Seven key things you really need to get right when starting your own business

Last year, according to the Centre for Entrepreneurs, a record-breaking 772,002 new businesses were formed in the UK – a 13.25% increase on 2019’s total. In more recent years, about 650k had been the annual average, so there’s no doubt about it – the UK is undergoing a start-up boom.

Covid-19 helped to fuel the phenomenal start-up growth last year. During the first three-month lockdown alone, an estimated 315,000 new UK businesses were started in the UK. While some did it following redundancy, others used the time and opportunity they had while at home during lockdown to finally start their own business.

Maybe you’re considering starting up or possibly you’ve already set the wheels in motion. There are many things to get right if your new business is to get off to the best possible start. But, here are seven key things you really need to nail if your new business is to succeed.

1 Come up with a good business idea

Good business ideas generate enough profit – it really is that simple. Some seemingly “good” business ideas don’t work in the real world, the demand just isn’t there. Once you’ve come up with your business idea, find out what others think (don’t just ask friends and family). Find out whether they would buy what you’re planning to sell for the prices you plan to charge. If so – great – you may be on to a winner. If not – think of a better business idea. It could save you a lot of time and money. 

You also must consider how you’ll sell – offline, online or both? Who will you target – consumers, businesses or both?

2 Decide what type of business you’ll start

When will you sell? The options are spare-time, seasonal (eg summer-only), part-time (aka “side-hustle”) and full-time business. Not all businesses can generate enough profit all-year-round. Some may only work at weekends. You also must consider how you’ll sell – offline, online or both? Who will you target – consumers, businesses or both? Will you sell locally, regionally, nationally or internationally? Will start from scratch or buy another business? Do you plan to go it alone or go into business with someone else? You must decide all of the answers to these key questions.

3 Choose the right legal structure

By law, you must register your business and pay all tax due. Most become a sole trader (ie self-employed). Basically, you and the business are the same in law, so you’re personally liable for any business debts. You can go into business with someone else in an ordinary partnership or limited liability partnership. Many people set up a private limited company to shelter them from personal liability. There can be marginal tax savings, too. Whatever you choose, registering can be done online, quickly and for little or no cost. There are formation agents that will do it for you for a fee.

• Visit government website Gov.uk for guidance on how to register a business. 

Successful brands are always distinct. They engage potential customers and encourage them to buy and remain loyal.

4 Create a strong brand
Think of your brand as the associations that would come to mind when customers think of your business. This is much more than your brand identity (ie logo, typeface, colours, slogan), it’s what you stand for – your promise to your customers. Successful brands are always distinct. They engage potential customers and encourage them to buy and remain loyal. 

Get it right and your business name becomes a deadly marketing weapon that distinguishes you from your competitors, announces your business to the world and helps you to attract and retain customers.

5 Pick a good business name

This is one of the most enjoyable tasks when starting a business – but it’s also one of the most important. Get it right and your business name becomes a deadly marketing weapon that distinguishes you from your competitors, announces your business to the world and helps you to attract and retain customers. But get it wrong and it can create negative perceptions about your business and ultimately drive potential customers away. 

6 Create a wonderful website

Even if you don’t sell online, customers will want to find out more about your business before they decide whether to buy. Your website allows them to do that quickly and easily. It may even be how customers find you. Your website should create a fantastic first impression by showcasing your brand, telling potential customers key facts and why they should buy from you. Doing your own website is cheaper, and DIY templates make it possible, but hiring the right professional will ensure better results, while also saving you time. 

7 Get the right support around you

Starting a business involves a lot of learning. You won’t know how to do many things, but others can help you. There are many sources of free online start-up advice, such as the Start Up Donut website, while government website Gov.uk provides guidance to rules and regulations and sources of government support. The startups.co.uk website also offers a wealth of free guidance, while those aged 18-30 can contact the Prince’s Trust for start-up support.

You may be surprised at other business owners’ willingness to share their experience, tips and advice. 

Paying for guidance from an experienced accountant could help you to save money, but seek recommendations from other small businesses. Finding a mentor (someone who has started and run a successful small business) could also really help. Running a business can be a tough at times, but that can made easier with the support of friends and family. You can also reach out to other start-ups and small businesses via Facebook small business groups. You may be surprised at other business owners’ willingness to share their experience, tips and advice. 

• Written for and published by Manage My Website.

What can be done to save the high street?

Although Covid-19 has made the outlook significantly bleaker, things have been pretty bad for the UK high street for much of the past decade.

According to the Centre for Retail Research (CRR), there are now more than 50,000 fewer shops on our high streets than there were ten years ago. High-profile brands that have gone bust or entered administration this year include Beales, Laura Ashley, Kath Kidston, Oasis, Warehouse, Antler, Victoria’s Secret, Monsoon Accessorize, Oddbins and Go Outdoors.

They follow last year’s major high-street casualties, which include Debenhams, Jamie’s Italian, Patisserie Valerie, Jessops, Mamas and Papas, Mothercare, Thomas Cook, Pretty Green, Jack Wills, L.K. Bennet, Clintons and Links of London. Thankfully, some were saved by acquisition, safeguarding many jobs, but many other retailers haven’t been so lucky. 

Some sources report that visitor numbers to Britain’s high streets have fallen by 20% in the past decade. No wonder so many UK high-street shops are vacant. 

UK retail crisis    

As reported by Retail Gazette, UK high street footfall has fallen by 10% in past seven years, with so many of us now shopping online. Some sources report that visitor numbers to Britain’s high streets have fallen by 20% in the past decade. No wonder so many UK high-street shops are vacant. 

According to the CRR, UK retail is in crisis and it’s been caused by high costs created by rent, business rate and wage rises, and low profitability because of squeezed margins and intense price competition, while “low growth in consumer spending since 2015 has meant that growth in online sales has come at the expense of the high street.”

Some predict that coronavirus will “vastly accelerate” the decline of UK high street. The CRR describes the lockdown as yet another hammer blow for the UK retail sector. Alarmingly, it expects another 20,000-plus store closures this year (16,073 closed in 2019), with more than 235,000 UK retail jobs to go in 2020 (more than 140,000 went last year).

So far, so bad – but what’s the solution? What could and should be done to rescue the high street?

Business rate reform

Trade association, the British Retail Consortium (BRC), believes we’re living through a period of “reinvention retail”, not “Armageddon retail” (well it did, before the lockdown). Retail is “experiencing a genuine revolution driven by technological innovation” it observes. 

Online retail will “continue to grow, as retailers invest in new emerging technologies”, it concedes, while “there will be fewer stores and those stores remaining will offer new experiences”. The BRC says the current business rates system is “no longer fit for purpose and requires fundamental reform”. Many small-business owners and their representative organisations wholeheartedly agree.  

“A tax system skewed towards people and property is contributing to store closures and job losses, and stalling the successful reinvention of our high streets,” the BRC says. A reformed business rates and tax system, with more affordable retail space rent would be welcome – but would it be enough?

Experts believe a “Mars Bar approach” is required, so that town centres become places to “work, rest and play”, not just indulge in retail therapy. 

Reinventing the high street

According to SaveTheHighStreet.org (an “industry movement on a mission to ensure diverse and successful high streets, now and for the long term”), customers still want to “buy local”, with online shopping unable to replace “local, human, real-world shopping experiences”. 

It believes that “ways must be found to merge the strengths of local and digital commerce” and calls for the emergence of a “better connected, digitally enabled high street”. Technology could indeed provide high-street shoppers with an experience better tailored to their likely preferences, for example, by remembering your past purchases and (via your mobile phone, before and while in store) drawing your attention to things you’re most likely to want to know about. 

Many experts believe that retail won’t be the focus of the town centres of the future, which need to become social places and community hubs, they say. As reported by BBC News, experts believe a “Mars Bar approach” is required, so that town centres become places to “work, rest and play”, not just indulge in retail therapy. 

Greater authenticity and choice 

And rather than resembling pretty much every other town centre, with the same brands dominating the vista, high street shops must offer more authentic local identity and diversity of choice, if visitors are to be attracted. 

The successful local high-street shops of today and tomorrow must offer things that people can’t buy online – not just products – but also fun events, immersive experiences and even “retailainment”. On a practical level, a small independent food retailer could offer cookery classes or a music retailer could put on in-store gigs. The idea is shoppers get a more enjoyable, rewarding and personalised experience.

Regularly staging events during the day and evening has already drawn more people back into some town centres. And making sure that public spaces are welcoming, attractive and well maintained, with plenty of places to eat and drink, good public transport links and adequate, affordable parking, can ensure that they come back. 

Success can only come if central government, local authorities, landlords and retailers truly work in partnership. Government funding must be matched by private sector investment.

Time for action

In February 2019, the House of Commons Housing, Communities and Local Government Committee published High streets and town centres in 2030, a report summarising the future role of the UK high street. It believes that UK high streets and town centres “can survive, and thrive, by 2030, if they

adapt”. 

The committee envisages “activity-based community gathering places, where retail is a smaller part of a wider range of uses and activities and where green space, leisure, arts and culture and health and social care services combine with housing to create a space based on social and community interactions.” 

However, it believes that success can only come if central government, local authorities, landlords and retailers truly work in partnership. Government funding must be matched by private sector investment, while the government “needs to go further and move faster to level the playing field between online and high-street retailers” when it comes to taxation, with much lower business rates and rent for high-street retailers.  

Doing nothing certainly isn’t an option. As the report warns: “Unless urgent action is taken, we fear that further deterioration, loss of visitors and dereliction may lead to some high streets and town centres disappearing altogether.” Who wants that?  

• Commissioned by the AAT and published originally on the Informi small-business advice blog and website.

20 financial terms that every small-business owner should know and understand

They’re words or terms that are frequently used in business. Many of them you possibly already use or often hear. But do you know the actual meaning of them all?  

1 Accounting period 

This is the period to which a business’s financial accounts refer, which is usually 12 months. You can compare headline numbers from different accounting periods to assess how well your business is performing or developing.

2 Accounts payable

This is an accounts/bookkeeping record of money owed by a business to its suppliers. This is shown as a liability on a business’s balance sheet (see 4). “Accounts receivable” is a record of money owed to a business by its customers.

3 Assets

These are items of value that a business owns. They can be physical, tangible things, such as machinery, tools, vehicles, premises, computers, office furniture, etc, or non-physical, intangible things, such as intellectual property, brand identity, “goodwill” (ie reputation), customer base, in-house systems, etc. Both can be important when valuing a business for sale.

4 Balance sheet 

A balance sheet is a financial statement that shows a business’s assets and liabilities at a given point, while detailing shareholder equity (ie the amount shareholders would receive if a company’s total assets were liquidated and all debts repaid). Bottom line is the last line on a balance sheet that shows total profit or loss.

5 Cash accounting 

Cash accounting is an accounting method that records income when it’s received and expenses when they’re paid. The alternative is the accrual accounting method, which is where income and expenses are recorded when they’re earned/incurred, regardless of when cash actually enters or leaves a business. There are pros and cons to each.

6 Cash flow

Cash flow (or cashflow) describes the relationship between cash entering and leaving a business. Positive cash flow means more cash entering a business than leaving it. Cash-flow problems arise when you spend more than you make or when you don’t have sufficient cash to pay your short-term debts. Poor cash-flow management can kill even profitable businesses.

7 Credit control

Firstly, this requires managing which customers get credit from your business and how much they get. Credit control also involves monitoring customer accounts and prompting them when necessary to ensure that they pay their invoices when due. 

8 Creditor 

An accounting term used to describe a person or business to whom/which your business owes money. Your suppliers can be described as trade creditors. A debtor is a person or business that owes money to your business.

9 Double-entry 

A bookkeeping system whereby every time you detail a transaction it’s recorded in two places within your accounts, once as a debit and once as a credit. The double-entry system can make it easier to prepare accurate financial statements and identify errors.

10 Gross profit  

This is your turnover (see 18) minus your cost of sales and direct costs. Your gross profit margin/percentage = gross profit/turnover x 100. So, if your business made a gross profit of £30,000 on a turnover of £75,000, its gross profit margin/percentage would be 40%.

11 Income

This is money that you or your business receives in exchange for your labour or supplying goods or services. Income can also be earned through investment. Revenue is an alternative name for business income. Net income is income minus cost of goods/services sold, expenses, depreciation and amortisation, interest and tax.

12 Inventory

This is simply another word for materials or stock that a business buys to sell or make into products for sale. Inventory is reported as a current asset on a company’s balance sheet.

13 Markup

Margin is sale price minus the cost of goods/services sold. So, if you sell a product for £100 and it costs you £70 to make, your margin is £30 (or 30% margin percentage). Markup is how much you add to your costs to reach your selling price. So, a markup of £30 from your £70 cost gives a £100 price, but the markup percentage is 42.9%, which is the markup amount divided by your costs.

14 Net profit 

This is your gross profit (see 10) minus your indirect costs and expenses. So, if your gross profit is £30,000 and your indirect costs and expenses are £10,000, your net profit is £20,000. Your net profit percentage = net profit/turnover x 100. So, in this case, £20,000/£60,000 x 100 = 33.3%.

15 Overheads 

Overheads are your day-to-day running costs, such as rent, rates, etc. Sometimes these are called “fixed costs”, because they don’t change regardless of how much you make or sell. However, your “variable costs” will increase if you make or sell more. Raw materials are the most obvious variable cost.

16 Petty cash 

This refers to small amounts of cash belonging to a business that is kept for low-value day-to-day purchases, such as a bottle of milk, tea bags or jar of coffee. Obviously, petty cash purchases must be accounted for.

17 ROI

Return on investment. Basically, the financial rewards your business gets back from things it invests in, for example, a marketing campaign, new website or new item of equipment. The formula for working out ROI as a percentage is net profit/total investment x 100. Doing such calculation enables you to work out how effective an investment proved.   

18 Turnover 

This is one of the most common words in the business lexicon. Turnover simply means the total value of sales made, usually in a year. Sometimes the word revenue is used, but it has the same meaning. A small price increase can make a big difference to your turnover.

19 Working capital 

This is the amount your business needs to operate day to day. It’s easy to work out how much working capital you need. You simply take your current liabilities (accounts payable – how much you owe) away from your current assets (ie your available cash, accounts receivable, inventory and short-term investments).

20 Year-end 

This refers to the end of a company’s accounting or financial year. It is known by the alternative name of accounting reference date (ARD) and is on the last day of the month during which the company was registered with Companies House (although it can be changed).

• Read the Companies House guide to accounting reference dates and periods.