How to set up a business: 8 steps to getting your start-up set up
8 steps to setting up your startup
Whether you’ve always dreamed of working for yourself, or you’ve spotted a gap in the market and have a great idea to fill it, starting your own business takes drive, determination and a detailed business plan. Getting the basics right from the very beginning can save you time and money in the long run, so great planning is essential. From branding to billing, our eight-step guide will help you to make sure you’re giving your startup the best possible foundation.
Step one:Write a business plan
Writing a great business plan is your top priority. This is where you prove to your investors, and yourself, that your idea is a winner. Your business plan should include what your business will sell, how and where you plan to market it, how much your business will cost to run, and the amount of money you expect to make. This is a living document that you’ll add to as your business grows. Take a look at our business plan guide to get you started.
Step two:Choose the best legal set up
How you decide to set up and register your company will have an impact on the compliance and tax process you need to go through, as well as your personal liability if things don’t go to plan. Here’s an overview of the main options for a startup:
Being a sole trader is in many ways the simplest way to set up a business. You won’t have to pay a registration fee and managing records and accounts will be relatively straightforward. You’ll be able to keep all the profits, however you’ll be personally liable for any debts that your business incurs, so it can be a risky option for business owners relying on external financial investment.
Limited companies have their own legal and financial identity, separate from directors or shareholders. This means they can own assets in their own right. Shareholders have limited liability, so they can’t be held personally responsible for any debt the business incurs.
Limited companies have to be registered with Companies House, submit annual returns and accounts, and pay tax on their operating profits. They need to have at least one director and shareholder.
Shareholders can be individuals or companies, but shares cannot be sold to the public. Limited companies are a popular choice for startup businesses and those that work in a consulting or contracting industry.
Your partnership will need to register with HMRC, and all partners are jointly liable for any debts of the business and creditors can claim money owed through your personal assets. So if you own your own home, or have significant personal assets, you may want to consider other options.
If one partner decides to leave the business, is declared bankrupt or dies, the partnership must be dissolved, although the business can continue to trade under a different structure.
A limited partnership includes a mixture of ordinary and limited partners. Ordinary partners are jointly liable for debt owed by the company, whereas a limited partner’s liability is limited to the amount of money they invest in the business and any personal guarantees that have been given. Limited partnerships are required to register with Companies House, though don’t usually have to complete an annual return or file accounts.
Limited liability partnerships (LLP)
LLPs have to have at least two designated members who hold extra legal responsibility for the business. If this drops to one, all members (designated or other) are automatically treated (and liable) as a designated member.
LLPs must register with Companies House and file annual returns and accounts. Within an LLP, a partner’s liability is limited to the amount of money they’ve invested, and any personal guarantees they’ve given to secure finance, so there is a degree of protection if the business has issues.
Step three:Pick a name and register your business
You may have already chosen a name for your company, but you’ll need to see if it’s available to register. If you use a formation agent, their website will allow you to check if your chosen name is available.
What happens if the name is taken?
If the name you had chosen is already taken by a limited company or LLP, and you also plan to set up as a limited company or LLP, you’ll have to change your name. Your business name can’t be the same as another, or similar enough to cause confusion.
If you plan to register as a sole trader and another business in a different part of the country is already using your name, it may not be a problem as long as you don’t operate in the same region.
Finally, if your name is similar to one that has been registered as a trademark, you’ll have to choose an alternative. You can check this on the UK Trade Mark Register. Registering a trademark automatically gives you exclusive rights to use that name nationally.
Step four:Set up a business bank account
You’ll need a dedicated bank account for your business, as it’s a separate entity to you. You can set up a business bank account with the same bank that you use personally, but most high street banks offer incentives like free banking for the first year of trading, so it’s worth comparing the market.
Step five:Insure your business
It may be the last thing on your mind as you start out, but your business is a significant investment, and you have a duty to your investors to make sure you’re protected.
There are many different types of business-related insurance, so it’s important to understand what they are and what you need. It’s worth checking how easy an insurance plan makes it to increase cover as your business grows (if you take on more staff, or buy more equipment for example).
If you contact customers face-to-face, you’ll most likely have to get public liability cover. You’ll also need to make sure all your equipment is covered with business contents cover, and if you’re renting or buying premises, you’ll need buildings cover too.
If you employ staff, make sure you look at employer liability cover and a pension scheme – especially with auto-enrolment coming into force next year. Professional indemnity cover is another commonly held policy – it protects you if a customer attempts to sue you for negligence if something went wrong with a product or service you provided.
You can find out more about the different types of cover on our business insurance page.
If you’re not sure what you need, take 2 minutes to answer a few questions and we’ll suggest cover that’s best suited to your business.
Step six:Create your company brand
Once you have your business name, you’re registered and ready to start trading – but first, think about your brand. Will you need a website, a logo, letter-headed paper, business cards, packaging or labels for what you’re selling?
Your brand is your personality; it allows you to stand out and helps people remember you.
Step seven:Plan your marketing strategy
Every business needs to market itself. You’ll have already answered many of the questions that’ll inform your marketing strategy when you created your business plan, such as what are you selling, and who you plan to sell it to. The next stage is to think about how and where you’ll put this plan into action with the marketing of your business.
Things to think about:
Do you need one? Could you do it yourself? Depending on the type of business, you may be able to set up something simple by yourself.
It’s likely that your customers will be on social media, and yes, it’s a good idea to consider it, but make sure that your social media presence has a strategy, and most of all, a point. Think about which social platforms your customers are likely to use, and how you want to communicate with them.
There are lots of options – local, national, online – and even with a small budget you’ll be able to get your name out there. You might want to think about partnerships and reciprocal advertising through other businesses too.
With the right connections and a good story, PR can be a very effective marketing tool, especially if your business has a clear social benefit or a good story behind it. Following relevant journalists and news outlets on social media is a good start – once they’re aware of you, you can build on your contact with them and get your story into the public eye.
Sales leads & customer relationship management (CRM)
How will you gain new customers and business leads? A sale may not be as simple as click and buy; you should consider the process that people go through when deciding whether to purchase from a business like yours. If you plan to gather and store customer information (with their permission) you‘ll need to consider how you’ll do that securely and what you’ll use the data for.
Think about your year ahead, are there key times of the year that will be busy in your industry? What about quiet times, what can you do in those to drive custom?
Step eight:Stay on top of your finances
From funding to financial compliance and on-going accounts, there’s a lot to think about in terms of your business finances. So if you’re not experienced in those areas, you’ll need external help.
What needs to be completed for your business to stay legal? Things like company accounts, tax returns and VAT returns (if you’re VAT registered) all need to be completed on time.
Will you need to invoice suppliers? Will they invoice you? Have you got a template to do this yourself or will you need help from an accountant?
You’ll have regular payments you need to make on things like rent, utilities and payroll, so make sure money is set aside to pay those each month, and that your business is receiving payments on time, too – otherwise you’ll quickly get into debt.
If you’re not confident in submitting your own tax returns and keeping on top of your profits, losses and cash flow, it’s better to consider the alternatives such as an accountant, bookkeeper or even accounting software to help you out. This is especially important if you have employees as you’ll need to consider payroll, pension and benefits.
If you’ve got this far you’re well on your way to getting your business off the ground, and that is a great achievement. Now you get the chance to grow your business into a success. We wish you the best of luck!The AVIVA team