10 things you need to know before starting your own business

RECORD numbers of new businesses have been launched during the pandemic as Brits try to make up for lost income or jobs.

Being your own boss can bring greater freedom and flexibility in your work life but it comes with new financial and legal responsibilities as well

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That’s why The Sun has teamed up with Camelot to give away £250,000 to kitchen table entrepreneurs.

We explain the 10 things you need to know before going solo in the workplace.

Running your own business puts you in control of your professional and financial destiny.

Starting out alone can be daunting though with regulations, taxes, finances and other business costs that you are suddenly responsible for.

You are your own boss and make your own decisions about how you work and how you get paid.

Whatever your reasons for building your own brand, here are 10 things you need to know before launching.

Make a business plan

A good idea isn’t always a great business idea.

Consider what your business is for and what differentiates you from the rest of the market as well as the costs and how much money you could make.

This is helpful so you know what you are working towards and also can be used if you are applying for a loan.

Bryn Glover, editor of small business website Startups.co.uk, said: “Whatever your business, you need to know your market like the back of your hand.

“An entrepreneur I know once spent three months working as a waiter in Brighton to get a better feel for the market before he launched his own restaurant on the beachfront.”

Limited company v sole trader

There are two main business types.

A limited company is a registered business that is legally separate to you as an individual.

This means if your business gets into legal or financial trouble, your personal assets such as your family home cannot be put a risk.

Running a company has extra responsibilities such as completing company accounts.

In contrast, a sole trader only has to complete a self assessment tax return each year.

There are tax differences as well.

Companies pay corporation tax on their profits, which is currently 19%.

In contrast, sole traders only pay income tax, which is 20% for basic rate taxpayers earning between £12,501 and £50,000, rising to 40% for higher rate taxpayers with income between £50,001 and £150,000 and 45% for more than £150,000.

You would also have to pay income tax on any salary you pay yourself through a company but you can take dividends as well.

There is a dividend allowance of £2,000 each year currently and basic rate taxpayers are charged 7.5% tax after that.

It increases to 32.6% for higher rate taxpayers and 38.1% for those on the additional 45% rate.

An accountant can help decide which structure is best for you based on your expected income and business plan.

You can find an accountant near you on the VouchedFor website or through the Institute for Chartered Accountants in England and Wales website.

Budget

Your are in charge of your own finances when you are your own boss.

This means no payday unless you have earned enough income that month.

Rick Smith, managing director of business rescue firm Forbes Burton, said it is vital to keep money aside for your tax bills.

He said: “One of the biggest causes of business failure is when people don’t pay their taxes on time and end up with a huge bill.

“There’s no shrinking away from this, HMRC have access to a wealth of information and can investigate with little notice.”

Funding options

Do you have enough money to fund your business?

Work out what your startup and regular costs will be and see if these can be supported by savings or outside investors.

You could also apply for a business loan, although banks typically require at least two years of trading history.

There may also be government schemes that can help such as Start Up Loans or you can search for grants and funding in your local area at Gov.uk.

Solo or staffed?

Can your business goals be achieved alone or would staff help boost your brand?

Websites such as PeoplePerHour and Fiverr can help source one-off help for projects such as graphic design or administrative tasks.

Lee Jefcott, a partner in the employment team at law firm Brabners, said a full-time staff member may be more cost-effective if you need regular support.

He added: “Employees have the benefit of working for you full-time but you also have to cover holiday, sick and maternity or paternity pay and pensions.”

Don’t forget your online brand

Your business is more than just your professional connections and previous work.

Many potential customers will search for you online.

Your online presence is like a shop window that is always available for people to see so it needs to be presentable, according to website builder GoDaddy.

It suggests choosing a user-friendly domain name and ensuring your website is optimised with keywords using search engine optimisation so you appear alongside and even above your rivals in search engine results.

Be sensible about social

You don’t need a massive advertising or marketing budget to promote your business.

Jennifer Macdonald, digital marketing manager at agency Glass Digital, suggests setting up a profile on Google My Business.

She said: “This will help ensure that searchers can find details about your company, such as your opening hours and contact details, and it’s particularly important if you have premises that customers need to visit.”

Social networks such as Facebook, Instagram and LinkedIn can be great places to interact and attract customers.

Your business doesn’t have to be on all channels though.

David Martin, chief executive of marketing and communications group Be Known, said: “There are so many marketing channel and social media platforms that you could spend all your time trying to be on and end up achieving nothing.

“Start by picking a couple of social platforms and focus on building a strong presence on those.

“You should decide which ones to be on not based on which ones you use personally, but which ones are most popular amongst your target market and which best fit your product, brand or service.”

Make use of free tools and advice

A business coach or mentor can give you ideas on how to grow.

You can search for mentors near you on the Mentorsme website.

Government-backed growth hubs or local enterprise partnerships (LEP) can provide free support, advice and sources of finance. Search for your nearest growth hub on the LEP Network website and you will be shown local schemes and financial support for your business.

You don’t have to spend a fortune on business tools.

There are free website builders on GoDaddy and WordPress plus you can organise projects on Trello and compile and store work for no charge using Google Docs.

Marketing emails and newsletters can be sent for free using Mailchimp and there are low cost online accountancy tools such as Xero and FreeAgent.

RBS and Natwest current account customers can use FreeAgent without any charges.

The legal side 

Make your terms and conditions clear when it comes to contracts and customer service.

Danny Roberts, practice manager of DFA Law, said: “It might sound boring but having a well-drafted set of terms and conditions can save you hours of heartache in the event of a dispute.

“Terms and conditions can also help set the parameters for your customers for things such as service delivery and more importantly, payment terms.

“It is much better to have an agreed contract in place than relying upon a court to decide what the terms of the agreement were.”

Network

Just because you work for yourself, that doesn’t mean you have to work by yourself.

Joining trade bodies and lobby groups such as your local chamber of commerce or the Federation of Small Businesses can help build contacts.

There are also events run by organisations such as The Met Club and Business Network International which usually involve meeting other entrepreneurs over breakfast or lunch events.

Chancellor Rishi Sunak revealed in his Budget earlier this month that corporation tax will rise to 25% in a sting for big businesses.

Here are the winners and losers of the Budget 2021.

He also announced new financial support for the self-employed. We explain all you need to know about the fourth self-employed government grant and when to claim.

This post first appeared on thesun.co.uk