, equipment, and processes.
- Management and organisation: Describes your business’ organisational structure, detailing the roles and responsibilities of key team members and outlining the leadership hierarchy.
- Product line or services: Provides detailed information about the products or services your business offers. This includes the benefits, lifecycle, and research and development activities.
It is essential to update your business plan regularly. This will help you understand your progress and track the goals you have set.
4. Determine the legal structure of your business
Before registering your business, you must decide on its legal structure, which will directly impact your tax liabilities. There are four main types of legal structures for your business:
- Sole proprietorship: Register your business as a sole proprietorship if you plan to own your business alone. You are considered self employed and are responsible for this structure’s legalities, obligations, and debts. Income tax and National Insurance must be paid and you must complete a self assessment.
- Partnership: As the name suggests, the business will have two or more owners. In this form, you do not have to bear all responsibilities alone. It is an excellent way to share the duties of setting up and running a new business. The partnership must be registered with HMRC.
- Limited company: A limited company is one of the most common legal structures for small businesses. It is a private company which is incorporated, limited by shares and essentially provides a partnership’s tax benefits and limited liability protections. The company must be registered with Companies House.
- Limited Liability Partnership (LLP): This is a hybrid of a limited company and a partnership. Like a partnership, an LLP can be run by two or more people. However, it must be registered with Companies House and provide limited liability protection to its partners.
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5. Explore funding options; raise capital
Often, business owners find it challenging to secure startup capital while setting up their businesses. Different funding options are available; some require significant effort, while others are easier to obtain. There are two main categories of funding:
a. Internal funding
It includes personal savings, funds from family and friends, and credit card payments. Although these funding options are readily available, they carry significant risks. If your company faces financial trouble, you risk losing a substantial amount of your savings.
b. External Funding
To minimise these risks, business owners often prefer external funding options. External funding options include:
- Startup loans: These loan schemes allow entrepreneurs to borrow up to £25,000 at a 6% interest rate, with repayment terms ranging from 1 to 5 years.
- Angel investors: Angel investors provide funding in exchange for equity stakes. They may give the money upfront or in instalments as your business progresses.
- Equity crowdfunding: This popular option allows early-stage startups to raise capital from a large group of investors via an online platform in exchange for equity.
- Small business loans: Business owners can obtain loans from local banks. However, loan approval depends on your business revenue and credit score.
- Small business grants: Unlike loans, business grants are non-repayable funds allocated to qualified businesses. New companies can receive public and private grants to develop their businesses, invest in technical equipment, and boost the economy. No interest or equity is required.
When choosing the right funding option for your business, consider your risk tolerance, loan repayment time frame, and capital needs.
6. Set up your finances
Launching a new business can be exhilarating, but neglecting financial details can quickly become a nightmare. Once you have explored funding options and decided on your business structure, it’s time to manage your finances, which typically starts with two things:
a. Open a bank account
The first step is to open a business bank account. Visit the branch to learn about their facilities and track record. Use this account solely for business transactions. Consider getting a business credit card for short-term financial needs and crucial business expenses.
b. Sort out your insurance
No matter how small your business is, you will need insurance. Here are some types of insurance you might want to cover:
- Property insurance: Covers your office property, including office space, equipment, inventory, and more.
- Liability insurance: Protects your company against third-party claims, such as false advertising, defamation, and property damage.
- Business interruption insurance: Covers losses incurred by your business due to temporary closure from events like natural disasters.
7. Plan out your accounting and taxes
Understanding your business’ tax obligations will help you create a solid foundation for your business. A good grasp of accounting, taxes, and finances will help you avoid HMRC penalties, develop tax optimisation strategies, and gain valuable financial insights.
Here is a breakdown of the tax types to consider:
- Income tax: As a sole trader, you must register your business with HMRC and pay income tax based on your business profits through the self-assessment tax system.
- Corporation tax: As a limited company owner, you must pay corporation tax based on your profits.
- VAT: This is a sales tax added to the prices of goods and services. Not all businesses are liable for VAT registration, but firms with a turnover of £90,000 or more must register to pay VAT.
To improve your business’s financial health, you must maintain accurate financial records of income, expenses, assets, liabilities, and other transactions. Take help from our brilliant Bradley’s accountants from the outset.
8. Devise your marketing strategy
Many entrepreneurs spend money and time on product development. However, they run out of capital and time when it comes to marketing. Your business development efforts will be unsuccessful if your target customer is unaware of who you are and what you do.
Here are the aspects you should consider when devising your marketing strategy:
a. Targeted marketing
Create a marketing strategy focused on your target market.
Position your product or service as a solution to problems or a need faced by your target customers. Explore different marketing channels, such as pay-per-click advertising, social media advertising, and email marketing for customer acquisition.
b. Social media
Regardless of your product or service, you must focus on creating a solid online presence, and the most creative way to do that is through social media. Use different channels to connect with your target customers, build brand awareness, and promote your company.
LinkedIn and X.com are the go-to choice for most businesses. Facebook and Instagram can work, too, depending on your industry type.
c. Networking
Networking is a time-tested strategy that works for any business. Through that, you can make industry connections and build partnerships that can benefit your business.
d. Online directory listings
Registering in online directories can improve your brand visibility. Customers often search these directories to find products or services they need.
e. SEO
A search-optimised website is crucial for visibility. When a customer searches for a product or service you offer, the search engine should prominently display your website. SEO is a long-term strategy, so you must remain consistent with it.
Over to you
Setting up your business is challenging; following the above steps will make your path easier. Often, budding entrepreneurs feel overwhelmed by what they want to do.
Conducting thorough research to validate your idea and setting realistic goals will smooth your entrepreneurial journey.
Whether you want to start a limited company or set up a startup, Bradleys Accountants can help you with the legal and financial aspects of the process, from company registration to managing accounts and tax liabilities.
Contact us today and see how we can make your dreams a reality.
