5 things to consider before starting a small business

June 27 marks Micro-, Small and Medium-sized Enterprises Day!

According to a 2021 report by the International Council for Small Business (ICSB), small and medium-sized enterprises (SMEs) make up 90% of businesses worldwide. In 2021, in the UK alone there were around 5.6 million SMEs, making up 99.9% of the UK’s business population. Read this blog to find out more about SEMs.

What are micro-, small and medium-sized enterprises (MSMEs)?

There is no set definition of what MSMEs are and different parts of the Government use different definitions and terminologies. Generally speaking, SMEs are businesses that employ less than 250 employees and have a turnover of balance sheet total below a certain threshold. A business will be classified as:

  • medium-sized if it employees between 50 and 250 people and turnover of less than or equals to €50 million or a balance sheet total of less than or equals to €43 million
  • a small business if it employs between 10 and 49 employees and has a turnover or balance sheet total of less than or equal to €10 million
  • a micro-business if it employs between 0 and 9 employees and has a turnover or balance sheet total of less than or equal to €2 million 

Why should I start a small business?

While starting and then running a business can be difficult, it can also be very rewarding. Not only does running your own business provide you with an opportunity to put your business ideas into practice, but also to reap the fruits of your labour. You get to work in a career and/or field that you’re interested in and passionate about and work toward turning your passion into a profitable business.

What should I consider before starting my small business?

1. Your idea

All good businesses start with a good and innovative idea. Successful businesses aren’t simply about clever marketing and shiny technology; they offer a solution to an existing issue or introduce a new product. In other words, successful businesses fill a gap in the market.

Before starting your business, consider whether your idea fills such a gap in the market. Bear in mind that your idea doesn’t have to be entirely original, it can be an improvement of what already exists.

2. Funding

All businesses need funding and capital to operate. Before starting your business, you should consider how you’ll fund your business.

There are many types of funding available for new businesses, including:

  • loans (from banks, community development finance institutions, family members or friends, or even other businesses)
  • investment finance (by selling shares to investors)
  • crowdfunding (through platforms like Kickstarter and Indiegogo)
  • grants (including Government grants and charity grants)
  • invoice financing (a short-term finance option where a third party financier buys your unpaid invoices for a fee)

To help you secure funding, you should create a Business plan, helping investors understand your aims and how you plan to achieve them.

For more information, read Funding your business and Startup funding. You can also use the Government’s Business finance support finder to find out if you are eligible for certain grants.

3. The market 

Before starting your business you should take steps to know your target audience and study their consumer behaviour patterns. Specifically, consider the demographic that you’re targeting and what characteristics your target consumers have in common and detail this in the market analysis and strategy section of your business plan.

You should also consider any potential competitors and their products, services and business operations. You should identify their strengths and weaknesses and assess how your business would differentiate itself from others by identifying your unique selling point (USP).

This will help investors get a better picture of the potential of your business and help you demonstrate that you have considered all possible hurdles and how these can be overcome.

4. Marketing 

Marketing is crucial for raising awareness of your business. Having in place an effective marketing strategy catered for your target audience before launching your business. Your marketing strategy should include:

  • a sensible pricing strategy – this is crucial and will often determine your success upon entering the market. Remember that you can always change your prices at a later date
  • various marketing and sales techniques – including advertising in newspapers or magazines, various types of online marketing and traditional direct mail

5. Professional advice

To help you better understand what is required of you as a business owner and reduce any potential risks, you should consider seeking professional advice on the accounting and legal aspects of starting a business. 

Ask a lawyer for legal advice on starting your business. For any accounting advice, consider seeking advice from an ICAEW Chartered Accountant or regulated firm

 

For more information on starting your small business, read our guide on Running a micro-business and Starting a business and do not hesitate to Ask a lawyer if you have any questions.

 

Rebecca Neumann
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