Why should I start a business?
Starting a business can be challenging yet incredibly rewarding. It’s an opportunity for you to put your business ideas into practice, reap the fruits of your labour and be independent. You’ll get to be your own boss and work on your own terms. Most importantly, you’ll be pursuing a career in a field that you’re truly passionate about, converting your interest into a profitable business.
What makes a successful business?
There isn’t a distinct recipe for success. However, successful businesses tend to have 5 things in common.
1. An innovative business idea
A successful business isn’t just about shiny technology or clever marketing but, it offers a solution to an issue experienced by those in the industry. It makes an impact by filling in a gap in the market.
Successful entrepreneurs tend to have an in-depth knowledge of the field they are operating in and conduct extensive research on market trends.
Your idea doesn’t have to be entirely original, it can be an improvement of what’s already in the market.
2. Effective budgeting and strong organisational skills
A successful business manages its finances efficiently and avoids unnecessary expenses. Therefore, it’s important for you to plan ahead to determine what’s needed to meet the milestones set and to work smart to maximise return.
Organisational skills are key in ensuring that goals are achieved in accordance to schedule. Moving quickly will keep your business ahead of its competitors.
3. Excellent customer service
The success of the business is largely determined by the market, therefore, it’s essential to keep customers happy. Good customer service will build a loyal customer base and enhance the reputation of your business. As such, it’s important to know your target market and constantly review your customer service practices.
Networking plays a big role in a business’ success. Knowing the right people can open doors to partnerships and investments. Successful entrepreneurs have the ability to persuade investors to take a leap of faith to invest in a new business.
Moreover, forming a network with other entrepreneurs can be beneficial as they can provide you with advice thereby allowing you to make more informed business decisions.
5. Determination and a talented team
Founding a startup is tough and you must be ready to put in the hard work to make your business successful. It may be a good idea to learn about the field and develop the necessary skills and commercial acumen by working in established businesses beforehand.
However, success is not purely based on the founder alone. It’s also crucial to attract and retain talent as your startup develops. One way to boost your business’ attractiveness is by offering employee benefits, competitive salaries and bonuses to recognise employee contributions. A good work environment and culture also helps.
What are the key considerations I should bear in mind before starting a business?
Funding and investments
Every business requires capital to operate. You should think about where you’ll get your funding to start your business. For further information on raising finance, read Financing your business.
To help secure funding, consider creating a comprehensive Business plan. This will help investors understand your aim and how you plan to achieve it. One of the key sections in your business plan is the Executive summary, which outlines the business proposal and acts to draw the investors to read the rest of the plan.
Analyse the market
Know your target audience and study their consumer behaviour patterns. Be specific about your target market - what is the demographic that you’re targeting? What characteristics do your target consumers have in common? This will impact on a multitude of business decisions eg marketing strategy and customer service practices. Detailing this in the Market analysis and strategy section of your Business plan will help investors get a better picture of the potential of your business.
It’s also important to know your competitors and their products, services and business operations. Identify their strengths and weaknesses and assess how your business would differentiate itself from others by identifying your unique selling point.
This is crucial for raising awareness of your business. You should have an effective marketing strategy catered for your target audience before launching your business.
Consider seeking professional advice on the accounting and legal aspects of starting a business. This can help you better understand what is required of you as a business owner and mitigate your risks.
Make your Consultancy agreement with Rocket Lawyer.
What legal considerations do I have to account for when starting a business?
Picking the right business structure is important because this decision will affect:
the level of personal liability you face as a business owner
the amount of tax payable and the tax benefits your business can enjoy
the options available for raising capital and
the amount of paperwork required of your business
The four most common options are:
Most entrepreneurs choose to incorporate their business as a private limited company due to various advantages it entails compared to the other three options, especially with regards to liability and tax benefits.
For further information, read Choosing a business structure.
Registering your business
This requirement differs depending on the type of business structure you’ve picked.
Sole traders and partnerships have to register with the HMRC for self-assessment. Limited liability partnerships and limited liability companies must be registered with Companies House.
For further information, read How to set up your business.
Your business structure will dictate the tax requirements your business is subject to and whether you’re eligible for loans and/or grants.
As a sole trader, partnership or limited liability partnership, you will have to:
send a self-assessment tax return to HMRC annually
pay National Insurance
pay Income tax on any profits made
As a limited liability company, you will have to:
submit a Company Tax Return to HMRC
pay any Corporation Tax to HMRC
register for VAT if you expect your turnover to be more than the current threshold
Directors that receive a salary must also submit a self-assessment tax return and pay National Insurance and Income tax through the PAYE system.
Where your limited company undertakes research and development projects in the science or technology field, it may be eligible for research and development tax credits.
Depending on what your business does, you may have to apply for a licence or a permit and consider what type of insurance is required for your business.
There are also specific rules that apply if you:
sell goods online
buy goods from abroad or sell goods abroad
store or use personal information
For more information on these requirements, read Set up a business.
It’s also important to have Terms and conditions if your business is concerned with the sale or supply of goods or services to protect your business interests.