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How to Start a Small Business in the UK
Want to know how to start a small business in the UK? There are over 5 million self-employed people in the UK, earning over £781 every month. Since the 2008 financial crash, the number of businesses has risen fast. Starting a business can seem complicated as there are so many things to consider. You’ve to come up with a business name, business plan, capital and much more.
To help you start your business, we’ve put together this in-depth guide on how to start a business in the UK.
Develop Your Business Idea
Starting a business requires research and careful examination. First, carry out SWOT analysis. This helps you to know your strengths, weaknesses, opportunities, threats and skills. Basically, you get to learn what you can do and what you cannot do. To ensure success, come up with a business idea best suited to your skills.
For example, if you’re skilled in developing apps and websites, you can start a tech company specialising in mobile app and web development. Before starting your business, you should be clear why you want to do it. What motivates you to start the business? Is it money, job security or would you like to solve your customers’ problems? Being clear about what you want to achieve gives you a better chance at succeeding.
The majority of entrepreneurs are usually motivated by all these factors: fame, power, saving the world and wealth. Understanding what drives you to start your business is critical to your success. If your business idea is not aligned with your goals and ambition, you’re likely to fail.
If you start your business solely to make money, it’ll be hard work to achieve success if there are no other factors to motivate you. The reason is it takes time between starting your business and making money from it. The key is to understand yourself and know if you’re well suited to the business idea. Also, it helps to narrow down your business ideas.
Your ultimate business idea should not be completely new. Just make sure it’s different or better than your competition. Remember, do not limit yourself to one business idea. To give yourself the best chance of coming up with the ultimate business idea, create a list.
Also, don’t overthink. If you’re stuck, stop thinking about it. The solution will come to you later.
Research Your Business Idea
Now that you’ve come up with the ultimate business idea, it’s time to find out if there is a market out there. Customers today have a lot of power. At the click of a button, they can research your brand, product and services before making any purchase decisions. Moreover, they are likely to contact your support team or sales team or read online reviews.
With this in mind, it’s crucial to conduct market research. Market research gives you an in-depth understanding of your specific market and who your buyers are. It also helps you learn what influences your customers’ purchase decision.
By understanding your buyer’s pain points, you’re in a better position to craft a product or service that appeals to them. Once you complete your research, the next step is to create a financial forecast.
From your list of business ideas, which idea is viable and which is not? If your ultimate business idea is not profitable, it’s back to the drawing board. From your list, if an idea is not profitable, scrap it. But if the business is profitable, proceed to the next step.
Besides having a financial forecast, have a marketing and sales plan. Your marketing and sales plan should make sense. It should help you understand how to reach your potential clients and grow your market share. These are critical to your success.
Select a Business Name
A business name not only gives your brand identity but a new segment of value for your customers. Customers can identify your products and services offered by your company easily. This is thanks to your business name, which they can remember with ease.
Choosing a business name is a daunting task, but don’t let it deter your progress. The wrong business name can make it hard for you to connect with customers. It can also lead to lots of legal hurdles.
The right business name has a significant impact on your success. It’s helpful in your branding and marketing efforts.
To come up with the right business name, follow these tips…
- Avoid being too vague or general – choosing a generic name is not only dull, but the name is not memorable. Instead, consider a name that’s descriptive enough.
- Avoid hard to spell names – a hard to spell business name will confuse your customers. Always keep it simple. Good examples of great names include Apple, Amazon, Tesla and Netflix.
- Never copy your competitors – avoid choosing business names similar to your competitors. Not only is it unoriginal, but it’s not good for your brand image.
- Don’t pick too narrow of a name – do not choose a business name that will limit your product, services or future expansion. For example, don’t use a specific product name or city.
- Be creative – do not be afraid to select a business name that’s unique or personal to you.
- Avoid using your name – unless you’re an established brand, avoid using your own name. This is because your name does not communicate anything about your brand.
- Follow the law – there are certain expressions or words that the law prohibits to use without permission.
If you find it hard to come up with a unique business, use online business name generators. Don’t forget to check the availability of the business. Use the Intellectual Property Office trademark checker.
If the name you want to use is available, buy a domain name for your website or blog. Next, create a logo for your business.
Write a Winning Business Plan
A business plan helps you run your company. It guides you through all stages, from starting to managing your company. It also helps you outline and achieve your business goals.
As a management tool, you’ll be referring to it regularly. You’ll also use the document to make strategic decisions, compare your performance and analyse results.
So, what should you include in your business plan? Today, most business plans fall under two categories…
- Lean Start-up
Traditional business plans are common, and they often use a standard structure. Such a business plan requires you to go into detail which means more work upfront and dozens of pages to write. Here are key sections of a traditional business plan.
- Executive summary
- Company description
- Market analysis
- Organisation and management
- Service or product line
- Marketing and sales
- Funding request
- Financial projections
Lean start-up business plans still use a standard structure, but they focus on your plan’s critical elements. As such, it takes less than an hour to complete the one-page business plan. Here are its key sections.
- Key Partnerships
- Key Activities
- Key Resources
- Value Proposition
- Customer Relationships
- Customer Segments
- Cost Structure
- Revenue Streams
There are thousands of business plan templates online. They are easy to follow and will guide you through creating your business plan. For more information, read the GOV.UK webpage on How To Write A Business Plan.
Raise Capital for Your Business
To get your business off the ground, you need capital. There are several ways you can raise capital for your business.
Family and Friends
Raising capital through family and friends is one of the best options. While it’s an excellent option, not every family member or friend qualifies. It’s recommended that you select family members or friends with solid business skills, not just fat wallets.
You need to have a list then narrow it down to friends and family who have faith in your business idea. They should also understand your plan, goals and clear about the risks.
If your business is not operating in an industry that requires lots of start-up funding, use your personal savings to fund it. Some of the businesses you can start with little capital include virtual assistant, online tutoring, pet walking and more.
If you don’t have enough savings in your account to run your business, you could get a 0% low-interest APR business credit card. This offers you a chance to borrow cash without incurring interest.
With the right product and pitch, you can run a successful crowdfunding campaign. Crowdfunding connects you with like-minded people. There are three different types of crowdfunding…
Learn more about Crowdfunding Platforms In the UK.
Other ways to raise capital are…
- Apply for a loan
- Get a government grant
- Bootstrap your business
- Find an angel investor
For more information, read the GOV.UK webpage on Finance and Support for Your Business.
Choose the Best Legal Structure for Your Business
Your business structure depends on your needs. There are three types of business structures…
- Sole trader
- Limited Company
A sole trader is a one-type business where ownership and management are by one person. As the simplest of business structure, it’s easy to adopt and suitable for…
- Web developers
- Virtual assistants
- Bloggers and more
There are more than 3 million registered sole traders in the UK, and the number is growing.
A limited company is a business type that’s a separate entity from its owners. As a separate entity, the business can sue or get sued while the owners are liable for all debts to the extent of the funds they invested in the company. There are two types of limited companies in the UK.
- Private limited company
- Public limited company
A limited liability partnership is a business structure used by many businesses. This includes accountancy firms, dentists and others. This type of business is usually made up of one limited partner and one general partner. The partners have different responsibilities in the business.
When choosing a business structure, look at your needs, goals and business operation. If you plan to operate a one-person business, a sole tradership is ideal for you. But if you plan to grow your small business beyond yourself, choose a private limited company.
If you choose a limited company, you must form a company and register with Companies House and for Corporation Tax.
Register as Self-Employed
If you choose to be a sole trader, you must register with the HMRC as self-employed. The purpose of registering as self-employed is to receive your Unique Taxpayer Reference number. As a sole trader, you pay tax on your business profit.
Here is how to register as self-employed.
Head to the GOV.UK register for Self Assessment webpage. Complete the questions, and HMRC will create your account. You’ll receive a letter with your Unique Taxpayer Reference number within 10 days.
If living abroad, the letter will arrive within 21 days. The Unique Taxpayer Reference number or UTR is a 10 digit number needed for filing tax returns every year.
HMRC will also send another letter containing an activation code. Use the code to activate your self-assessment account. If you do not receive the activation code, get a new one online.
You must register by 5th October in your business second tax year. In the UK, the tax year runs from 6th April to 5th April the following year. File your tax returns before the deadline to avoid fines.
Comply With UK Laws and Regulations
Besides registering as self-employed for tax returns, there are other laws you should comply with in the UK. For example, if starting a food business, register with the local council 28 days before opening. They will send local health officers to your premises for inspection to make sure you are complying with UK food and safety laws.
Another requirement you must comply with is the license. While not every business needs a license to operate, it’s worth checking. In the UK, you’ve a license finder webpage. All you need to do is answer a couple of questions, and you’ll receive your license required to run your business.
Business insurance is also necessary. There are many types of business insurance available. They include theft, professional indemnity, product liability, employer’s liability and more. To learn more about which business insurance you should take, head to the Association of British Insurers site.
Invest In Accounting Software
Many businesses fail within the first year for several reasons, one of them being lack of record keeping. When you fail to keep financial records, you cannot tell whether your business has sufficient or insufficient funds. If you want to succeed, invest in accounting software.
Bookkeeping is the foundation of informed decision making and growth. It helps you answer questions such as:
- How much tax do you owe the HMRC?
- Which products or services are profitable?
- How much do you owe creditors and suppliers?
- How much should you pay yourself as a salary?
There are several factors you should consider when choosing an accounting software.
Cloud-based accounting software is the norm. It offers easy access to your financial data, especially to your bookkeeper or accountant. When choosing a cloud-based system, make sure it’s secure.
Your business will grow, and so, you need a system that grows with it. Business growth increases the volume of transactions. It’s a good idea to choose a multi-user accounting system. Check what upgrades you need to cope with future expansion.
Bank compatibility allows you to download transactions from your bank. It also helps you complete your bank reconciliations and automate them saving a lot of time.
Easy to Use
The accounting system should be easy to use. It should have a user-friendly interface making it easy for users to navigate or search. Before buying the accounting software, try out the demo. You should also read customer reviews.
Create a Business Website
Over 80% of people research a company online before they make a purchase or visit the company. Having an online presence is crucial in today’s business world. It helps your customers find information about your brand, products and services.
If selling online, you can have a shopping cart on your website, making it easy for your customers to buy your products. As such, you never have to miss a sale. A good website is not enough to convert users into engaged customers. What you need is a great website.
Qualities of a great website are…
- Functional and well designed
- Responsive and mobile-friendly
- Easy to use
- Optimised for search and social media
- Accessible contact and location information
- Clear call to actions
- Dedicated web hosting
When it comes to performance and speed, your website page load speed should be fast. If your web pages take more than 2 seconds to load, they are slow. To ensure all the qualities above are on your website, hire a professional web developer.
If you’re a skilled web developer, you can build the site yourself. It’s a lot cheaper and easier. Alternatively, build the site using a free website builder or eCommerce platforms such as:
Don’t forget to incorporate social media buttons. This allows your visitors to share your content with their followers. It also boosts brand awareness on social media platforms such as Instagram, Facebook, LinkedIn and Twitter.
Promote Your Brand and Start Selling
Now that you’ve created your products and services, it’s time to find customers and start selling. One of the most popular ways to promote your brand, products and services is social media marketing.
Social media is a reliable marketing tool because it helps to connect with your customers. Since most of your customers are on social media, marketing will help you generate quality content and links for your website.
To keep engaging your followers, post relevant content regularly and reply to their comments. There are online tools that can help you automate as much of your social media strategy as you can. The top five are:
Another way of promoting your business is email marketing. As an effective digital marketing strategy, email marketing allows you to keep in contact with your customers. To get started, create an email list.
The best way to do so is through a landing page on your website. Every time people sign up, you can reward them with a free eBook or send a newsletter with news like product launches and events.
Next, choose an email marketing service provider such as Mailchimp, ConvertKit or Constant Contact. These providers not only help you manage your email list, but they automate your email marketing strategies saving your time.
Besides email marketing, you’ve video marketing. Businesses of all sizes leverage video marketing. Create unique videos that appeal to your target audience and post it on TikTok, YouTube, and other social media channels. This will help you drive traffic to your website/online store and make your brand stand out. You can also add videos to your blog posts.
If you want to connect with customers across Google, get your business on Google My Business. This is a free business listing tool offered by Google. It helps you manage your online presence, including Google Maps and Search.
When you list your business on Google My Business, people can find your business with ease by using keywords. For example, if you own a flower shop in London, people can search using the following keywords ‘flower shop London’ or ‘flower shop near me’.
One of the best things you can do for your business is finding an industry-relevant mentor. Your mentor will provide guidance and advice since he is knowledgeable in your industry.
You should also build a strong support network. They will support you and keep you going through the ups and downs of running a business. Whether it’s family, friends or colleagues, a strong support network is essential.