Things to consider when starting a new business
So you've had a great idea for a business for a while now, and you're convinced that it would be well-placed to rake in a profit. You've done your market research and the opportunity is definitely there to be had. All you need to do now is put the wheels in motion and reach out and seize it. But how…? Jack Moore of chartered accountants Page Kirk offers some tips and advice.
So what's the first step? And what are the steps after that? And what haven't you considered which might help give you a better leap off the starting blocks?
The old adage 'you don't know what you don't know' is never more fitting than your first outing into launching a business from scratch. At Page Kirk, we have helped many business owners through their seedling stages and can be an invaluable source of advice, guidance and reassurance for anybody entering the world of business for the first time.
Business structure
As a start-up, you will find yourself choosing between two options for the structure of your business - operating as a sole-trader, or incorporation and operating through a Limited Company. Both options are less onerous than you may think.
Starting a business as a sole trader does have fewer hoops for you to jump through, so may be a better option if you are starting a side business and wish to get going in the simplest way possible. After all, if trading through a Limited Company does prove to be the better option for your business, you can easily address this down the line.
Starting a business as a sole trader is relatively easy – you can begin trading straight away. Just let HMRC know that you have started a business before 5th October following the end of the first tax year (5th April) in which you operated. You'll be taxed on all of your profits from the tax year in which they are earned, which may not be particularly tax-efficient if you are a higher-rate taxpayer from your main employment.
Forming a Limited Company is also much simpler than you may think. You will, however, need to consider the following key points: the company needs to be registered at Companies House; you'll need to decide on the company name; choose a registered address; and decide upon its share structure and who the directors and shareholders will be.
Bear in mind that all of this information will be publicly available, so if you wish to keep information such as your home address off the public record, Page Kirk can offer a registered address service, as well as handle the entire incorporation process for you. Forming a Limited Company and becoming a director of it comes with certain statutory requirements – drawing up annual accounts and filing them at Companies House, filing the company's annual confirmation statement and maintaining the company's register of people with significant control.
If you do form a Limited Company, you'll need to let HMRC know that the company will be required to submit a corporation tax return. The company will pay corporation tax on its profits earned during the accounting year, and you'll need to decide the best way for you to extract the profits from the company. Again, Page Kirk specialise in tax planning for small, owner-managed businesses and can discuss the most tax-efficient options available to you.
Business bank account and taking payments
First things first. You'll want to nail down exactly where customers will send you their money. This is 'Business 101' – you need to make it as easy as possible to get their cash into your pocket.
You will want to avoid using your personal bank account to take and make business payments. This creates an admin nightmare when it comes to preparing your annual accounts, either as a sole trader or a Limited Company.
Nowadays, you can set up a business bank account in minutes with online banks such as Starling Bank. No need to wait a week or two for a high-street bank to approve your business and set up an account for you. These online 'challenger' banks also typically have no monthly fees, either. And the main ones offer just as much security over your money as they are often protected by the FSCS in the same way as the high-street banks. You'll get a sort code and account number within 24 hours, and you'll also get a business debit card through your letterbox within a couple of days. Now you can start taking and making business payments right away.
You will also need to consider how your customers will be paying you. Are you a retail business? Will you need to offer card/contactless/Apple Pay payments for your customers? This is also easier than you may think. Point-of-sale providers such as iZettle can set you up with a card reader for as little as £29 + VAT, and charge just a small fee on each transaction. Being able to take seamless non-cash payments will not only make your business look more professional, but also make it easier for your customers to get their money to you, which is key.
Will you be sending email invoices to your customers and expecting them to make bank transfer payments to you? Cloud accounting software such as QuickBooks makes invoicing in this way incredibly easy and offers your customers a one-click payment solution via the same email in which they receive your invoice, saving them the time and hassle of going through their online banking. QuickBooks can also send out payment reminders if the customers haven't paid you yet. You can set these to go out automatically after a set number of days.
Accounting software
This moves us on nicely to choosing your accounting software. Online cloud solutions are a great choice for start-ups and they will almost certainly have all of the features which you need to help run your business. The main contenders here are QuickBooks and Xero. Your business bank account will integrate with them and bring in your transactions automatically (no more manual data-entry!) and your invoicing can be handled effortlessly within the software as well.
You'll need an easy way to keep track of your business expenses and receipts. Gone are the days of lugging boxes full of receipts to your accountant at the end of the year and getting yourself in a mess trying to keep on top of them. Page Kirk can give you free-of-charge use of Receipt Bank, which will allow you to snap a photo of your receipts as you go – simply take a picture when you get it and then throw the original in the bin (or shred it for security reasons, of course). Oh, and it goes without saying that Receipt Bank will integrate with your QuickBooks or Xero, so each receipt can be sent through and matched appropriately within your accounting software.
As your business grows, you will want to keep tabs on how well you are doing. How many sales have you made? What is your gross profit margin? Are you spending too much on a certain expense, and can you rein it in to improve your profits? QuickBooks has fantastic reporting features, which gives you all of this information at your fingertips. If you keep on top of your accounting throughout the year, you'll be able to jump on and see this information in real-time.
Website & social media
In the technology age, an online presence is key to any business. I don't care what industry you are in, there is not a shred of doubt that having visibility online will increase awareness of your business, which will lead to sales. Whether it's an Instagram page, your own business website or simply being listed as a local business for Google reviews, people find your business online if you put it out there.
Setting up and hosting your own website adds immeasurable credibility to your business and is far easier than most people think. Buy your cheap domain (website address) through a provider such as 123-Reg or GoDaddy, and then use a website builder such as Wix.com to build your website using ready-made templates. Click a button to have them host it for you. There you have it – within a day your business has a live, professional-looking website for a fraction of the cost you expected. Want to be able to sell your goods through your website, too? Shopify are fantastic for this.
Business Insurances
One final incredibly important and easy-to-overlook consideration for your new business is making sure that you have the right insurance covers in place. There are a number of insurances which you should consider which may be specific to your business, but here are a few of the main ones to consider.
Are you going to be working at your customers' property, or are they going to be visiting your business premises? You'll need Public Liability Insurance, in case you accidentally damage something of theirs whilst you're working, or in case they injure themselves when they visit you.
Are you going to be employing any staff? You'll need Employer's Liability Insurance in case any of your employees are injured or get ill while working for you.
Are you giving professional advice as part of the service offered to your customers? You'll need Professional Indemnity Insurance to cover your business against a client's loss if any results from your advice or service.
Final word
Starting a new business is a daunting prospect for anybody, and even more so if it is your first time out. Talking it over with a professional who you can trust to give you full and honest advice could give you the push and the confidence you need to actually make it happen. Taking that first step is absolutely key to making the business seem real and the difference between making it happen and looking back and thinking 'what if..?'. Page Kirk want to sit alongside you as your trusted advisor as you embark on this business journey, so please do get in touch for a free consultation to see how we can help. Call 0115 955 5500 or email enquiries@pagekirk.co.uk.