The Unbiased Guide to Starting Your Own Business
First published on 24 of October 2017 • Updated 27 of March 2019
Your first step is having an idea. What can you do well that others will pay for?
Next, find out how much demand there is for your product or service, and how much competition. Many businesses start when a commercial hobby or freelance service escalates to the point where it could become something more.
If you decide your business is viable, you can proceed on your journey. All the steps below are usually essential when setting up a new business, though you won’t necessarily cover them in the order listed here.
Register as self-employed
Even if you’ve filed tax returns before, you must notify HMRC as soon as possible after you become self-employed (i.e. start your business). You can register for self-assessment here.
You will now be established as a sole trader. However, you may benefit from having a different business structure.
Whatever your structure, you should have a separate business bank account, to keep your personal and business finances separate. If your business is a company, this will in any case be a legal requirement.
Which business structure?
What kind of entity will your business be? This is one of the most important decisions, as it affects everything from tax to liability. You may want to consider all the other factors first before making a decision, but have your options in mind from the start. These are:
- Sole trader
- Limited liability partnership (LLP)
- Limited company
- Not-for-profit organisation
The way your business operates will have legal implications as well as financial ones. You should therefore also consult a small business solicitor when choosing a business structure.
Choose a name
Ensure your preferred name is available by searching online and the Companies House website especially. If you are starting a limited company, you must register it at Companies House. Use their WebCHeck service to ensure that your name is not already in use.
Also check the Trade Marks Register to ensure you will not infringe any existing trademarks.
Don’t invest in any branded materials until you are sure you can use your chosen name. When your choice is confirmed, buy the appropriate website domain. You may also want to buy any similar URLs to prevent copycats.
Write a business plan
If you don’t already have a written business plan, now is the time to create one. A business plan is usually essential if you need to raise bank finance or investment.
First, work out your business model. Once you know this, you can set about creating a workable plan based around it. Your business plan is a document that:
- Identifies your business goals
- Outlines your business strategy for achieving these goals
- Presents a realistic action plan to show how this strategy will work in practice
A business plan should also include:
- Your marketing and sales strategy
- Your financials (e.g. cash flow forecasts)
Check out our guide to writing a business plan.
Set up business insurance
Before your business carries out any work, you must have the appropriate business insurance in place.
If you employ others, you must by law have employers’ liability insurance (in case one of your staff is injured or falls ill due to their work). Similarly, if your business uses vehicles then you must have commercial motor insurance.
Depending on the kind of work you do, you may also want to have:
- Public liability insurance
- Professional indemnity insurance
- Commercial property insurance
- Key person insurance
Talk to a financial adviser who specialises in protection about obtaining suitable cover for your business.
Your business must be fully compliant – that is, it must conform to all relevant legislation covering your area of activities. For instance, if the business serves food, it must comply with food safety and hygiene legislation, and if the business handles customer data it must conform to the Data Protection Act.
Your business may also need licences or permits to carry out certain activities. You can find which ones you may need using this licence finder at Gov.uk.
A small business solicitor can help you fulfil all the necessary compliance.
Appoint an accountant
Although in a small business it’s possible to handle the accounts yourself, this is rarely the best use of a boss’s time. Using a qualified accountant also gives you peace of mind that your finances are sound and that the business is paying all the necessary tax.
Your accountant can also advise you on whether to register for VAT. This is compulsory over a certain level of turnover, but it may make financial sense to do so voluntarily. Find out how else an accountant can help you.
Set up your business premises
Decide where your business will be based – at your home, or in commercial premises.
If your business will be based in your home, then you may need to obtain special permissions and/or insurance. Find out more at Gov.uk.
You may be able to benefit from special business rates, tax reliefs and other perks if you set up your business in a particular area, known as an enterprise zone. Find out more about enterprise zones.
Create your brand
Your brand is far more than just your logo and visual style. It’s everything they represent to customers. Think about the qualities you’d like people to associate with you – e.g. reliability, quality or a sense of fun – and then try to build these qualities into all your visual and written materials.
However, use your discretion. Swish branding may be appropriate for, say, a maker of greetings cards – but it may be wasted on a handyman business. Find out more about building your brand.
Set up your communications
You must be able to reach your customers. It must be easy for them to find you. And you need to be able to have a conversation with them if something goes wrong.
So you need a communications strategy. Decide how you will handle things like:
Ensure you have the necessary capacity for each of these – e.g. sufficient time (or staff) to engage with your customers.
Recruit your staff
When should you hire staff? Many bosses would answer, ‘When you have no alternative.’
Taking on permanent staff is a major undertaking, so explore all other options first. Use freelancers, sub-contractors and agency staff initially, until it becomes clear that a permanent role makes more financial sense. A strong business plan will help you answer this question.
As an employer you must:
- Pay at least the minimum wage
- Have employer’s liability insurance
- Enrol all eligible employees in a workplace pension scheme
- Provide statutory minimum paid holiday and sick pay
- Provide paid maternity, paternity and adoption leave
- Attend to staff development
These are just some of your responsibilities towards your employees.
Your accountant can help you with key responsibilities such as setting up your payroll, employer National Insurance contributions and employment contracts.
Find out more about being an employer.
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