The coronavirus pandemic has caused people to rethink their careers, with many deciding to try their luck at starting their own business. As many industries are having a bit of a reshuffle at the moment, now can actually be an opportune time to start a new venture.
While embarking on a new business is certainly an exciting time, there may be a lot of practical issues you need to learn about before you make your first sale. For example, three critical steps in setting up a new business are writing a business plan, making sure your business is properly registered and buying the right business insurance. Here’s what you need to know about these steps to get started.
1. Create a Business Plan
Even if you don’t need initial funding (e.g., a business loan), writing a business plan is a critical first step for any fledgling business. A thoughtful business plan that has been well researched can have a significant impact on the ultimate outcome for your business. For starters, a business plan will help you to cement your business model (in its simplest form, how you plan to make money) and give you a roadmap to follow as you move forward.
Writing a business plan involves researching your target market, thinking through your marketing and sales strategy, learning about the competition and projecting financials so you can figure out what kind of expenses you’ll incur along the way and how much growth you need to make your business work.
At its best, a good business plan will identify weaknesses in your product or strategy, inspire new ideas and ultimately improve your odds of success.
Before launching a new business, make sure that you’re meeting legal requirements. For starters, you’ll need to set up as a sole trader, a business partnership or a limited company, all of which involve registering with HMRC no matter what type of business you’re starting.
In addition, limited companies will need to register with Companies House. And all businesses must register for VAT if your turnover is over £85,000.
If you employ anyone, even if you’re operating as a sole trader, you need to setup a PAYE (Pay As You Earn) payroll scheme to collect income tax and National Insurance contributions (NICs) and pay HMRC.
3. Buy Business Insurance
Another critical aspect of setting up a new venture is buying the right business insurance for your needs. All businesses face certain types of risks, although they vary, and the right cover can protect both you and your business should something go wrong–from injury of a customer or employee to theft of your stock.
Some common types of business insurance are public liability cover (which protects against bodily injury or property damage claims made by third parties), product liability insurance (which protects against claims made by customers that your product caused injury or illness), employers’ liability insurance (which is a legal requirement and protects against claims made by employees who are injured or fall ill as a result of work), professional indemnity cover (which covers claims made by customers regarding your professional advice or service), etc.
In addition, there are many other types of business insurance to consider as well. For example, if you use your personal car as part of your business, say for client site visits or to deliver product, then you’ll need to make changes to your car insurance policy. If you don’t have the right business use or commercial cover in place then your car insurance policy could be deemed invalid leaving you uninsured.
The cost of small business insurance depends upon factors like the types of coverage you need (e.g., public liability, employers’ liability, professional indemnity, etc.), the policy limits and your industry. For instance, a riskier business like a construction company can pay 10X as much for public liability insurance (starting from £500 a year) than a caterer (starting from £50 a year).
If you’re uncertain about what types of business insurance you need it’s best to speak with a specialist business insurer or broker. They’ll ask you questions about your business to help guide you towards the best products to cover the risks your business faces.
Starting a new business is a dream come true for many people. Sorting out your business plan, registration and insurance are critical before you start trading–not only to improve your odds of commercial and financial success, but also to make sure your business is legal.