If you have a bright idea and you think that you have spotted a gap in the market, testing, preparing and assessing all the risks involved and the potential opportunities will give your business the best chance of survival.
Our video highlights a few things that you should consider on your journey to setting up your own business.
Testing your Idea
The first thing that you should do before even thinking about launching your product is testing your idea. This can save you a lot of money and time if your plan doesn’t work out as planned.
To enable you to be able to gauge the interest of your product, or service, and see how much customers may be willing to pay for it, conducting market research will give you a clearer indication about this.
Living in the increasing digital age means that you’re able to conduct the majority of your market research online, saving you money and time. The internet enables you to look at the websites of potential rivals, trade groups and industry publications for useful statistics all for free. Doing this is also an ideal way of identifying your ideal customers and think about their needs and habits.
Setting up a business structure
There are around 6 million private sector businesses operating within the UK, with sole traders accounting for 60% of those.
Opting to become a sole trader means that you are entitled to keep all of your businesses profits but also mean that you carry any losses made.
You must pay income tax and national insurance tax on any profits that you make by completing a self-assessment tax return each year.
Partnerships and limited companies define the liability of the partner’s debts. Profits are generally shared between partners who are then responsible for paying the tax on them.
Being in a partnership will mean that you can be personally responsible both for the partnerships debts and managing the business. The partners will also be taxed just the same as the sole traders, through a annual self-assessment tax return.
Operating as a limited company keeps the businesses finances and your personal finances separate, meaning that your personal assets are protected if the business ever get in any financial trouble.
Being a limited company director comes with a few more responsibilities as you have to register the business with Companies House, submit annual confirmation statements to Companies House and complete tax returns each year. However, you will not be personally taxed on the profits that you don’t extract from the company.
With all the of the business structures, once your income exceeds £85,000, then you will have to register your business for VAT.
Writing a business plan
By writing a good business plan it can potentially help you sell your business idea to investors or banks, whilst also enabling you to think strategically through every detail for every eventuality.
Considerations when writing up your business plans can include:
- What your business will sell or supply
- Your business structure
- How you are going to sell your products / services
- The price you are going to sell your products / services at
- Your short-term and long-term targets
- Timelines for meeting them
It’s a good idea to when possible, analyse your competitors’ customers. Think about:
- Who are they?
- Where are they based?
- How much does your product differ and appeal?
- How do you attract these customers?
You should also include financial forecasts as this will set them out clearly for you and help you with potential investors. Things like profit and loss, projected sales, cashflow and any marketing contingency plans.
Naming your business
With millions of businesses already registered, thinking of a company name might not be as easy as you thought as each business name must be unique. You can do a quick check on Companies House for any business names that are already being used.
It is also a good idea to check that there is a suitable web domain available for the business name you have in mind.
If you are wanting to sell your products or goods globally, then you must also check that the name you want to choose for your business does not have another meaning in another country.
You will also need to check that the name is not trademarked, and does not resemble a trademark.
Certain words and phrases are also not allowed to be used in company names, for example those suggesting endorsement by the government. Also, words such as ‘optician’ or ‘architect’ are restricted to use for only the people with the appropriate qualifications.
Managing your business
How you manage your business within the first 100 days of operating will go a long way in determining how successful your venture is going to be. Here are a couple of areas to consider:
- Business insurance – protecting you against potential mistakes, damage to stock and premises, and legal costs.
- Have a medium-term goal and stick to it! This should support your long-term business plan.
- Pay attention to your customer early. Using a social media platform is a beneficial way of doing this.
- Decide how you are going to handle your customer care early on is also vital
- Understanding your businesses cashflows – knowing exactly how much money is coming in and out of the business will help you keep an eye on finances. The easiest way to do this is to keep digital records of everything.
Finally, think about how much tax the business will potentially be paying and make sure that you are going to be taking advantage of any reliefs or benefits that you are eligible for. If in doubt, ask an accountant!
I hope you found this useful. If you would like to know more, please get in touch.