Do you ever dream of starting your own business?

Summer is over and autumn is here. And at this time of year many of us start to feel restless and wonder if this is as good as it gets.

No matter how much you like your current job, if you are working for someone else you can’t help but feel that there must be something better out there. Something where you can be your own boss and make your own rules. And reap better rewards than you are doing now.

In short, your own business. For many people, that is the dream.

But would you dare take the risk of making it happen? Even if you think you have a brilliant business idea, how do you actually get started? How can you make it work?

In this article we take a look at:

• What you need to do before starting a business.
• How to set up a business.
• What help is available for small businesses.
  
  

What you need to do before starting a business

There are three key things that you need to do before you decide whether or not to start your business.

• Do your research

If you watch Dragon’s Den you will recognise those excruciating moments when a budding entrepreneur is informed by a dragon that their business idea is not a new one at all. So if you have a business idea, the first thing to do is some thorough research as to whether anyone else is offering the same product or service. If so, you would have to ensure that you are both better than and different from them.

• Test out your idea

Even if you think your idea is brilliant, there is no point starting up a business if others don’t agree. So you need to do plenty of market research and testing to make sure that your business will be of interest to others. Some of the ways you could do this are to:

• Conduct surveys or focus groups to see what people think of your business ideas.
• Create a test version of your product or service for people to try out and give you feedback. 
• Set up a web page and/or social media feeds about your business to see what kind of response you get.
• Start a small version of your business in parallel with your current job. This is a great way to dip your toes in the water. For example, if you are making handbags you could start by selling to family and friends, then on eBay, then on third-party websites such as Etsy or Not on the High Street to see how well you do before growing the business further.

• Build some savings

Whilst you are still in employment it is important to build some savings towards your new business. In the early days of your business you may not be able to draw a full salary so will need some reserves. And as your business grows you will need to invest in it further to move it forward.

How to set up a business

But how do you actually set up a business in the UK? 

There are three ways to do this: 

• Sole trader

This is a good place to start, and if you earn more than £1000 in a tax year you are required by law to set up as a sole trader. If you set up as a sole trader you will need to register with HMRC as self-employed, and complete an annual tax return, but you do not need to register with Companies House.

As a sole trader you run your own business as an individual. You keep any net profit the business makes but are also personally responsible for covering any losses.

You can find out more about how to set up as a sole trader on the Gov UK website.

• Limited company

A limited company ensures that the company and its finances are kept completely separate from you as an individual and your personal finances. This means that you are not personally liable for any financial losses made by the business. It can also be easier for a limited company to secure business loans and investment than a sole trader.

A limited company can be limited either by shares or by guarantee.

• A limited by shares company has shares and shareholders. Any profits made by the company are usually paid to shareholders in the form of dividends. 
• A limited by guarantee company is usually a not-for-profit company. Any profits are reinvested back into the company.

To set up a limited company, you will need to register your business with Companies House and pay a small fee, currently £12. You can read more on the Gov UK website about how to set up a limited company.

• Partnership

Another business option is a partnership. This is a way for two or more parties – which can either be individuals or limited companies – to run a business together. All parties share responsibility for the accounts, tax, profits and debts of the business.

You can read more on the Gov UK website about how to set up a business partnership.

What help is available for small businesses?

Setting up a new business can feel very daunting, but there are various sources of help available.

These fall broadly into two categories: financial and practical:

Financial help

• Start up loans of between £500 and £25000 are available from the government-backed British Business Bank. The loans are designed to support people to start or grow their own business. They are unsecured, and do not need a guarantor. As well as the loan, successful applicants receive 12 months of free business mentoring and exclusive offers to help them succeed.
• The New Enterprise Allowance provides money and support to help people on certain benefits make their business idea succeed.
• There is also a wide range of other loans and grants available to businesses. The Gov UK website lists current details of loans and grants available.

Practical help

As well as financial support, there are various sources of practical help available for both new and small businesses. 

Some of these are:

• The website Mentorsme aims to match small businesses with a suitable – and free – business mentor.
• The Princes Trust – offers business mentoring and support to the 18-30’s.
• British Business Bank – as mentioned above, offers business mentoring to recipients of its start up loans.
• Many organisations offer free business plan templates to help you get started on the documentation you need to attract investment in your business.
• Alway be on the lookout for online resources such as Youtube videos and business networking events. These can be invaluable for filling gaps in your knowledge and helping you to make new contacts that could be helpful for your business.

We hope that the above information helps you to think through whether you are ready to give your business idea a go, and explains some of the help currently available. 

If you need additional short term funding at any stage of the process, remember that Munzee offers low apr loans that may be able to plug the gap.

Good luck with following your dream! Munzee Loans are with you at every step of the way.