Starting Out

Validate your business concept

Perform market research, look at your competitors, and identify potential customers. This research can be carried out through internet searches, local business forums (e.g. a Chamber of Commerce), local social media groups, your local council, and charities. You can talk to various people or groups, including potential customers, friends / family, potential suppliers, local competitors, and competitors operating in a different region.

• Identify your target market - age, location, income, interests, and buying habits.
• Analyze competitors - their pricing, strengths, weaknesses, opportunities, threats and market share.
• Test your concept through surveys, focus groups, one-on-one research, or starting with a trial of your minimum service or product.
• Calculate market size and your potential customer base.
• Research industry trends and future growth projections.

Consider your USP

Identify, define and improve your Unique Selling Point. Why will customers come to you and what solution are you providing to them? What makes your product or service different and why would customers come to you instead of others? It could be related to quality, pricing, innovation, ease of use, features, reliability, delivery time, ethics, environmental, and many other factors. Focus on two or three factors only.

• Define what makes your business different from competitors.
• Identify specific customer pain points you'll solve.
• Determine your competitive advantages.
• Calculate market size and your potential customer base.
• Test your USP with potential customers.

Consider your personal situation and goals

Taking this step is very rewarding in many ways, but there is no denying there is a risk. Roughly 8% of new businesses do not make it past the first year, and only 40% of new businesses reach the 5-year mark. This is why it is important to realistically evaluate your skills, your personal situation and your goals to put you in the best position to succeed. The process is not designed to make yourself feel bad, it is quite the opposite. You will find how many strengths you do have, and ways to tackle the areas that need improvement. You will also realise that you will have support, whether its from existing personal relationships, new relationships you can make on the way or support services designed to help you and your business to develop and grow.

• Evaluate your skills, knowledge and experience in general and specifically against your business requirements.
• Identify any gaps that need addressing, consider how you could improve on them and make a realistic timeline or plan.
• Consider business courses, workshops, learning "on-the-job", online reasearch, identifying others who have those skills, mentoring, local business networks, and local Council services.
• Assess your financial situation, savings, your credit rating, upcoming costs like holidays, and your risk tolerance.
• Determine how much time you can dedicate to the business, and consider starting it part-time to build it up.
• Assess family support and the impact on personal life.
• Consider if you could partner up with anybody, or join an existing network of providers in the area.
• Identify friends/family, mentors or advisors who can help to guide you.

Name selection

Choosing a name can be both enjoyable and frustrating. Take your time, have fun and keep in mind that your business can grow into the name or you choose to change it at a later date!

• Brainstorm potential names that reflect your brand.
• Check if the name is available, by performing an internet search and on Companies House.
• Check if the website domain name is available.
• Search for existing Trade Marks and other businesses that use the name.
• Test names with your target audience as part of your market research

Decision Factors

Your choice here will depend on a number of factors so there is no right or wrong answer. The good news is that it is possible to change your structure in the future, which you may need to do anyway for various reasons you cannot foresee now. It can be helpful to look at your market to see if you notice any trends in how your competitors, customers and suppliers are set up, but be mindful that it may not the best option for you. It is also helpful to talk to business advisors or accountants who can help to guide you as this is what we are trained to do. Keep in mind that your funding requirements may impact some of these factors, for instance a bank loan for a limited company might also include a personal guarantee from you and your assets. Also note that other factors, such as whether you need to register for VAT, apply regardless of the structure you choose.

• Consider whether you need limited liability to protect your personal assets - e.g. do you own a house or savings you do not want to risk losing? Insurance may be available to cover or reduce these risks.
• Tax efficiency for your situation - what works best for how often you need to take profits and for any potential future sale of your business.
• Administrative burden and legal requirements - what level of burden can you handle or would you accept a higher cost of somebody else handling the burden for you?
• Future growth and investment plans - what are your long term plans and hopes for the business?
• Professional image requirements - do customers expect a certain type of business before they will engage with you?

Sole Trader

Simplest business structure to set up and maintain. We still highly recommend you obtain a separate business bank account to help keep personal and business expenses separate. It is often used when starting out in business, when there is only ever going to one person running the business, or when only contractors will be used and not employees. It is the most common form of structure in the UK with roughly 3.2 million.

• You are self-employed and run your own business.
• You keep all your profits after tax.
• You are taxed at the income tax rates similar to employment.
• Simple tax arrangements through Self Assessment.
• Liability - you are personally responsible for business debts, and any assets you have can be used.
• Minimal paperwork, administration and set up time.

Limited Company

Legally separate from the people who own it, is run by one or more directors but comes with more responsibility and administrative steps to undertake. It is often used where the owner has personal assets, and when a business has expanded to need employees. There are roughly 2 million limited companies in the UK.

• Business is a separate legal entity, which its Directors decide how to run.
• Profits remain in the company until you decide how to extract them - through dividends, payroll or loans
• The company is taxed on its profits at 19% to 25% (depending on size of profits).
• You are taxed on any money taken out depending on the method, but can choose the most advantageous position.
• Liability - your personal finances are protected from business debts.
• More complex tax and reporting requirements.
• Has more of a professional image for larger contracts.
• Can sell shares to raise investment.

Partnership

Similar to Sole Trader but for groups of two or more people.

• Partners share responsibility for the business.
• Partners share all profits and liabilities.
• You are taxed at the income tax rate on the portion of your profits.
• The Partnership needs to file a return which calculates the taxable profits or losses for each Partner.
• Simple personal tax arrangements through your Self Assessment.
• The Partnership itself does not pay tax.
• Liability - every Partner is personally responsible for business debts, and any assets you have can be used. The debt is shared equally but if your partner does not have enough assets to cover a debt, you will have to make up the shortfall
• A Partnership Agreement should be entered into, to define the business activities, profit sharing, investment needed, and any other factors to make sure the partnership runs well
• Minimal paperwork, administration and set up time.

Limited Liability Partnership

Cross between a Partnership and a Limited Company, for groups of two or more people who want a partnership but with limited liability. It is often used by professionalals such as architects, accountants and lawyers.

• Partners share responsibility for the business.
• Partners share all profits and liabilities.
• You are taxed at the income tax rate on the portion of your profits.
• The Partnership needs to file a return which calculates the taxable profits or losses for each Partner.
• Simple personal tax arrangements through your Self Assessment.
• The Partnership itself does not pay tax.
• Liability - your personal finances are protected from the business debts of other partners
• A Partnership Agreement should be entered into, to define the business activities, profit sharing, investment needed, and any other factors to make sure the partnership runs well
• More complex tax and reporting requirements.

Write a Business plan

A Business Plan is a living, breathing document that forms the ethos of your business and which you will change many times, and may never reach a "final" version. It should work for you instead of being a chore. You do not need a perfect looking and completely filled document to start your business, and in fact, you should keep revising and adapting it regularly over the course of your business career, often at the start and less often when established. However, if you need funding from investors or a bank, they will expect are current version that makes sense. Whilst AI can help you write the details and give you guidance, it is important to think about each factor yourself and tailor it to your business needs.

There are many templates online you can easily find. We recommend the King's Trust Business Plan Pack found here: https://www.kingstrust.org.uk/how-we-can-help/tools-resources/business-tools/business-plans

• Executive summary - overview of your business concept and plan. Should be completed last!
• Owner's Background - all about you.
• Products / services - detailed descriptions and pricing.
• Market analysis - detailed research findings.
• Marketing and sales strategy - how will you reach your customers?
• Operations and logistics plan - how will you deliver to your customers?
• Financial projections - 3-5 year forecasts (see below).
• Back-up plan - what is your plan if it does not work?

Develop Financial Projections

Trying to work out what you will earn and spend, over time, to help make sure you do make a profit and can set the price of your produce or services at the right level, is what makes up financial projections. It can be as simple or as complicated as you would like, from just making sure you sell your products at a high enough price to cover your costs, to a full model showing all aspects of income and expenditure. To start with, list all your current known costs, list all of the costs you expect to incur, and add some contingency costs to cope with fluctuations. Do this for each week or month for the next twelve months, add estimates of the costs and you will have a financial projection.

There are many templates online you can easily find. We recommend the King's Trust Financials Spreadsheet found here: https://www.kingstrust.org.uk/how-we-can-help/tools-resources/business-tools/business-plans

• Personal budget - work out your living expenses, including accomodation, utilities, food, travel and other essentials, using your bank statements from the last 3 months. This will show the income you need to survive
• Business costs and pricing - work out all the costs related to your product or services, reflecting information you have decided on in your business plan. This will help set a price to charge.
• Forecasts of sales and costs - estimate your sales and costs for the next 12 months. Be realistic!
• Cashflow forecast - project your cash inflows and outflows throughout the year. Think of it of your estimated bank balance at any one time. This will show periods where you might not have enough cash to continue, so you can address them.
• Actuals - once you start trading, keep a close on on actual costs compared to your forecast. This will help warn you in advance if you might run out of cash.

Under Construction

We are still working on this guide!