By Gil Dekel (founder of Streaming Knowledge).
I will share my top tips based on my own experience in market research, VAT, networking, business plan, finding good accountant… tax return, business entity, brand, and opening a bank account.
Feel free to post your questions at the bottom of this page.
1. Where to start?
Start your business journey in one place, and one place alone: yourself. Begin by asking yourself ‘what do I love to do?’ The answer to this should be converted into a business. Here is a research method to help you come up with key-words and definitions for your business.
2. Market research
A lot of market data and stats are available via your local library. It does take some time to do a research, but I have found that it is worthwhile. I have compiled a full market research for my business, which helped me understand who does what in my area and how I can focus my business.
With a market research you will be able to identify a ‘gap’ in the market. A ‘gap’ is basically a service that is not delivered, which you think people will pay for. So, you can focus on delivering this service or product, and create advantage for your business over the competitors.
Check your local University. Nowadays universities are keen for local residents (non-students) to visit their libraries and make use of their resources.
3. Business plan
Once you have completed your market research, write a business plan. It does not have to be complex. Here is what you need to write. A business plan will help you understand whether you need investment upfront (or maybe not), and how exactly to run your business.
Your business plan will also help you to decide how to position your business. Positioning is the way you market yourself against the competitors.
If you do need investment, then completing a business plan means that you have projected figures ready. Any investor would like to see your projected figures, and that you are serious about your business.
4. Entity type
You will need to decide on the legal structure of your business – this is called ‘the entity’. There are a few entities – Sole Trader, Partnership, Small Business, or Limited Company. There are further variations that you can choose from. Each entity has its own advantages.
First, you need to determine how will you operate (alone, or collaborate, or hire staff?) Then, think of your expected earnings and liabilities. These will determine the best entity suited for you. All the information you need is available online.
5. Register your name
You will need to choose and register a business name if you start a small business. However, if you start a Sole Trader (or Partnership) you do not have to register a name.
In the UK you register a business name via the Companies House. Ideally, you want to register a name that is also available as a domain name for your website.
Ask your previous clients to write testimonials for you. Even if you have given your services for free in the past (in case you did so as a hobby), still your past ‘clients’ can write testimonials for you.
Testimonials are not only useful for promoting your business to new clients, but also as feedback for yourself. Learn from this feedback, and improve your services. Sometimes clients would write things about you that you yourself did not notice. Pay attention to what people say, as they can clarify or specify your unique service better that you do… Also, notice what people do not say; read between the lines… Testimonials are free advice.
Networking will help get the word out there. Check local libraries for free networking events. Also check for posters/leaflets of local businesses, to see what other businesses are offering in your area. Send emails to other businesses, introducing yourself and asking for any advice they can give.
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There are commercial networking events, where you pay a fee to attend and promote your business. I attended a few ‘networking breakfasts’ and have met lovely people there. However, I noticed that everyone is coming to sell their products to everyone else… Also, when a colleague ‘brings’ you as their ‘guest’ to your first free networking breakfast, then they get some credit or points for doing so. So, be aware that these networking events actually target you as a client. You do pay a fee to join.
The costs and time did not work for me, but might work well for you. The support is really good, and a colleague said to me that the costs to join did pay themselves back in his case, as he gained clients through these events.
You also get to meet others professionals, some of which you may end up hiring for your business. For example, you may meet graphic designers who you may want to hire to help with your website design. It is good to meet people in person, and get to know them, before you hire their service.
8. Remember your contacts
If you take a contact (business card, email or phone number) from someone – always note down the date and place where you met them. In future, you may forget the context of where you have met them and what exactly their service or skill was; so write down small ‘reminders’ to yourself.
Once you choose a name, you want to create a design look – a brand – for your business. A brand is a coherent visual appearance across all your products, logo, website, apps, social channels, business card and stationary. Here is a link to some free images to help you get ‘inspired’.
There are ample of online designers who can help you.
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To cut the costs of the designers, come to them prepared with some ideas of what you prefer. Look out for some 5 examples of other businesses’ designs that you like, and show them to your graphic designer. If you come to a designer without any clue – they will still help you, but will charge you more.
Also, write down 3 key-words that define the uniqueness of your business and products. Well defined key-words help graphic designers to ‘visualise’ and develop the best images and colours to fit your business. This will save you (and them) a lot of time, and will reduce costs.
Think about what you really need. For example, do you really need to spend money on developing printed stationary, if your business is mainly online?
When you develop a logo and associated brand – make sure the design is original (i.e. that it is not a copy of someone else’s work). Also, you want to own the copyrights of your logo and the designs. Make sure you buy the working files from the designer as well as all copyrights. If your business grows, you may even want to register the logo, to protect it. This means that other businesses cannot just copy and use it.
10. Bank account
Once you choose a name for your business, and have some projected ideas about your expected incomes, you need to open a bank account. You have to open a business account – you cannot use your personal account for your business. If you open a PayPal account, again, it has to be business PayPal.
Separate your personal purchases from your business purchases. You want to be organised and know exactly what expense was for the business. You don’t want to confuse business expenses with personal expenses.
The following advice is important:
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When you approach the bank, all they really want to know is that you are not going to waste their time and money… It does cost the bank to meet you and to set up an account for you, so they need to know that you are genuine. This is why it is good to do your market research beforehand. The bank wants to deal with committed people, not people that will close their business after a few months, or just borrow money without re-paying. So, be truthful and passionate about your business.
You will need to tell the bank your registered business name (registered with the Companies House).
The bank I approached asked me how much I anticipated to have in my account each month. The bank representative knew I just started the business, and was ok that I would have something like £50 in the bank to begin with.
At the moment, some banks offer free service for the first 18 months of your operations. After that, you start paying them a fee each month. You pay the bank whether you make a profit or a loss. The bank fee covers the bank’s services. Banks do not take commission or percentage off your profit, but they will charge you monthly fee whether you make a profit or a loss.
The banks will also charge for some actions you make, such as transferring money between accounts or depositing cheques. If your business is mainly online, and you do not expect to receive cheques, then choose the online services fee scheme. This is what I chose for my business. The bank representative will explain this to you when you meet them.
11. Tax Return
Your ‘tax return’ is your declaration of your profit (incomes minus expenses), which determines how much tax you will pay. You have to submit your tax return each year.
You can print and post the forms or submit online. If you submit online you will have more time to do so, as the online deadline is later than the printed forms deadline. I personally submit as soon as I can. I do not delay submissions to the last moment.
The financial year in the UK runs from April to April. You will need good spreadsheet to keep a note of all your expenses and incomes. Try this one. There are also online accounting software, some come with a free version. If you sign-up to any software which is free, it is likely that you will get used to it, and soon will need to upgrade to the paid version.
If you prefer to just collect receipts, and give them to your accountant to sort it for you at the end of the financial year (in April) – then they will charge you a lot more for doing so. I prefer to write down all my expenses/incomes on a spreadsheet, so when I come to an accountant, they have all figures ready. It makes their work easier, so they charge me less for their service. Also, this means that at any point I know exactly how much I earn and how much I spend. It is good practice to be ‘on top’ of your business.
An accountant will submit your tax return. You can do it yourself, if you have the time and want to save on accountants’ costs.
12. Finding good accountant
13. Putting your energy in the right place
Remember that the tax man is not stupid. They have seen all tricks. So, focus your energy on growing your business and selling good products. Keep your mind engaged with how to improve your services. Do not waste your thoughts on trying to fool the tax man.
In addition to tax, you need to pay VAT if you reach certain threshold in profits, which at the moment is £82,000. You do not pay VAT if you earn less than that, however there are further VAT rules relating to selling online downloads. See below:
15. VAT on online downloads
If you sell online download (such as e-books or digital files) to clients based in the EU, then you have to pay VAT even if you do not pay VAT in the UK. For example, if a client in France bought a digital download from your UK business, then you need to add the French VAT cost – and transfer it to the French authorities. You need to do that even if you do not pay VAT in the UK.
Currently this law relates only to automatic downloads once the client has paid. For example, a client paid via PayPal, and was automatically directed to a download page. On the other hand, if a client pays, and then you manually email them the digital file, then the sell is not automatic. In such case, you do not need to worry about the Euro VAT.
The reason behind this law was to stop some companies from taking advantage of low VAT in some EU countries. While this reason seems sound to me, the application of the law was difficult.
The problem was how a business can ascertain where online clients are based? And since VAT amounts differ between EU countries, how can we know what is the VAT in the client’s country? And, how to actually transfer the VAT sum to the country’s authorities? On top of that, the law asked businesses to report and pay this VAT every four months (not once a year), making the process very difficult. Luckily, there was a solution. If you purchase a product, then the guys at PayHip.com collect the VAT and pay it to the EU authorities on your behalf.
© Gil Dekel. 7 April 2016.