Starting a small business requires having a thorough plan in place, a process that takes a lot of time and research. But before you start your business, there are a number of questions and considerations you need to address.
QuickBooks have put together 9 points (spread over two weeks) that you’ll need to look at before starting your business.
1. Select Your Type of small Business, and Consider Its Effects on Your Taxes and Liability
There are many types of small business entities, and you need to choose the one that’s most appropriate for your industry and tax circumstances. Registering as a sole trader is the best option if you are the only business owner. By setting yourself up as a sole trader, you’re essentially just registering for tax purposes. Once you’ve paid your share of income tax and national insurance, the remaining profits will be yours to do with as you like. You can also disregard VAT if you’re earning less than £81,000 per year.
Another option is setting up a limited company. This will require you to pay Corporation Tax and fulfil certain legal responsibilities. If you intend to establish yourself as director, you’ll also be criminally responsible for the company’s books, even if you outsource them to an accountant.
Alternatively, you can try entering an ‘ordinary’ business partnership. This can be in conjunction with an actual person, or a separate limited company. Bear in mind that if you’re based in Scotland the process is different – partnerships are known as “firms” and have separate legal structures. Limited partnerships and limited liability partnerships are worth looking into if you’re worried about possible debts incurred by your business and want a legal framework in place to help you navigate these potential pitfalls.
Finally, if you’re looking for a much less formal arrangement, the UK government allows you to form Unincorporated Associations. This method is only worth looking into if your main goal isn’t turning a profit and is usually reserved for community groups. However, if you intend to start turning a profit at some future date, there is a framework for making sure you can do so legally.
2. Ask Yourself “Who Is My Competition?”
The answer to this question is critical. It’s important to know who your competition is, how they conduct small business and what you can learn from their successes and mistakes as a company. Besides word-of-mouth and background knowledge, there are many different ways to research your competition. Beyond a general Google search and social networks, you will perhaps want to attend some conferences or check with your suppliers. A great resource to start with is Inc.com’s article on competitive research.
3. Understand Your Target Audience
There are literally thousands of ways to reach your target audience. Depending on your demographic, some may want to be reached via Facebook, some may react to Google advertisements, and some may really just need a face-to-face interaction. Understanding your target audience is the key to successful marketing; without it, your products will be tough to sell. Who is your product or service targeting, and what unique benefits does it provide? Once you understand that, test different forms of marketing to see exactly what your target audience responds to. For example, if your target is older consumers, traditional advertising is probably your best bet, but for a younger market, you’ll need to get creative and use new media (i.e. YouTube spots, social media posts, etc.). By using a variety of market-research tools from Google, you can get started on defining and marketing to your target audience.
4. Choose Your Company’s Name
You likely already have a great name in mind. But before you launch your small business, make sure someone else doesn’t already have that name trademarked; it’s also a good idea to make sure your preferred name is available for a website domain. Use the UK government’s own website to find out if your small business name is protected by trademark, and WHOis.net is a great resource to find out if your domain name is already taken. Your name is your small business’ identity, so make sure it’s right for your brand and represents it properly. It should also be easy to understand and remember for consumers, or at least have them thinking about your business name in a unique way.
We’ll post the remaining 5 things that you’ll need to consider before starting your business next week. But in the meantime, for more information on getting starting with your business, visit the Getting started section on the Small Business Centre.