In 2019, the UK had an additional 200,000 new businesses started by entrepreneurs than the year before.
The majority of these were small businesses accounting for 99.3% of all businesses. Employment in SMEs accounted for 60% of the UK working population. The trend is continuous with increases in the volume of businesses since the statistic began in 2000, even during recessions.
People start businesses for many reasons. These range from serial entrepreneurs beginning another enterprise, redundant employees leveraging a new opportunity from a cash injection, and people that just want to test their ideas.
Not all will succeed although support networks and central government funding improve the success statistics.
If you’re thinking of joining this growing economy with your own products and services, then help and guidance could produce greater profitable results.
Procrastination and lack of access to finance are the two main reasons people cite for not starting their company. If you’re ready to begin your journey, then use these litmus tests and tips to guide you through the start-up jungle.
Start by asking yourself these three questions to help visualise if you’re ready:
Most people start businesses to make profits, although some simply want a hobby. Some industry sectors are more profitable than others, so it’s wise to research your idea before investing too much of your savings.
Sometimes we are blinkered and can’t see potential pitfalls along the way. It’s always best to ask for a second opinion as a sanity check. Select someone you trust that either runs a successful business of their own, or are fairly senior in their organisation. If you can’t think of anyone, then you could approach your bank or a financial adviser.
As the early days are the most critical for long-term success, the owner often spends long hours alone as the employment of staff is many months away. Be prepared to perform all roles in your new company, and seek help if you’re unsure of something.
Turning an idea into a profitable business is successful in less than 45% of cases. The best advice is to create a simple forecasting spreadsheet with monthly revenues and costs for your first 12 months. This excercise will highlight any gaps in your projections and produce the required funding for initial working capital.
A thorough understanding of the volume of sales required during the year shows at a glance if your venture is successful from a financial viewpoint.
Once you have your forecast ask friends or colleagues for their opinion. Using an unbiased third-party could highlight areas of concern by interrogating your data and may save you from making the wrong investment decisions. Selling at a loss or a small margin will lead to imminent failure.
Running any business is going to be hard work especially at the beginning. You may not be able to employ staff to help you initially, and the majority of work will be undertaken by yourself. The early stages of growth could require working seven days a week up to ten hours per day. Once you’re generating positive cash flow, you can begin to bring in staff to take over some of the running activities.
Enthusiasm can take you so far on your journey. If there’s limited demand for your products, then your business may be short lived.
Undertake research on your target customers by talking to them face to face. There may be valid reasons if there are no competitors where you’re thinking of setting up.
Perhaps others had tried with the same concept before and also failed?
Investing in initial market research before you undertake any personal monetary investment could save you a fortune in lost revenues in the short term.
Failure often comes to people who start businesses where they have no previous experience. For example, if you haven’t run a cafe or restaurant before it’s unwise to start a business in this area. If this is your dream then partner with others who have the necessary experience. Training and qualifications can improve your chances, but first-hand experience always wins.
Legally registering a new Limited Company takes a few minutes with many online services available. If you’re a sole trader, you simply need to register with HMRC your new self-employment status.
There are other requirements if you’re employing staff such as PAYE registration and liability insurance. Self-employed people add their income to their self-assessment return each year while Limited Companies submit annual accounts and pay Corporation Tax.
You’ll also need a company bank account to separate business income and expenses from your personal accounting records. Many banks will refuse cheques and payments with a company name, so it’s wise to get this setup as soon as possible.
Below is data from The Office for National Statistics showing the different sectors for UK business start-ups.
|Communication & information
|Scientific, technical & professional
|Business support & administration
|Food services & accommodation
|Retailing stores and services
|Insurance & financial services