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How to Start a Business in the UK – The Ultimate Guide

If you’ve been considering starting your own business in the UK but have been hesitating because you’re not sure how to go about it, you’re obviously not alone. This article aims to provide you with everything you need to know about how to start a business in the UK, so you have the tools you need to get going!

To start a business in the UK, you need to:

  1. Understand what you must do to succeed
  2. Establish what you’re going to sell
  3. Work out how you’re going to sell it
  4. Consider any necessary licensing
  5. Acquire any necessary specialised equipment

Running your own business can help you achieve financial independence, allow you to dictate your own weekly schedule, and even support social causes that are important to you and your community. However, along with the benefits of starting your own business come responsibilities and commitments that you have to be willing to take onto your shoulders in order to reach your full potential.

But with good planning, hard work and the right entrepreneurial mindset, you can turn your passion into a thriving business that is profitable, sustainable and provides unique value to your customers. So, let’s first consider the mindset you need for starting a business in the UK.


How to Start a Business in the UK – The Mindset

One of the most important things that you’ll need in order to succeed in the world of business is the right ethos. Every business is unique, but there are certain entrepreneurial mindsets that apply to any type of business that you may want to establish.

Be Decisive

As an entrepreneur, you will be faced with problems that need to be solved before you can move forward.

Be Confident

Once you’ve made a decision for your business you will need to have the inner confidence to trust your own judgment, even if others disagree. Only time and experience will teach you how to become a better decision maker, but confidence is key from the start.

Be Accountable

It’s essential to be as transparent and accountable as you can while running your business. Customers, clients and colleagues will appreciate you being accountable and honest with them. This will help you to build loyal relationships with everyone you are involved with in your professional life.

Be Tough and Resilient

It’s not always going to be easy to run a business, so you’ll have to be tough and resilient to get through the harder times while still keeping your business ticking over.

Be Humble

Running a business is a constant learning curve. To make the most of potential lessons you’ll need to be humble enough to modify your views and opinions as new information emerges. You’ll very quickly find that the only constant in the world of business is change!

The business mindset is something that you can adapt to suit your specific business. However, if you can tick these core boxes, you’ll be in a better position to start a successful business. But how do you know what business to start?


Finding a Business Idea With Potential

Every business that has ever succeeded started with an idea. It doesn’t matter whether you’re talking about a huge multinational corporation or a weekend market stall, they all began with a single moment of inspiration.

When you’re brainstorming the type of business that you’d like to start you should narrow down your concepts to things that you’re already genuinely passionate about. Starting a new business is going to take hard work and a lot of time, particularly in the early days. That’s why if you choose a business idea that you’re not really interested in, you’re going to find it very challenging to stay motivated and put in the extra hours when needed.

Another good reason to start a business in a sector or niche that you are already interested in is because you will already have a fairly good idea of what your customers will expect. Of course, you can acquire the requisite knowledge about any niche through specialized training, but it’s going to be much easier if you are already quite knowledgeable in the sector!

Discuss Your Business Ideas With People You Trust

Honest feedback from friends and family is worth its weight in gold. So, before you start to invest time or money in launching a new business, it’s always going to pay off to talk with a few people first. Bouncing your ideas off people is an effective way to see the flaws in your concept or to get new angles on the way it could be successfully marketed and launched.

If you know people who already run a successful company, then their advice will be invaluable. Someone who runs a business will be able to point out a whole range of pitfalls that may not have crossed your mind. It doesn’t matter what kind of business they run, or if it’s directly related to your chosen industry. Any experience and educated advice at this stage is very useful.

However, you need to be very careful about who you are sharing your ideas with, even if you’re excited and want to tell everyone! Many great business concepts have been stolen, so you have to be cautious about putting your idea out there before you’ve actually launched your business.

This is especially important to keep in mind if you’re discussing a potential business idea online where you may not know the people you’re chatting to as well as your friends or family in real life. Just use common sense, and only seek advice from those you trust.

Keep Your Business Ambitions Realistic

When you first start your business it’s very unlikely to be a huge overnight success. That’s not to say that you shouldn’t be ambitious, but you should keep your feet on the ground and be realistic.

Not only will this avoid you suffering from burnout or frustration, but it will also help you to stick to your budget and carefully crafted business plans. Expecting the world to fall at your feet from the start will only set you up for failure and frustration. Be ambitious, but be realistic.

It’s Better to Start Small and Grow Big

When you start your business, you should aim to focus on a fairly small niche and work to build your presence and authority within it over time. Once you have found a winning formula, you can consider ways to duplicate it in other niches or areas of the market.

In this way, you can safely start small and then grow your business at a sustainable rate without putting yourself at unnecessary financial risk. It also allows you to make efficient use of whatever resources you have available at the start.

So, once you know what kind of business you want to start, how do you go about actually starting it?


How Do You Start a Business in the UK?

1. Understand What Must Do to Succeed

Understanding what you need to do in order to succeed is key. Part of this will just come down to knowing what makes a successful business in general, but it will also involve understanding what is required to succeed in your chosen niche and industry.

You’ll need specialised insights into your niche to succeed. You can obtain this through vocational courses and training, or from your own experience if you are already self-taught in the niche. You can also learn a lot from your competitors, so make sure you understand what the rest of the field looks like before you make any big decisions.

2. Establish What You’re Going to Sell

If you’re going to sell products to your customers, then you’ll need to have stock before you can get started. This applies whether you’re planning to sell handmade jewellery online or establish a clothes store on the high street.

It may sound obvious, but you need to know what it is you’re going to sell before you can make any money. Get specific and understand what products you might also sell in the future, even if they’re not what you stock from the beginning. Are you selling digital or physical products? Are you selling both? Whichever you choose will have major implications on how you actually sell it.

3. Work Out How You’re Going to Sell It

It’s one thing to know what you’re going to sell, but knowing how to sell it is just as important. Do you have a brick-and-mortar shop? Are you selling things through a third-party marketplace? Do you plan to build your own website? These are all questions you must know the answers to before you start your business.

4. Consider Any Necessary Licensing

Most businesses in the UK will require some form of licensing to operate legally. This includes selling food, trading at a market, or running events. You can check on the UK government website and use the License Finder tool to see if you will need a license for your proposed business idea.

5. Acquire Any Necessary Specialized equipment

Depending on the type of business you plan to set up you may need specific tools or equipment. This can range from a good laptop and internet connection if you’re planning to set up a remote business online to a warehouse and a fleet of vans for a brick-and-mortar company.

This all comes with a cost, so creating a budget before you start spending any money will show you what you can and can’t afford from the beginning. But aside from tools and equipment, you also need some skills to start a business too.


How to Start a Business in the UK – The Skills You Need

The 15 key skills you need to run a successful business are:

  1. Excellent time management
  2. Good planning skills
  3. Ability to multitask
  4. Negotiation and deal making skills
  5. Logical and efficient approach to problem solving
  6. Sales, marketing and promotional knowledge and skills
  7. Customer service skills
  8. The ability to strategize in the short and long term
  9. Analytical and market research skills
  10.  Basic financial literacy
  11.  Strong personal drive and discipline
  12.  Management skills
  13.  Natural leadership qualities
  14.  Confident and calculated decision-making skills
  15.  Great networking and communication skills

To start and run a successful business you will need to have a whole range of skills at your disposal. Unlike working as an employee, where your work might be limited to a small aspect of a company’s overall functioning, as a business owner you’ll have to take responsibility for every part of the operations.

Learning New Skills

You can learn many of the necessary skills by taking courses, studying at college or university, or by reading books and using free online materials. However, you may already have more of the required skills than you think. So, don’t underestimate yourself and your abilities!

The most important skill to have as a new business owner is the ability to learn from your mistakes and be willing to take advice and guidance from others. Each business will have its own set of challenges and obstacles to overcome, but with the right attitude you can succeed even if it looks difficult at first.

Learn as You Go

You can learn or improve on all of these skills as you progress through your own personal journey of entrepreneurship. So, if you don’t feel like you already tick every box, don’t be discouraged – just be ready to learn new things and push yourself to your full potential as you manage your business!


Starting a Business in the UK – How to Choose a Name

It’s vital to choose the best name possible for your business. Large corporations spend millions of dollars on their branding, and when they launch a new product or company a great deal of thought goes into the name of it.

This is because the business name is going to be the first thing that people see, and it will leave an indelible impression in their mind. Your business name should therefore be memorable, impactful and relate in a meaningful way to the type of company you’re setting up. Your business name should also tell a potential customer something about your business’ personality and help your brand stand out from the competition.

Do You Need to Register Your Business Name?

Different types of business need to be registered with different government agencies. It’s a legal requirement that you comply with the regulations or else you may face fines or even criminal prosecution.

If you’re setting up a sole trader business, then you do not need to register with Companies House. Instead, you must register your business with the HMRC and file an annual Self Assessment tax return.

However, if you are setting up a limited company or a limited liability partnership (LLP), then it is a legal requirement to register your business name with Companies House.


The 4 Types of Business Structure in the UK

1. Sole Trader

This is the simplest and most common type of business structure in the UK. As a sole trader, you essentially are the business. This means you take on all the responsibilities of both income and expenses.

A sole trader business is run by the owner, who must keep all the records and is responsible for filing a Self Assessment tax return each year. This means that you can keep all of the profits after tax. There is no maximum cap on the amount that you can earn as a sole trader, but at higher income brackets it can make more sense to use a different business structure to bring down your tax rate.

As a sole trader you are responsible for any liabilities involved in your business and so you must be properly insured for the situations you work in to financially protect yourself. This also means that, if the business starts losing money, or owes any debts, it’s your responsibility to pay for it.

2. Partnership

A legal partnership is a business that has two or more people who have agreed to work together and share the costs, profits, risks and losses of the enterprise. It’s important to realize that each partner in the business is also responsible for the negligence or misconduct of the other partners in the business.

So, trust is an essential element in this type of business structure. You should therefore ensure you only go into a partnership with someone you trust in a business capacity. You must register a partnership at Companies Houses to legally do business in the UK.

3. Limited Liability Partnership

This business structure is very similar to a partnership except that, in a limited liability partnership (LLP), each partner in the business has a liability that is limited by the amount that they have invested in the business.

This also applies to the profits that each partner takes from the business if it is successful. An LLP needs to be registered with Companies House to legally conduct business in the UK. Each partner in an LLP must also register their profits with the HMRC in a Self Assessment tax return on an annual basis to pay taxes on their personal profits.

4. Limited Company

This is a more complex, privately managed business structure that is run by a director, or directors, but is legally owned by its shareholders. The company is considered to be a separate legal entity, which means that its profits and losses are legally distinct from the directors or owners of the company.

If you’re starting your first business in the UK it’s unlikely that a limited company will be the right option for you. However, if you think it might be right for you, then you would be well advised to seek professional financial advice before you do so.

We mentioned taxes above, and it’s important that you understand your tax implications before you start a business in the UK.


Start a Business in the UK – Taxes You Need to Pay

Everyone has to pay taxes in the UK above a certain income threshold, but when you’re running your own business it’s even more important to stay on top of these legal requirements. If you don’t pay the correct taxes, you can find yourself facing steep fines that can not only eat into your bottom line, but they could put an end to your business itself!

It can easily start to feel a bit overwhelming when you’re trying to figure out what taxes you have to pay. However, it’s not as complex as it might seem at first!

Tax Free Allowance

Every business has a basic £1,000 tax free allowance. This means that if your business earns more than £1,000 in a financial year, you either must register with the HMRC for a Self Assessment tax return (if you’re a sole trader), or with Companies House (for the other business structures mentioned above). You also get the usual tax free allowance that everyone is subjected to, which is £12,570 in 2022.

The two most common types of business structure in the UK are sole trader or a limited company. Most new entrepreneurs will start out as sole traders and then, as their business grows, it might make financial sense to transition to a limited company structure. This is because beyond a certain income you can actually reduce your tax bill by operating as a limited company as opposed to a sole trader. If you’re just starting out with a small business, sole trader is usually the way to go.

Sole Trader

As a sole trader you are legally required to register your business with the HMRC. You will also need to submit an annual Self Assessment tax return with your income and expenses.

You can submit all the necessary information online and, despite what you may have heard, the whole process is actually quite smooth and painless! So, don’t let paying taxes put you off from starting your own business. As long as you maintain records of your income and expenses and stay on top of things, it’s quite an easy process.

Limited Company

The requirements for a limited company are more complex. All limited companies must register with Companies House to operate legally in the UK. A limited company is also required to pay corporation taxes on any profits that are made during the financial year as well as file a company tax return and pay VAT.

Any self-employed people that work within the limited company also have to file a separate Self Assessment tax return with the HMRC.

If you’re thinking about setting up a limited company, you should seek professional advice to help you navigate the potential maze of legal requirements. Once you know what kind of business you’re going to start, it’s worth considering whether you may need extra funding to get it off the ground.


How to Secure Funding to Start a Business in the UK

1. Grants

One of the best types of initial funding for your business is to apply for a grant. In most cases, you won’t be required to pay back the money, although the supplier of the grant will take a much closer interest in your business as it develops to ensure it meets the specific requirements of the grant.

Many grants are given to new businesses that are involved in worthy social causes or help to benefit members of a particular community.

If you’re looking for available grants in the UK, GrantFinder is an excellent resource that you can use in your search. GrantFinder works with local governments, consultants, charities and businesses to help facilitate access to grants for new businesses and local community projects.

2. Government Funding for New Businesses

The government also provides funding in the form of Start Up Loans to new businesses in the UK. The government platform allows new businesses to borrow up to £25,000 with a fixed interest rate of around 6%.

The service also offers mentoring, guidance and advice during your early days in business. The best businesses can also receive awards of recognition. These can help to boost public awareness of the venture as well as bolster the company’s credibility.

3. Crowdfunding

Another fantastic way to get your business off the ground is to make use of an online crowdfunding platform. Crowdfunding leverages the power of a huge potential audience to raise large sums of money very quickly for causes that capture the imagination of the public.

There are a variety of ways you can reward your early supporters through a crowdfunding platform. You can offer them free prototypes of your product if they donate above a certain amount for example. Or, you could give them a 1 year 25% discount for purchases from your business. In all cases, a personal ‘thank you’ card, or some other form of recognition, is polite and will help you build a future customer base.

If you get the crowdfunding right, you can raise almost any amount of money in a very short period of time. But you’ll have to be able to market yourself extremely well to stand out in these competitive online spaces. Crowdfunding websites include Crowdfunder and GoFundMe.

4. Personal Bank Loans

If you’re willing to take on the risk of a bank loan, then it can be a quick and easy way to access the funds you need to get your businesses started. It’s worth being aware that the interest rates will be higher than a government loan, although you’ll be able to access the loan much more easily. This is not financial advice of course, so you take on the burden of any kind of loan at your own risk.

5. Friends and Family

You may also be able to borrow money from your friends or family to start a business. The reason this is not always the best choice is because, if the business isn’t successful, then your relationships with the friends or family who lend you the money could be damaged.

Remember the old axiom, ‘Don’t mix business and pleasure’? This means that it’s always safer to keep your business deals and the associated risks separate from your family and social life. Nonetheless, many people do opt to take this approach and so it’s something to consider, even if only cautiously!

6. Angel Investors

Angel investors work in companies that look for the best and brightest business ideas to fund. You usually need to apply directly to them or present your proposition at arranged business startup events. If they like what you are offering, they will fund your business startup in exchange for a share of the business or its future profits.

Don’t forget that angel investors are hard-nosed business people, and even though you might get the money you need, it will come with strings attached because the investors expect to make a good profit too.

So, usually, if you can find a source of funding that allows you to retain ownership of your own business, it will work out better in the end. This is particularly true if you’re setting up a small business that you hope to grow in the long term.

However, angel investors can be a great route to go down if you’re starting a company that is based on a new high-tech invention. Specifically, one that will be extremely expensive to finance but you expect massive returns in the long run can be a good option for angel investors. In which case, losing a share of the business won’t dent your future wealth in a noticeable way.

7. Personal Savings

If you’ve been working in a regular job and managed to save a reasonable amount of money, then it might make sense to dip into your own savings to start up your business. Of course, you will be taking all the risks onto yourself, but you won’t have to pay any interest or give up shares in your business.

A huge number of small to medium sized enterprises are started by using personal savings. So, if you can afford it, then it’s probably going to be your most reliable source of funding.


A Brief Overview of Business Insurance

Depending on the kind of business you’re setting up in the UK, you may need to consider business insurance. It’s critical that you have the right type of business insurance to protect yourself and your customers or clients. In fact, in many industries in the UK it’s a legal requirement to have basic insurance cover. Business insurance can cover the costs of any damages, accidents and in some cases even legal fees.

Insurance companies will also offer specialised forms of cover for specific industries. This is particularly important if you are using or renting expensive equipment in a sector such as photography or videography where individual items can cost thousands of pounds each!


The 5 Main Types of Business Insurance in the UK

1. Public Liability Insurance

This is a basic type of insurance that is necessary if you run a business that has customers visiting your premises or if you are working on the site of other clients or businesses.

2. Professional Indemnity Insurance

This covers you in the case that one of your clients loses money or financial assets as a result of your services or negligent advice.

3. Employers Liability Insurance

This is a legally required form of insurance for your business if you have any employees working for you.

4. Legal Expenses Insurance

It will protect you from the costs of lawsuits that may be taken out against you or your business.

5. Self-Employed Health Insurance

This is a good idea if your work is dangerous or if you simply want quick access to private health cover in case of an emergency.

Once you sort out how you’re going to fund your business and any necessary insurance, the next step is to work out how you’re going to grow your business. This involves some marketing!


4 Essentials for Marketing Your New Business

1. Do Plenty of Market Research

This should include researching your competitors so you can analyse what they are doing right and what you think you can improve on so that you can offer customers a superior service.

Pay careful attention to the prices that your competitors are charging, the deals or packages that they offer, and for ways that you can make your brand stand out from theirs. Understanding what you’re up against and what is doing well in your chosen industry or niche is a great way to get a head start.

2. Create an Online Presence

You should consider setting up a website for your business that can act as a hub for your online bookings, communications and customer feedback. This is an easy way to give your new business authority in your niche. You could even create a blog page to draw more organic traffic to your business.

Social media can also be an invaluable resource for your business, depending on the sector and niche that you are working in. By using social media, you can connect with new markets, promote your brand, and even sell your products or services directly to new demographics.

3. Send Out Regular Newsletters

Whether you send your newsletters by traditional mail or by email, keeping in touch with your customers is a great way to build trust and secure lasting relationships.

Keep your customers up to date with your latest offers and how you’re planning to improve and develop your services in the future. It’s also an ideal opportunity to ask for feedback that can be used to help guide your business growth and strategies going forward.

4. Never Stop Networking

Networking, particularly in rapidly evolving industries, is essential to keep your business ahead of your competition. Attend business events, arrange your own conferences and take advantage of any opportunity to network and create new business connections in your field.


Starting a Business in the UK – Is It Right for You?

Before you start a business and make the financial, emotional and career investment to make it work, you need to be sure that you’ve got the determination and ambition to succeed. There will be tough days and plenty of problems to overcome, but if you’re the right person then you can turn these challenges into opportunities to learn and improve your long-term prospects.

It’s essential that you have the right mindset before you embark on the journey of starting a new business, as well as the financial backing to be able to turn your ideas into a reality. Launching a new business venture will take several months, if not years, before you reach a steady and sustainable level, so you really need to consider whether or not it’s right for you.

If you’re unsure as to whether you’re ready to start a business, then you should try to speak to some people who already run their own companies. They will be able to give you honest accounts and stories of the realities of working as an entrepreneur without sugar-coating the rough patches.

Be Honest With Yourself

However, in the end you are going to have to be honest with yourself!

  • Do you have a burning drive to create your own career and determine your own future?
  • Are you ready to take on the responsibilities and risks of running a business, as well the potential rewards and profits?
  • Do you think you can provide a product or service that no one can?
  • Can you corner the market in a given niche and dominate the competition by delivering above the expectations of your customers?

If you find yourself answering a firm ‘Yes’ to the questions above, then you are more than ready to start your own business in the UK!


Essential Resources for Starting a Business in the UK

  • HMRC – Register as a sole trader and submit an annual Self Assessment tax return.
  • Companies House – Register your partnership, limited liability partnership (LLP) or limited company – registration costs between £15 to £100 per application.
  • VAT registration for UK companies – required for sales of over £85,000 per year.
  • PAYE registration – Required if you have any employees and pay them more than £120 per week or if your employees have expenses or other benefits associated with their position at your company.
  • License Finder Tool – UK government tool to help you find out if you need to apply for a license for your business startup.
  • UK Government Funding and Support Services – Find out more about funding opportunities for businesses in the UK.
  • KickStarter – Leading crowdfunding platform for business startups.
  • GrantFinder – Help to find appropriate grants for your new business in the UK.

Advice and Guidance for Starting a Business in the UK

  • Startups – An independently run organization that provides resources for startups in the UK. The site has an active community forum of more than 50,000 members where you can get practical tips and advice on all aspects of business startups.
  • MentorsMe – A service that helps to connect small to medium size UK business owners with mentors in their sector.
  • SmallBusiness – A fantastic resource that provides advice and inspiration on all aspects of business startups as well as up to date news.

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