Starting a business in the United Kingdom (UK) is a good idea; more than 5.5 million businesses operate here. For many individuals, owning their own business is a lifelong aspiration, whether going solo in their career, transitioning to a new industry, or beginning a side hustle. To assist you in sidestepping potential pitfalls and increasing your likelihood of success, we’ve compiled a step-by-step checklist covering everything from getting started to thriving and surviving.
Starting a business checklist
So, how do you get off to a flying start and avoid problems? Our handy checklist shows you how to start a business and helps steer you toward success. Here are our seven steps for success:
- Step 1: Conduct market research and analyze your competitors.
- Step 2: Create a professional business plan and decide on the name.
- Step 3: Register UK business with Companies House.
- Step 4: Get financing for your business.
- Step 5: Establishing and maintaining a solid brand and reputation
- Step 6: Build your operational and back-office functions
- Step 7: Grow your business
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If you’re considering starting a business, we can assist. We can provide information on various business types, guide you through the setup process, and inform you about government-funded programs that can provide support.
Step 1: Conduct market research and analyze your competitors
Analyze the market when starting a business
Are you one of those people who have a burning desire to turn their passion into a full-time or side business? Starting a business is a common aspiration, whether becoming a personal fitness instructor, a professional dog trainer, or setting up a retail business selling handmade clothing and crafts.
Maybe you want to be your boss, achieve your desired lifestyle, or switch to a new career. Whatever your reason, it’s crucial to do your homework and determine whether your business idea meets a real customer need or demand. After all, with a market or a mission, your business idea will have a purpose.
You should also consider if the market is likely to grow and develop, whether there is a gap in the market, or if there is room to create a unique selling point (USP) that your competitors need. Moreover, you should consider the location or the potential of reaching out to new customers online. By taking these steps, you can set yourself up for success and make your dream a reality!
Refine your products and service offerings.
Once you have noted your target audience, you can start shaping your product or service offerings and how best to deliver it. Depending on the sector, customers may expect a hybrid experience that allows them to connect with you through various channels.
For instance, if you are a fitness instructor, you may need to offer sessions in a local gym, face-to-face sessions in the client’s home, and create videos and online classes. It’s essential to keep in mind that while price is important, today’s consumers also value products and services that are sustainable, environmentally responsible, and socially responsible.
Focusing on your delivery can help you find ways to increase revenue and decrease costs. For instance, you are a marketing consultant and want to expand your services by offering social media management. In that case, you can utilize your skills to create and sell online guides, showcase your content calendar management, and eventually manage clients’ social media accounts.
Seek professional advice and feedback.
When starting a business, it is advisable to seek the guidance of an expert. Several government-backed support schemes are available for startups through local government and council offices. In addition, some cities have a University business school that collaborates with entrepreneurs to help them launch their businesses.
Collaborating with business professionals and experienced entrepreneurs in your sector can help you avoid common pitfalls and test your ideas, especially if entering a new industry.
Step 2: Create a business plan and decide on the name when starting a business
Your business plan when starting a business
Crafting a business plan when starting a business can aid you in defining and refining your business idea, encompassing your goal and unique selling proposition. It outlines your targets and tactics for enticing customers, vending products and services, estimating revenue and expenses, and nurturing future expansion.
Your objective and USP will form the foundation of your business; hence, it’s crucial to express them clearly. Weighing the practicalities of your business idea will also assist you in identifying and addressing any concerns at an early stage.
Business plan sections
The typical sections to include when writing a business plan:
- Executive Summary
- Company Overview – History of The Business
- Business Model – Your Product or Service
- Research – Understanding Your Marketplace
- Management – The People
- Financial Analysis
- Funding Strategy – The Deal for the Investor or Loan Requirements
- Appendices (i.e., research data, CVs)
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The perfect name
You are analyzing the ‘what,’ ‘who,’ ‘how,’ and ‘why’ of your business concept, which is a helpful method to concoct the perfect name for your enterprise. Your chosen name should exemplify your objective and USP, as it will be the core of your brand identity.
Today’s numerous low-cost and free advertising tools offer logos and various marketing materials to experiment with brand names. Testing and evaluating your name is essential before finalizing it – run it past family and friends. Doing so helps you differentiate yourself from competitors, resonate with your customers, and ensure long-term growth. It is imperative to ask yourself whether your chosen name will endure the test of time and grow with your business.
Step 3: Register UK business with Companies House when starting a business
Registering your company with the UK Companies House is mandatory to operate a business in the UK. The registration process is quick and easy, with online services in just 15 minutes, costing £12 (which you can pay using your debit or credit card). Generally, your company registration is live within 24 hours. To complete the registration process, you must provide at least three pieces of personal information about yourself and your shareholders or guarantors, such as your town of birth, mother’s maiden name, father’s first name, telephone number, national insurance number, and passport number. Once you’ve chosen a company name, it’s essential to decide on the structure of your business, which has significant legal and tax implications. We suggest seeking personalized guidance from an accountant or solicitor regarding the options outlined.
Running your own business and being self-employed means being a sole trader and you are working for yourself. You are entitled to keep the profit your business makes after paying taxes. Still, you are also personally accountable for any losses it incurs. This option is famous for many small business owners, including freelancers and tradespeople, as it is more straightforward than setting up a limited company.
You will register your company with HMRC and file an annual Self Assessment Tax Return. Suppose your turnover exceeds the VAT registration threshold (currently £85,000 – Jan 2024). In that case, you will also need to pay VAT, and you’ll have to investigate National Insurance payments to access benefits.
You and any partners in your business share personal responsibility for any losses incurred when you set up a business partnership. The costs and profits are shared among partners, and each partner will pay tax on their share. A partner can be a ‘legal person,’ such as a limited company, or an actual person.
Setting up a partnership is a simple process that involves registering with HMRC. You must select a business name and a ‘nominated partner’ responsible for submitting the new company’s tax returns and maintaining ongoing business records.
A partnership can be an excellent way to divide the responsibility of starting a new business. Still, it may become more complicated, particularly if you need to close the company or your partner(s) no longer agree or enjoy working together.
As a private limited company formation, you can separate your personal and business finances, eliminating any risk to your wealth or assets. This is because the company’s liabilities, including debts and legal action, are limited to the company itself. Additionally, you may have to pay fewer taxes as limited companies usually pay less corporation tax on profits than sole traders and partnerships.
Being a limited company can enhance your business’s credibility, especially in B2B sectors where you may be tendering and competing for contracts and investors. However, setting up a limited company is more intricate than registering as a sole trader or partnership.
In the UK, there are two types of private limited companies: those limited by shares and those limited by guarantee. Companies limited by shares have a share capital, represented by each share that indicates a percentage of the company. Shareholders receive a percentage of the company shares.
Companies limited by guarantee are generally run as not-for-profits and do not have share capital. They are owned by one or more guarantors who agree to pay a set amount towards any debts if the company becomes insolvent.
If you choose to set up a limited company as an individual, you can be the sole shareholder or guarantor and the company director. Alternatively, you may appoint multiple shareholders/guarantors and directors. Either way, you must register with Companies House and prepare documents agreeing on how to run your company. Moreover, you must maintain company and accounting records and have an official company address.
Limited Liability Partnership (LLP)
If you intend to launch a business with a partner, consider forming a Limited Liability Partnership (LLP). This type of partnership provides a blend of the protection offered by a private limited company and the shared responsibilities of a partnership. In an LLP, members are responsible for paying tax on their share of the profits, like in a regular business partnership. Still, they will not be held personally accountable for any debts that the business may incur.
You will need to complete a few steps to set up an LLP:
- You will have to choose a name for your business.
- You must have a registered address, which will be publicly available. You will also need at least two “designated members” and an LLP agreement outlining how to manage the LLP.
- You will need to register the LLP with Companies House.
If you are planning to establish a limited partnership, be sure to scrutinize the rules. The procedures for starting an ordinary business partnership or a private limited company differ from those for creating an LLP.
Step 4: Get financing for your business.
How much does it cost to start a business in the UK? The cost of starting a business can differ significantly, and there are numerous ways to fund a new venture with a loan, grants, crowdfunding, or investors. The following funding options are some possibilities that could be accessible to you as you embark on your entrepreneurial journey.
Startup grants and loans when starting a business
Small businesses in the UK have access to various funding options when starting a business, such as startup grants and loans. We recommend exploring the available support options and seeing if you can apply for a startup loan. Grants and loans focus on specific goals, such as empowering young entrepreneurs, supporting hiring or digital transition, or promoting innovation and sustainability.
For instance, you may qualify for funding to purchase new laptops if you change from a diesel van to an electric one or work on social projects to support local communities. It is important to note that businesses often must fund a portion of the total funding costs when applying for grants, so read the terms and conditions thoroughly.
Several banks (e.g., Barclays, HSBC, Santander, Virgin Money) and building societies, including the British Business Bank, provide small business loans. Some newer banks (e.g., Revolut, Starling, and Monzo) are worth exploring, especially for overseas travel and not having to pay fees.
You can also compare business bank accounts using Uswitch. Before applying for a loan, it is advisable to use a business loan calculator to determine the amount you’ll have to pay back each month with interest and ensure you can afford the repayments.
Crowdfunding and peer-to-peer lending
In the UK, small businesses have access to various alternative funding and finance options that are becoming more prevalent. One such option is to launch an online crowdfunding campaign, where a large group can invest small amounts of money.
Entrepreneurs can leverage online crowdfunding platforms to showcase or advertise their projects to the general public. While some platforms are generalists and offer diverse types of crowdfunding and projects, others concentrate on specific project types, such as technology, or focus on one crowdfunding type, like equity crowdfunding.
Alternatively, small businesses can borrow money through a peer-to-peer lending platform instead of approaching a bank or building society.
Different crowdfunding platform providers have distinctive fee structures for their services. These fees may include a commission on funds raised, yearly or monthly subscription fees, flat fees, arrangement fees, administration fees, and legal costs. Various crowdfunding sites are available (e.g., Crowdfunder, Kickstarter, and GoFundMe), so investigating the best option for your needs is worthwhile.
While some platforms serve as a landing page connecting entrepreneurs with funders or investors, others act as the central counterparty in the funding arrangement between the two parties.
The VAT treatment of crowdfunding arrangements is subject to variation depending on the specific services provided by the platform provider and the unique characteristics of the platform’s service. It is crucial to consider the individual facts of the crowdfunding arrangement to determine the applicable VAT treatment.
Asset finance when starting a business
Asset financing is a popular option for startups and small businesses in the UK. It enables them to acquire necessary equipment, such as machinery or vehicles, without upfront investment. This financial solution allows businesses to obtain critical assets, replace outdated equipment, or expand operations without affecting cash flow or requiring significant working capital before purchase.
The mechanism uses assets on a company’s balance sheet as collateral to fund the purchase. Asset financing is a flexible financial product. Its different variations are available to fund purchases ranging from machines and manufacturing plants to office and IT equipment.
It is worth comparing the costs and options of various kinds of asset finance that are available.
Suppose you’re interested in obtaining a substantial investment when starting your business. In that case, consider attracting angel investors and venture capitalists to your UK-based small business or startup. These investors can provide valuable expertise and experience to your business. Still, it’s important to note that they may have certain expectations in return, such as a degree of influence in your business by having a board seat or a guaranteed return on their investment with annual profit sharing.
Financial management when starting a business
To ensure long-term business success, you must manage cash flow and your startup’s finances carefully and efficiently. Finding the correct business bank account and building a positive relationship with your bank are crucial steps when starting a business. Additionally, it would help if you considered obtaining small business insurance, a bookkeeper, and setting up a credit card or merchant account for electronic payments to support your procurement strategies (i.e., Amazon Business).
Investing some time into understanding the financial side of your business will be beneficial in many ways, such as increasing revenue, reducing costs, and ensuring compliance with your financial responsibilities as a small business owner. Knowing which business expenses you can write off against taxes is an example of how such knowledge can save money. In addition to consulting with an accountant and participating in training courses, many online business tools, including accounting software, can assist with managing your finances.
Step 5: Establishing and maintaining a solid brand and reputation
Your business’s brand is more than just what it does. It also represents your company’s identity and values to those interested in it, such as customers, investors, suppliers, partners, and employees.
To create an effective brand when starting a business, you must have a clear mission and unique selling proposition (USP). Once you have established this, you can consider your brand’s visual and verbal aspects, such as your tone of voice and visual identity. You can either work with a graphic designer or use free online tools to develop your brand elements, such as your logo.
After you have finalized your logo, brand colors, and fonts, you can start creating marketing materials that showcase your brand, such as your website, case studies, social media content, and email campaigns. Numerous online tools, including drag-and-drop website builders and content writing tools, can assist you if you don’t have the budget to hire a professional.
As a small business owner, you can leverage the trend towards authenticity and meaning by sharing your unique personal story that aligns with your customers’ needs. By doing so, your brand will appear honest, fresh, and relevant, and you will be able to connect with your customers. Remember that people prefer doing business with individuals they know, trust, and like.
Step 6: Build your operational and back-office functions
A consistent and seamless customer experience across various channels is crucial for a prosperous business or when starting a business. The initial step is to map out the customer journey to understand customer engagement and purchase intent in depth. This will assist in planning everything from marketing and communication strategies to product and service delivery procedures.
Moreover, it will help recognize the required underlying elements for online retail businesses, including equipment, technology, and third-party services, such as courier services and supplier agreements. This is also an excellent opportunity to investigate external factors that may influence business operations, including sector-specific, supply chain shortages, and general regulations and laws that you must follow voluntarily or legally. Remember that the rules and laws may differ depending on the countries of operation.
Business tools when you are starting a business
Numerous free and low-cost business tools are available when starting a business, such as project management platforms and customer relationship management (CRM) systems to support business processes. Establishing effective internal processes from the outset will help fulfill brand promises and encourage customers to spread the word about the business. It also helps to increase revenue while reducing expenses.
For example, using a CRM system enables tracking of customer interactions and personalized marketing offers and communications that are more effective. It is critical to ensure that the data in the CRM is up-to-date. Since business data ages quickly, as people change jobs and companies, keeping track of data is vital when targeting businesses.
Creating a great workplace and internal brand based on values will help attract and retain excellent employees and safeguard your business against risks such as fraud and cyber-attacks. Thinking ahead with contingency and continuity planning is essential, which will help you remain agile and protect your business from potential threats.
Step 7: Grow your business
If your business plan requires it, you may have a grand launch to support starting a business or take things more slowly as you grow your business. However, always remember that word-of-mouth marketing is one of the most effective ways to promote your business. Please stay connected with your customers on social media and engage them by sharing relevant and interesting content. This may include posting pictures of your latest products, behind-the-scenes videos, or informative guides that offer a glimpse into what you have to offer.
Focusing on providing a remarkable customer experience will increase your chances of creating a loyal customer base and encouraging repeat business.
Remember to prioritize your health and well-being. Starting a business can be both rewarding and stressful. Taking breaks and recharging is essential to prevent burnout. There is ample support available for small businesses, so don’t hesitate to ask for help.
Are you thinking about starting a business in the UK but not sure where to begin? Let me help!
Are you eager to start a new business venture in the UK but overwhelmed by the complexities? Worry not, my friend! Starting a business can be challenging, but with the right guidance and support, you can transform your brilliant idea into a profitable reality. That’s where we come in! Our team of expert consultants specializes in helping startups and small business owners like you navigate the ins and outs of business creation and growth. We’ve covered you, from selecting the best legal structure to securing funding and insurance. We’ll also work with you to develop a solid business plan and financial model to ensure your long-term success. So why wait? Let’s join forces and turn your entrepreneurial dreams into a thriving reality!
Noirwolf is a management consulting company based in Leeds, UK. We provide consulting and coaching services to startups and small businesses across various industries. Our business consulting programs cater to firms that require business plans for fundraising, want to develop growth strategies, hire the right people, and improve operational performance within their organizations. We also offer startup coaching, financial modeling, and business planning services. Contact us today to schedule a free discovery call.