How to Start a Small Business

Starting a successful business can be a nerve-wracking process for small business owners. You need to navigate the financial responsibilities and considerations unique to your role. These include: financial management, securing business insurance, setting up a merchant account, understanding business expenses and tax offsets, utilising the services of an accountant, and leveraging online business tools for financial oversight.

Regardless of your industry or level of experience, stepping into the shoes of a small business owner can be fraught with insecurity and doubt. But the good news is many business owners have taken the leap and found success.

But one of the reasons holding many people back from making the leap is not knowing where to start. So to help you on your way, here are a few things to consider before you develop your business idea, whether you want to start a bed and breakfast business, run a pub, or set up your own shop.

Business Plan and Business Structure

Before starting a small business, it’s important to have a clear plan in place. A business plan will help you define your business structure and outline your goals and objectives. It’ll also help you understand the financial aspects of your business, including personal and business finances.

So imagine you’re explaining your new business to a friend or associate, they’re going to have lots of questions like the following.

Firstly, what does your business idea look like? Why are you launching your business, is it a passion project or have you spotted an under-served market? Have you carried out comprehensive research into your customers and competitors? What will your objectives be, and how do you hope to meet them? What timeframes or deadlines will you work towards?

This is where a business plan will come in. It’ll help you answer these types of questions by helping you:

Pinpoint your business idea.
Spot potential hiccups.
Align your goals.
Measure your progress.

And we can’t forget about the finances. Forecast your profit levels and keep them realistic to help you understand upfront costs and profitability. Having information on your current or predicted outgoings, and any financial history, will help with your credibility.

If you need funding to get your business up and running, you’ll need a business plan as part of this process. It’ll also help you understand how realistic starting your own business is at this current moment. To effectively manage your business finances, incorporating accounting software can be a game-changer. It enables you to track your income and expenditure, generate invoices, run reports, and calculate your tax liabilities with ease.

So, if you’re pulling the structure of your business plan together then it should be complete when you have your basic concept, business goals, USPs and how you’re going to get there. This would also be the time to add in a brief marketing plan.

By setting this all down in writing, you’ll have a clear focus and strategy to get you on the road to owning and running your own business. However, make sure you continually review your business plan on a regular basis, as it will change!

Forming and Registering Your Small Business

So you have decided now is the time to actually do this! You’re ready to embrace the creative freedom, business autonomy, job satisfaction and financial gains. But, what are the next steps?

You’ll need to set up your company formally, by registering with Companies House. Put simply, Companies House is the UK registrar of companies. Most businesses register as a limited company or partnership. In doing this, you’ll receive your VAT number and company number if your company and income makes you liable for VAT.

You’ll need to register an online account with gov.uk and complete your registration using your Government Gateway details, as well as information like your trading name and contact details. You need to register so that HMRC knows how much you’re earning and can calculate your tax. The best way to register a limited company is online for just £12.00. It’s £40.00 to register a limited partnership but some third parties may do it cheaper.

If you’re setting up as a sole trader you don’t need to register a company. You can still give your business a trading name but you’ll need to follow certain rules on naming and running as a sole trader. You need to register for self-assessment on the gov.uk site. This essentially lets them know you’re becoming self-employed.

There’s also the ever important name for your business! Do you want to use your own name or something a bit different? You also need to make sure there aren’t any other businesses with your chosen name. Make sure you’re happy with your name before registering with Companies House as there’s a fee to change it.

Once you’ve registered, there will be a number of obligations and responsibilities such as completing your self-assessment tax return every year.

You’ll need to keep accurate records of sales and outgoings connected to your business. This will make things a bit easier when it comes to completing your tax return by 31 January every year.

Securing Small Business Loans for Your Small Business

Securing financing is often a challenge for small business owners. If you need funding to get your business off the ground, there are several options available, such as small business loans. It's important to research and explore different financing options to find the best fit for your business.

Additionally, having a business bank account is essential for managing your finances and separating your personal and business expenses. Look for a bank that offers services tailored to small businesses and provides the necessary tools and support.

The average UK start-up spends £22,756 in their first year up and running.1 So knowing how you’re going to get your business off the ground is important. Not every start-up will require a large outlay at first, but if you do need funding there are several options open to you. From council grants for small businesses to enterprise investment schemes. It’s also worth looking into tax breaks that might be open to you, such as the Employment Allowance.

Breakdown the costs you need to be aware of:

Costs to get your business trading ready.
Fixed assets needed prior to trading.
Daily, weekly, and monthly outgoings.
Expected income.
Pricing and costs to customers.

When it comes to banking, look around and see which is the best bank for a small business. Don’t be afraid to look at the challenger banks out there. Your chosen bank will provide you with the necessary tools as needed. This can include as card readers for making payments or chip and pin devices for taking payments etc. Your chosen bank can also advise you on lending options, should you require them. A good accountant may also be a worthwhile investment and could save you a lot of time.

Business Stock and Premises

So you’ve got your business plan ready, trading name is registered and your finances are in order. What’s next?

Have you considered where you’ll work from and where you’ll store your stock?

This could be your largest outlay, depending on your profession. You need to ensure your premises are large enough to cover operations and growth ‒ and in the right location to suit your audience as well as your needs. You may also need to look into licences and permits. If you’re looking to use a residential address as your business address to save on costs, then look into steps to ensure your privacy as this address will be publicly listed.

Shared and flexi workspaces are now in their thousands around the UK. Their main benefit is they provide a community for start-ups and are often in city-centre locations. They offer competitive small business rates and flexible contract arrangements.

It’s also worth noting that whether you have premises or not, you’ll still need the right business insurance in place. As well as small business insurance, you may need to look at policies for general liability, cybersecurity, public liability and employers liability.

Building an Online Presence for Your Business

In today’s digital age, having an online presence is crucial for any business, especially for online businesses. Considering starting an 'online business' is an essential step in leveraging the digital landscape. It offers opportunities in various sectors such as copywriting, online tutoring, blogging, and running an online shop. Setting up social media accounts and a website can help you reach a wider audience and attract customers. It’s important to create a cohesive brand image across all your online platforms to establish credibility and attract customers. Read our tips on How to get found on Google.

1 How Much Does it Cost to Start a Business? | Capital on Tap