Do you have a great idea and want to start a business? Congratulations!! Starting a new business is exhilarating but can also be terrifying and overwhelming. I am sure you have a lot of doubts and questions, like:
– Will it work?
– How do I set up a company? How do I choose a name?
– Do I need a loan? Or an investment?
– Do I need a partner? Or if you already have a partner, how will it work?
– Do I need a business plan? What is a business plan?
– Do I need a website? A domain?
– Do I need an accountant? How do I choose one?
– Do I need a lawyer?
– How do I choose an accountancy system? Or a payroll system?
– And on and on….
Of course, the easier option would be to appoint a professional to do all the set-up work for you. But it can be really expensive and why pay for something you can do yourself? Don’t worry, my step by step system will help answer your questions and take the pressure off starting a business, at no cost. It is also prepared for non-accountants (I will do my best anyway).
If you need more help, you can also get in touch.
Do you think you have a great idea that cannot fail? Yes, that might be the case, however before investing any money, make sure you research your idea as much as possible.
– Is there a market for your idea?
– How big is the market?
– Is it a growing market?
– Are there any competitors? How big are they? How fast have they grown? What are they offering?
– What are you offering that will make you stand out?
2. Choosing a name
When choosing a name make sure it is clear and reflects what your business does. If you are incorporating a company, research the name to ensure it is available. www.companieshouse.gov is the best place to start.
3. Choose a business structure
It can be:
– Sole trader
If you don’t need to hire staff, probably this is the easiest option; it is inexpensive, easy and you can hit the ground running right away. The profits are taxed as income (same as being employed).
However, the liability is unlimited so if your business fails you are responsible for any debts.
It’s an extension of Sole trader for example if husband and wife work together.
An agreement would be needed how liabilities, ownership and profits are split and each partner must register as self employed.
– Limited Liability Company (Ltd)
Incorporate at Companies House.
Adds credibility to the business and it is easier to borrow money or find investors.
It is limited by shares which means the limited company is a separate legal entity from the shareholders.
Link to help you incorporate a company limited by shares yourself.
– Limited Liability Partnership (LLP)
Mostly for professional services companies.
Limited liability like a Ltd company and flexibility like traditional partnerships.
Profit is taxed as income.
If you have a business partner, I strongly urge you to have a partnership agreement. Get a solicitor to prepare it as it can be a bit tricky especially if you end up in court.
Most people start companies with friends which is great but I’ve seen things turning bad and people end up in court without a partnership agreement. Make sure that doesn’t happen to you, protect yourself!
5. Domain and website (or app)
It is of course important to ensure you choose the right domain for your business. It’s easy to register a domain, there are a lot of suppliers that can do that for you, it’s very cheap and it takes seconds. The exact name you want (ie your company name as registered at Companies House) might not be available but you choose something close enough. My advice is to choose something short and memorable for example if the name of the company is ‘Jones and Smith Finance Consultancy Services Ltd’ don’t choose as a domain www.jonesandsmithfinanceconsultancyservices.com’, it’s a very long name and you will have email addresses with the same domain, do you really want to type all that? Might not even fit on your business cards! I am joking of course but you get the idea.
These days you definitely need a website but the good news it’s very cheap and easy to set up one. You can do that yourself, there are plenty of suppliers that offer website builders, you don’t need any coding skills, it’s basically just a drag and drop exercise.
Most of the time when you buy a hosting package for your website, they also offer one free domain so don’t rush to buy your domain first.
6. Logo and slogan
You will also need a logo to advertise your business. My advice is, keep it easy and fresh. Thinks about the colours, for example if you are a plumber, perhaps don’t choose pink for your brand. But the logo must stand out and print well on business cards, mugs, stationery etc
There are a lot of suppliers out there that offer free templates, check it out and get inspired. You can design it yourself or hire a professional.
You must decide how much you will need to start the business and how you will finance it. You can of course turn to family or friends or maybe you can finance it yourself. Great, but my advice is not to put your house or anyone else’s house as a guarantee.
Look for alternatives, like a bank loan, equity funding, crowd funding or government schemes.
Just remember you must repay bank loans!
At the same time, equity funding can be an expensive source of funding. As I am sure you know, investors receive equity (shares) in exchange for the seed investment. You might end up giving investors a big chunk of your business, depends on the business it can be anything form 20-25% up to 75-80% of the business! It all depends on a lot of factors I will go through in another article. Before giving up so much of your business just remember you still have to do all the work. And you might need to raise more capital down the line which will further dilute your equity.
If investment is the option you choose and you decided to trade as a limited company, you might also qualify for SEIS or EIS scheme which is really attractive for investors, make sure you apply for an Advance Assurance from HMRC.
It is crucial to have a business plan when you start a new business. A lot of start-ups entrepreneurs have been asking me if they need a business plan since they are not looking for investors.
Now let’s clarify what a business plan is. A business Plan is basically an outline of the business, who you are and what you are trying to achieve over the next 3-5 years and how are you planning to achieve it. Even if you are not seeking funding, you need to have a plan, understand your market, competition, how you tackle it, what kind of resources you need and what kind of results you can expect. You cannot start something aimlessly, it will most certainly backfire!
There is no standard business plan or layout as it all depends on the business. Don’t add a lot of irrelevant information because you want to look more professional by having as many pages as possible. That is of course a mistake, if anything it will make you look like an amateur in front of investors and laugh out of the boardroom.
You can prepare a business plan yourself as you know your business better than anyone else, however if you don’t know how to prepare Financial Forecasts, get a professional to help you.
Just remember to keep it realistic, concise, specific, know your company, the market, competition and finances. It’s great to think big and maybe you think your idea is the next Facebook or LinkedIn which is great. However, do not say you will sell your business to Google in 3 years for 3 billion! Even if that happens, for now, you must keep it realistic. If you are in the tech sector, add a sensitivity analysis and that will show investors what it could happen. They are smart people and they can tell what an idea might be worth!
Make sure you keep track of all your incomings and outgoings as you will need to report it to HMRC. You can choose a software, appoint an accountant or at the very least a spreadsheet.
At the beginning, a simple spreadsheet might suffice. You only need to ensure you keep all the receipts.
If you incorporate a limited company, you need to open a separate business account which might help separate the transactions from your own. As a sole trader you don’t necessarily need to have a separate bank account which will make separating transactions a lot more challenging.
You also know the saying ‘cash is king’? I am sure you do as well as 95% of companies fail in the first 2 years of trading because of cash issues? It is all true unfortunately which is why you need to ensure you have a cash flow model in place to track your cash and know in advance how much money you will need.
You already thought about resources when preparing your business plan. To succeed you need resources like premises, phones, printers, software, vans or cars, staff, insurance.
Make sure you have all the insurances you need before starting trading. If you hire staff, it might be worth speaking with a HR company as there is a lot of compliance to consider and there are heavy penalties for non-compliance. I don’t want to scare you but sometimes you can also criminally prosecuted. You will also need to pay your staff but you can outsource it to a payroll company if you don’t want to do that yourself.
11. Start selling
You already know how to do that, now it’s time to apply it!
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