If you have a strong desire to start your own business, you will be willing to work hard and to invest time and money into turning your dream into a successful commercial reality. It will be challenging, but to help you get started, we have compiled a list of tips to ensure that your fledgling business has every chance of success.
1. Plan, Plan, Plan!
First things first and before you do anything else, make sure you have a clear objective. What will your company do and what do you want to achieve? Do you want to hire anyone? Be sure to write down where you see yourself and your company in one, two- and three-years’ time.
It’s better to plan to succeed than to fail to plan. Even if you don’t end up sticking to all your plans, set yourself targets, break down your expectations into monthly jobs and work up from there. Your hard work will start to amount, and you’ll realise it is incredible what you can do in a small amount of time!
2. Decide on a Legal Structure
One of the first things you’ll need to do is decide what type of business you are starting. There are three main types: sole trader, limited company, or partnership. If you’re confused with which one is which, check out this article. The type of business you decide to set up will dictate the legal structure, as well as who holds financial liability, whether you have shareholders and how the company is going to be run. HMRC has a concise and clear explanation of all three, so you’ll easily be able to decide what will work best for you.
The tax implications will also be different, depending on what type of business you decide fits you the best. It may be that you start off as a sole trader and grow into a limited company after a few years. Additionally, while we’re focusing on the legal stuff, be sure to check whether your business needs licences to trade and if you require business insurance, it’s best to dot the Is and cross the Ts straight away.
3. Choose a Name – this doesn’t have to be boring!
Choosing a name for your new business is fun but you also need to stick to the rules. It goes without saying that you can’t use a name which other businesses have already adopted or reserved, and the rules for choosing a name do differ depending on the legal structure of your business too. You can check which names are already taken by using the name checker on Companies House. Also, if your business is a limited company, the name will need to include ‘Ltd’ and if your business is a limited liability partnership, it will need to include ‘LLP’ instead.
4. Make it Official
Once you’ve decided on the name and the structure of the company, and you’re confident and comfortable in your business strategy, it’s time to register your business officially! This includes registering your company with Companies House, opening a bank account, and registering with HMRC as well. You need to sign up to both HMRC and Companies House within three months of trading but get organised and do it sooner rather than later – it’s better to start off on the right foot.
5. The All-Important Deadlines
Make a clear record of your tax, accounts, and Companies House deadlines. These come around quicker than you think and can be confusing, so get your head around them at the start and chart them in your planner as soon as possible. For example, if you’re a partner in a business or a sole trader, you’ll need to submit your personal self-assessment tax return by 31st January each year to HMRC so don’t leave it until the 30th to get organised.
6. Do your Market Research!
Whatever service or product you are selling – KNOW YOUR MARKET! Be sure to do extensive research into your competitors, how much they are charging, what systems they use, where they are based and what their customers are like. This will help you set yourself apart from the competition. A thorough competitor analysis will help you price your products and services appropriately, whilst checking out what your competitors are doing and how they are doing it.
7. Operations and Logistics
Make sure you fully understand how you’re going to bring your products or services to fruition. Who are your suppliers? How are you going to sell your products or services? What materials will you need and where will you get these from? Plan the lifecycle of the product or service fully to understand what it will take to bring your goods to the market and how much this will cost, it is better to over budget than underestimate your start-up costs! It’s okay to start small and simple and build this up over time. Make time to build up relationships with your suppliers or retailers, having an efficient and reliable network surrounding you will prove useful in the long term.
8. Financial Strategy
This might seem overwhelming at first, but once you get stuck in, it’ll start making sense. You need to understand cashflow and profit forecast to make sure you know when you’re making money and when you’re losing it! Break up your financial plan into monthly expectations, chart your outgoings and costs against your planned incomings, and always have an emergency pot of money to fall back on just in case you hit a road bump. It can be useful to instruct an accountant to help you go through this, so you have a thorough understanding of how your business plan and financial strategy will work together, and more importantly, what to expect money-wise and what you’ll potentially bring home in the first few months and years.
9. Develop a Regular Bookkeeping System
This is where you should keep your records ship shape. Every expense, outgoing and income should be recorded, every invoice documented, and every credit and debit on your accounts, should be accounted for. This will allow you to keep on top of your profit forecast and cashflow too, as well as if you need to prepare any annual accounts. This should be done on a daily basis, so if you get in a good habit at the start, it’ll help you later down the line. It is always important to track your financial transactions, however small. Again, you can employ a reputable accountancy firm who can help with this and make sure you’re recording the right way, so you don’t waste any time. Whether you just need help at the very beginning or you make this a regular practice, it’s worth asking for help if you need it.
10. Tax can be Taxing, so get ahead…
Make sure you swot up on all the rules and deadlines, particularly tax deadlines. You can’t escape paying tax and nor should you try too, so make sure you’re up-to-date and in the know about what to pay and when. Preparing in advance means less panic and less mistakes (some of which are fineable) at the last minute. HMRC are in the process of Making Tax Digital (MTD) which should make it easier for you to submit and file your tax returns with HMRC, with hopefully less room for error too! Once you get into the habit of budgeting for tax and planning for your payments on account, it will seem a lot less onerous. There are some handy tax guides which walk you through some common queries if you’re stuck. If you decide to use accountants, they should handle this all for you, so you don’t have to worry. If not, HMRC clearly walks you through what’s expected of you and when your deadlines will be, so you don’t miss a date!
11. Accounting Musts
Make sure you keep on top of your accounting; this is another non-negotiable! Whether you’re starting up a business, running a limited company or just doing your own personal accounts. Amongst other things, don’t forget to audit your cash flow, manage any debt or loans, plan budgets, complete year-end financial reporting, get the payroll sent out on time, chase down payments owed and ensure continued work is put into your business strategy and plan. This can feel like quite a lot to manage and employing an accountancy firm to manage this for you can help considerably.
12. Business Investment and Loans
This sounds like a scary prospect, and it is worth being wary of getting into debt or taking out loans. However, sometimes this can be handy at the time and feasible to pay back in the future when you’re making more profit, so it is worth looking into your options and seeing what is available to you. Research and Development (R&D) tax credits are a worthwhile tax relief opportunity for businesses who can show they are investing in innovative processes. There are also other grants and monetary support given to start up businesses, so you should always check if you’re eligible, look into how you can apply and do your due diligence.
13. Software and Technology
Get the right software and technology to guide you through these steps and help keep track of your business, its profit, invoices, and expenses, as well as ensuring your accounts and bookkeeping are presentable and acceptable for when HMRC come calling! Some accounting software we’d recommend is Xero and QuickBooks. You can try some of these for free to see if it works for you or not. Also, make sure you’re working with reliable technology, so you avoid the stress of computer breakdowns or bad cyber security. You can find software that will protect you and run regular checks to keep yours and your customers’ information safe and sound. It’s worth investing in this sooner rather than later and making sure you’ve understood the GDPR rules when handling customer data too.
14. Talk to the Experts
Never forget to keep learning, keep doing your research and keep attending those networking events, webinars or replying to those tweets. You can always learn something from other people, especially the experts who have navigated the same waters as you and probably learnt some valuable lessons along the way. Keep your eyes and ears open and don’t get too complacent – you might be making profit – but there are always ways to improve, learn and increase your offerings.
15. How are you going to pay yourself?
Are you going to pay yourself a salary or award yourself a dividend when you’ve had a particularly good month? These are two very different things with different tax implications and National Insurance Contributions, so this could affect your benefits received, like your pension. Be clear with yourself on what you expect your salary to be or how much in dividends you’re going to take from the business. There are different rules on what you need to do if you’re withdrawing dividends, so make sure you’re in the know. For example, if you are going to withdraw dividends from a limited company, you must hold a directors meeting to declare the withdrawal and record the meeting as well. It may seem pointless, but this is something HMRC will definitely check for.
16. VAT Schemes
Make sure you understand the different VAT schemes, and which one is right for your business. These come in the form of Standard VAT, VAT cash accounting and the flat rate scheme. VAT can be tricky and complex; this is where a qualified accountant can really help. Businesses with a turnover of £85,000 or higher must have registered with the UK VAT scheme with HMRC so essentially, you’ll be collecting VAT on behalf of HMRC ready to declare it. HMRC will probably contact you about your VAT so make sure you’re up-to-date and in the know. HMRC publishes and regularly updates their VAT guide which contains all the detail you’ll need.
17. Hiring an Accountant and Bookkeeper
Do you need to hire a bookkeeper and accountant for your business? Ultimately, it’s up to you, you may find you can keep up to date with your accounting and bookkeeping, and you’re beating those deadlines, and that’s great! However, most of us find these regular but unavoidable jobs complicated, confusing and time consuming, not to mention having to get your head around the HMRC deadlines and Companies House requirements. Hiring an accountant and/or someone to help you with your bookkeeping will ensure all your accounts are correct, up-to-date and all your tax returns submitted on time. Hiring a fully qualified accountant will get rid of the worry and stress, and they’ll be able to update you on your financial progress, so you’re in control but not spending too much time stressing over the small stuff.
18. Training
You should always be learning and training yourself to improve, whether it is sitting in on webinars, taking courses, qualifications or just reaching out to other people in your local areas to network, introduce yourself and put down roots – however great your company is and however much profit it is making – always look to improve and swot up on the latest industry trends and changes.
19. Sign up! Sign up! Sign up!
Sign up to everything you can, the more subscriptions you can find for free, the better. This is everything from updates from HMRC and Companies House, to industry-related news, updates and changes, and your competitor’s news and bulletins. Try and absorb as much information as possible, you want to have a good understanding of what’s going on around you and in your market. Stay in the know! Seeing your top competitors’ newsletters in your inbox will remind you to keep a check of what they are doing and will provide a good marker to compare your progress with that of others.
20. Personal Touch
Finally, don’t forget this is your business, so go at your own pace and don’t be afraid to put your own personal touch on how you do things and what you do, different schedules and working patterns suit different people – there’s no wrong answer. If you meet your deadlines and manage your own expectations, you’re good to go! Good Luck!
If there is anything you’re not sure about, do not hesitate to get in touch with us at Ridgefield Consulting and we can help you navigate through the more confusing aspects of starting up your own business.