How to set up your own business
Read our simple step-by-step guide explaining the necessities of starting a business.
If you’ve never started a business before, it might appear intimidating.
Perhaps you feel unable to do it because there are so many steps to take. Put simply, that’s not true. It’s actually relatively easy to start a business. The hard part is making a profit and staying profitable!
The guide below outlines the essential steps needed to start a business in the UK.
Step 1. How to write a business plan
You don’t have to write a business plan unless you’re seeking outside investment, in which case you’d need a document to present to investors.
But regardless of whether you’re looking for outside funding, it’s a very good idea to write a business plan.
The majority of mistakes made when launching a new business could have been foreseen while writing a business plan if the owner had taken more care while doing so.
If you’re not seeking outside funding, you can afford to create a leaner business plan, but every business plan should still include the following elements:
- Company overview. This includes the basic details about the business and the management team. Who are they? What is their role? What is the business name and address? Is it a sole proprietorship, partnership or corporation?
- A mission statement. This is a short explanation of why your business should exist, what you hope to achieve and your vision for the future.
- Your target market. Be as detailed as possible and explain why you have chosen this market.
- Products and services. This is a full list of what you offer, how much it costs to deliver and the price you will sell each product or service for.
- Competitors. Who are they? How are you better than them? What is your business’s unique selling point?
- Marketing plan. Where will you market your business? What is your marketing budget? How much money will you spend per month on each marketing platform?
- Financial plan. How much will it cost to launch your business? What are the estimated monthly running costs? What are your monthly sales forecasts and how much money will that bring in (minimum, target and stretch target)?
Time moves fast in the world of entrepreneurship, so you may want to revisit and alter your business plan at least once every quarter.
Step 2. How to register your business in the UK
Before you register your business, you’ll need to choose your business type.
Here are your main options in a nutshell:
- Sole proprietorship. You and your business are one and the same. You’ll pay income tax and national insurance as an individual, and you can be held personally liable for your business debts or lawsuits.
- Partnership. This is the same as a sole proprietorship, except you’re splitting a percentage of your business income with a partner or multiple partners.
- Private Limited Corporation (PLC). Here, you’ll pay corporation tax, and you’ll pay yourself a wage from your business profits. Your business debts and lawsuits are independent of you, so you can’t be held personally liable if something goes wrong.
Sole traders and those in a partnership only need to register as self-employed with HM Revenue & Customs (HMRC) and fill out a self-assessment each year.
Corporations will have to register and trademark their business name with Companies House. This can cost as little as £12 when you do it online. It costs more by post.
Note: As well as the options above, there is also a Public Limited Company, which is owned by shareholders, but few start-ups begin this way.
Step 3. Set up your space
An online presence is essential in 2020 and beyond.
So, whether you’re an online business or not, you’ll need to buy web hosting, a domain name and set up a website. A presence on social media, Google Maps and other listings websites in your niche is also very important.
If you’re an offline business, you’ll need to find a business premises. You’ll need to provide your business address when you register with Companies House.
Before you launch, make sure to spruce up your online and offline space with company branding with help from a professional graphic designer. First impressions are important, so this isn’t an element of your business you want to skimp on.
If you’re a foreigner, you may need to acquire the appropriate working visa.
Step 4. Open a business bank account
A business bank account basically works like a personal one – the main difference is that it’s dedicated to your business’s finances. You should therefore expect the same features, such as a debit card, the ability to make and receive payments, an overdraft option, a banking app and so on. Compare and open a business bank account here.
Step 5. Invest in small business insurance
Here is a list of small business insurance products you may need.
- Public liability insurance (PLI). This protects businesses against losses suffered by customers or employees injuring themselves due to the activity of your business.
- Professional indemnity insurance (PII). This protects businesses against legal claims for damages if your business negatively affects a customer.
- Employers liability insurance (ELI). This protects businesses against legal claims for damages when an employee suffers a job-related illness or injury.
- Product liability insurance (PLI). This protects businesses from paying for damage to property or personal injury caused by its products.
- Business contents insurance. This protects businesses from covering the cost of lost or stolen contents.
Step 6. How to set your business up to employ people
If your business is hiring employees, you must make sure to take the following steps.
- Register as an employer with HMRC since you’ll need to pay various taxes on your employee’s wages.
- Create a contract, outlining the terms of employment for everyone you hire.
- Set up a payroll system to automate payslips, deduct the right amount of tax from your employees and pay the right amount to HMRC.
- Set up your employees for pension auto-enrolment.
It pays to have a firm knowledge of employment law, so you’re aware of rules surrounding minimum wage, working hours, maternity leave, employee discrimination, hiring and firing regulations, etc.
Step 7. Begin marketing – and hopefully profiting
With a detailed marketing strategy already outlined in your business plan, you should be ready to market as soon as your business launches.
If your marketing is on point, there’s no reason why it shouldn’t start attracting customers immediately.
This is the element of your business plan that is likely to change most often. As many businesses need to constantly tweak their marketing in order to maximise their return on investment.
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