So you’ve got your big idea, or want to make your side hustle your full-time job by starting a business. Now’s the time to go for it! Before you start a business, here are some important steps you need to take to make sure you’re starting your business the right way.
Find a business idea
There are lots of different reasons to start your own business. You might have a unique business idea to bring to life, have the expertise you want to share with others or have a hobby you want to take to the next level. Finding your reason for starting a business will help you get a clear picture of how to move forward.
Whether you’re offering a product or a service, it’s important to make sure that your idea can make you money and solve a problem for your target audience. Your idea needs to create value. It can be original and give a solution that doesn’t already exist or be a unique approach to a common problem.
Test your business idea
To make sure your idea is valid you need to test it. Testing your idea before you start a business will help you avoid spending time and money on an idea that may not work, and can provide valuable feedback to help you develop your product or service.
First, you should research the market and your competitors. See if what you’re doing is unique enough to be appealing.
Next, move on to getting feedback. There are a few different ways to do this depending on your budget:
- Organising a focus group
- Creating a website and marketing it
- Sharing it on social media and asking for feedback
- Involving friends and family
Write your business plan & budget
Before you start your business you should create a business plan and budget. Both go hand in hand to help you plan ahead. They can give you clear targets to work towards and will help you check if you’re on the right track. A business plan and budget are also very important assets to have if you need to seek finance for your business.
How to write a business plan
A business plan will help you get a clear idea of how you intend to grow, how it will be structured and what your finances will look like. You can use the information you got while researching and testing your business idea to help you. Here’s what you need to include in your business plan:
- Executive summary
- Business name and description
- Market research, competitor research and target audience
- Business structure
- Marketing and sales plan
- Pricing goods and services
- Budget projections
Get business finance
What is business finance? Business finance is the way you fund starting your own business. Whether you’re financing your business yourself or getting a loan, there are lots of options to help you get started.
How to finance a business
Here’s a quick rundown of how you can finance your new business:
- Use your savings
- Get a business loan
- Try crowdfunding
- Use invoice finance and asset finance
- Get a business grant
- Find an investor
Choose a business structure
When you start a business, there are several options of how you can choose to structure your business; sole trader, limited company or partnership. Which you choose will depend on what best suits how you want to run your business and how much responsibility you wish to have.
Register as a sole trader
Being a sole trader means you work for yourself, and as a result, you are responsible for the debts of your business and doing your accounting. To be a sole trader you need to register with HMRC.
Set up a limited company
When you have a limited company, your business finances will be separate from your personal ones. But, you have certain financial, reporting and management responsibilities as a director of a Limited Company. To start a limited company, you will need to register a company with Companies House.
Start a business partnership
If you want to run a business with another person (or several people,) a partnership is one way to do so. The responsibility for your business finances will be shared between you and your partner(s). To set up your partnership you can register with HMRC. There are different types of partnerships you can create; a partnership, a limited partnership and a limited liability partnership (LLP).
Choose a business location
The most common way to run a business is to either work from business premises or to work from home. There are pros and cons to both, so you can choose which solution suits your business best.
Work from a business premises
If you’re looking for business premises, like an office or a store, there are a few things you should consider:
- Rent and bills – These should be factored into your business budget to make sure you can afford to pay them long term
- Location – Are there competing businesses nearby? Is there enough foot traffic to gain customers? How accessible is the building to visitors?
- Infrastructure – Assess if the building is the right size for your needs. If you need wi-fi to run your business a good connection should be a high priority.
- Business rates – If you rent or buy business premises, you may have to pay business rates. However, small businesses can apply for a deduction depending on the rateable value of the property.
- Health and safety – You will be responsible for carrying out a health and safety risk assessment and following health and safety rules. If you don’t, you can face legal action.
Work from home
If you choose to run your business from your home, there are some costs you may be able to deduct a proportion of from your Self Assessment tax return, or from Corporation tax if you are a Limited Company. While this can be a cost-effective solution, you also have some legal obligations to consider:
- You may need permission from your mortgage provider/landlord, your local planning office and your local council
- If you sell your home, you may need to pay Capital Gains Tax on the part you ran your business from
- Check if you have to pay business rates by contacting the VOA (or your local assessor in Scotland)
- Manage health and safety like any other workplace
If you run a business in the UK, you’ll need to pay business rates on your business property. These normally apply if you’re running a business from premises, but if you work from home but there are some exceptions. Make sure you do your research to make sure what applies to your business.
Obtain a business licence
Depending on what kind of business you’re starting you may need to apply for a business licence. Some licences are issued by your local authority, while others have a specific government body.
The easiest way to find out whether your new business needs a licence is by using HMRC’s licence finder.
Open a business bank account
Having separate business and personal bank accounts is the best practice as it makes your life easier! When it comes to doing your accounting, it will be clear which expenses are only for your business so you can record them correctly.
Know your taxes
When you run your own business, there are several different taxes you may need to pay. These include:
- Income tax and National Insurance contributions
- Corporation tax
- Capital Gains Tax
- Dividend tax
You may have to register for certain taxes before you can pay them. You will also need to submit tax returns for your business. What you need to submit and when will depend on which taxes you need to pay.
Get business insurance
The only kind of business insurance you have to have by law in the UK is employer liability insurance for most businesses who have employees. However, some regulators will need you to have insurance for certain trades. You should also get insurance for your business premises if you have one.
It’s a good idea to see which kinds of insurance are available for your new business so you can make sure you’re prepared and covered against any issues.
Legal responsibilities of starting a business
When you run a business there are some legal responsibilities you will need to take care of.
For example, if you plan to sell alcohol or food, or play live music, you may need a licence. You can check on the HMRC website if you need one.
Buying and selling goods in the EU
If you plan to buy or sell goods there are specific rules you will need to follow.
There’s lots of information you need to give your customers when you’re selling online. There are also extra rules for selling digital services. You can read more about online selling on the HMRC website.
If you’re importing or exporting goods, you may need specific licences or documents depending on what you sell, for example, animals or agricultural products. The rules also vary depending on whether you are trading with EU or non-EU countries.
Data protection applies to any information you hold on your staff, potential hires and customers. You are required by law under GDPR to keep the data secure, correct and up to date. You also need to have clear permission to collect the data and tell them how you plan to use it.
Get the right tools and software
When you start a small business you also become responsible for certain administrative tasks. Making sure you have tools and software will make your job easier. Here are some areas where you need to make decisions:
- Accounting and invoicing
- Project management
- Online store
Hire your team
You might decide to run your business alone or choose to build a team to help you grow your business. If you choose to become an employer and hire employees, there are legal responsibilities you need to be aware of.
How to become an employer
If you decide you need employees to run your business there are several steps you need to follow to make sure you are a legal employer.
- By law, you need to pay your employees the National Minimum Wage. You must also check if the person has the right to work in the UK. You may also need to do a DBS check on your potential employee.
- As soon as you employ someone you will need employers’ liability insurance.
- If you are employing someone for more than one month they will need a written statement of employment.
- 4 weeks before you pay your staff you need to register with HMRC as an employer.
- You can also check with HMRC if you need to enrol your staff in a workplace pension scheme.
How to run payroll
When you pay your employee, you normally have to operate PAYE as part of your payroll. PAYE is the HMRC system to collect Income Tax and National Insurance from employment.
You can do PAYE by either paying a payroll provider to do it for you or doing it yourself using payroll software.
Market your business
Marketing is important to help spread the word about your new business and find customers. You can create a marketing plan to help you get your thoughts in order and decide when you There are lots of low-cost or free ways to market your business. Here are some things to consider:
Brand your business
Branding your business will help you figure out your identity. It’s how people feel when they engage with anything to do with your business, whether it’s your website, store or product. It’s how your company represents itself. From creating a visual identity to the tone of voice guidelines.
Create a website
Whatever your business, having a website will help you be discovered. You can start a blog about your area of expertise, or list your products for online sale. If you have the budget, you can use Google Ads to make your site easier to find. If you don’t, read up on some simple SEO techniques to help potential customers find your website when they’re searching for your service or product.
Use social media
Social media is a simple place to begin sharing your brand. Create profiles in social media channels and fill them with content about your business, and if you have the budget you can pay to advertise your posts to reach a wider audience.
There are lots of different ways you can pay to advertise your business. These include:
- Social media
- Google Ads
- Magazines or newspapers
- Out-of-home advertising like posters or billboards
Depending on your budget you can find the best option to suit you.
PR helps grow a positive reputation surrounding your business. This could be anything from getting featured in local papers to holding events. Try reaching out to local magazines, websites and papers with your great business idea and see if you can get featured!
Manage your finances
Starting your own business means you will need to take care of your finances. You can either choose to do this yourself or with the help of an accountant. Whatever you choose, using accounting software to keep track is a great way to start.