5 Things Before Starting a Business

Starting a business

5 Things Before Starting a Business

With lots of redundancies and job changes following Covid-19, many people maybe thinking about starting a business. 

But how do you get going?  And what are the potential pitfalls to look out for? Here, we choose 5 things to consider before you take a step and set up your own business.

1. Start-up or franchise?

The first big decision for you to make is to decide whether or not you should start from scratch or buy an existing franchise. There are pros and cons to both. 

A start-up works particularly well if the service you offer uses your unique skills on a one to one basis, such as consulting. 

Any business type can be a start-up but unlike one you buy, you have no customer base and no previous trading detail to prove to funders that your idea works.

Franchising is a useful way of starting a business. While you own your business, you don’t own the trading name. For example, McDonald’s is one of the largest franchise businesses. You can find out more about what franchises are available from Franchise Magazine.

Head office has a big budget for advertising and marketing your business as well as experience and advice. It will cost you, of course! While starting on your own is essentially free, you need funding for equipment and marketing.

2. Sole Trader or Limited?

This can depend on how big you want to go! If you’re a sole trader, you file your tax return and pay tax according to the profits you make. 

Limited companies have directors and shareholders and you become one of them. Your company pays corporation tax. You can also be paid as an individual via your limited company, and this can come via dividends as well as being on the payroll.

3. Finding funding when starting a business

It’s hard to start a business from scratch with no money; so where are you going to get the capital needed to start your venture? 

There are several options: Consider asking for a loan from a family member or friend; talk to the bank for a start-up loan; use crowdfunding or approach private investors.

Do your research and work out what’s best for you. Be careful when asking investors, as they might want a share of your business in return for their investment. It might be worth it if their cash sets you apart from the rest.

4. Will I need an accountant?

The short answer is no, not legally! But is it wise not to have one if you are starting a business because you will need to start dealing with HMRC. If that’s not your specialist field, then it can be a minefield. 

Accountants know the laws, the changes in legislation and a good accountant will save you money! 

Also, spending time managing and filing your own accounts can be very time consuming. Do you really have time to work on those when you should be attracting new business? It’s always advisable to get professional advice when it comes to accounts.

5. Will I need a business bank account?

When you set up a business you must keep your financial records in order. And that means you need to open a business bank account.

If you are a freelancer or a sole trader, you are not legally obliged to have a separate account. It is considered to be good practice, however, to have one despite it not being required legally. It also makes you look more professional and is more appealing to investors and banks. 

Limited companies are classed as separate entities to the people who own them and they are legally obliged to open a business account. 

If you want more information about starting and running a business, why not speak to us today?