It’s never too late to set up your own business – in fact, there’s research to suggest that entrepreneurs in their 50s are nearly twice as likely to succeed as their younger counterparts.
But if you’re new to running a business, it can seem like a really daunting task. Keeping track of your new company’s finances while trying to make your mark in the industry is no small feat, so here are a few tips to help you get started.
Contents
- Understand the competition
- Work out your start-up costs
- Explore different funding options
- Don’t underestimate the power of social media
- Look for help with design and marketing
- Be realistic about your own pay and benefits
- Be thorough when keeping records
- Consider your work-life balance and build a support network
- Additional help
1. Understand the competition
One of the key things to research in the early stages of planning your business is the state of your chosen industry, including other companies who will be your competitors in the field. It might be intimidating, but learning everything you can about the products or services already on offer means that you can develop a unique angle or selling point for your business.
Don’t just focus on the present state of the industry – look at its history as well, and learn about which companies made it big and which ones didn’t. From this, you can gain a sense of what works and what doesn’t in that particular field, and apply this knowledge to your own venture, avoiding the potentially fatal mistakes that others have made.
Stuart Lewis, founder and CEO of Rest Less, says: “It’s important to research competitors, both locally and nationally. Are there any? If not, then why? Have others tried and failed, and can you learn from their mistakes or did they fail for structural reasons? On the other hand, if there are lots of competitors then do you have a different enough product or service to compete against them?”
2. Work out your start-up costs
The costs of getting your company off the ground will differ a great deal depending on what kind of business you’re building, but you should have a firm idea of what your set up costs are likely to be so you can draw up a realistic budget and seek out the funding you need.
Stuart Lewis of Rest Less says: “It’s crucial that you have a plan so you know where to start. How will you fund your lifestyle until your business takes off? Can you start your business whilst still working to test out the idea? Where will you source products from? What are the costs of those products? What about staff, can you do everything yourself to start or do you need to hire staff early on?”
When starting a business, you will almost certainly have to think about some of the following:
Premises and utilities
While it is increasingly popular for businesses to forgo having a fixed office space and letting employees work remotely, this isn’t always going to be possible. You may well have to factor in the cost of renting or buying office space or physical premises from the get-go, plus bills and utilities.
If you’re keen to avoid the extra cost of renting office space, our articles Business ideas that you can start from home and How to set up an online shop might offer some inspiration.
Tech costs
You may need to consider tech costs such as hosting a website, storing customer data and licenses for software (such as Microsoft Office). If you’re planning to have employees later down the line, you may need to provide work devices and IT support.
Employment (paying your staff)
It may be that you start off as a one man band, or you may need to employ staff to support you from the get-go. Whether you intend to hire full-time employees or work with freelance contractors, you will have to think about how they get paid and factor these numbers into your startup costs. If you plan on working with agencies to recruit workers or advertise vacancies, you’ll need to consider these costs too.
If you are an employer who is interested in recruiting skilled employees in their 50s and 60s, you can fill out this form to get in touch with Rest Less and promote your company on our job boards to over 900,000 members.
Stock and materials
If your business is going to be selling a particular product, you’ll need to think about the costs of obtaining that product.Be realistic about how much you need to order straight away, whether you are having items specifically manufactured or just ordering goods from a wholesaler to sell yourself.
Finding the best suppliers for your product is key. Many suppliers don’t rely on flashy advertising or search engines, as they only really need to connect with business owners rather than members of the public, so Google won’t necessarily be your friend here. You may be better off attending a trade show or exhibition, which should also serve as a good networking opportunity and a way to get a sense of the landscape.
Once you have a supplier, be very careful with your initial orders. Let’s say you sell two kinds of chocolate and order equal amounts of both, but one of them immediately begins outselling the other. You might end up with not enough of the popular kind to keep up with demand, while the unpopular kind sits around gathering dust. Do a bit of market research first amongst friends and contacts and see what does well before you commit to ordering larger batches.
Sales, marketing and branding
There’s no point being the best at what you do if nobody knows who you are – good branding, marketing and advertising can make or break a company’s fortunes. Most new companies rely on digital marketing to attract new customers, so building a robust web presence with appealing branding and a good website is key, and you should be prepared to hire an agency or contractor to help design these.
Find out which channels will be the best for advertising to your demographic. Different mediums appeal to different age groups and types of people – for example, you probably don’t want to be putting ads in the newspaper if your target audience is mainly younger people.
This is another part of starting a business where connections can be key. Developing good rapports with other businesses can evolve into affiliate relationships, where they promote your business to their own users in exchange for a fee.
Insurance
You’ll need to have buildings insurance if you have a mortgage on your workspace or shopfront to protect the premises in case it is damaged or vandalised. You should also strongly consider getting contents insurance for the contents of the building, so you will be covered if they are damaged or stolen.
Professional indemnity insurance is an optional policy you can buy that will cover you financially if a customer or member of the public makes a compensation claim because they think you’ve made an error, such as breaching confidentiality. You may also want to consider public and product liability insurance, which is designed to cover you in case your business or a product that you sell causes injury or harm to a member of the public.
As with any form of insurance, you should compare all the different options available to you, instead of just going for the first and easiest option.
Legal fees
3. Explore different funding options
There’s no doubt that starting a company is costly, as the last section explains. Fortunately, there are lots of different ways you may be able to raise money so you can set your business wheels in motion.
Investors are a common way of generating funding for a business. There will always be people on the lookout for the next big thing, and if you can come to them with a convincing pitch, they may be willing to offer you funding in exchange for a share in your company. Ideally, you should have a brand identity, some kind of following (if your company is public-facing), a good business plan and some results as a business before you pitch to investors, so that they will be incentivised to get onboard.
Some investors will come with the added benefit of their own industry network, or can offer input into the running of your business – after all, having a stake in your company means they will want the business to succeed as much as you do.
The downside of an investor-driven approach is that even if you do manage to secure funding, you may clash with investors over the approach you take, or they could withdraw funding later on if they are not optimistic about your business’ future.
It can also be difficult to get in the room with investors if you are not already well-connected in the business world – this is another advantage of attending trade shows and exhibitions, or researching upcoming pitch nights that are designed to connect new companies with curious investors. Even with good connections, finding an investor can take months, so don’t get discouraged.
Loans are another option for funding your business. The government offers personal Start Up Loans of £500 to £25,000 with free support, guidance and mentoring for up to 12 months, which you can apply for at GOV.uk.
Lenders are sometimes reluctant to offer personal loans for the purpose of funding a business, as start-ups are financially risky and there may be issues paying them off. As such, many lenders offer specialised business loans or peer-to-peer loans for this purpose. Sites such as Funding Circle exist in order to connect lenders with new companies in need of cash.
There are also grants available from Innovate UK, which is the UK’s national innovation agency. You can see which are currently accepting applicants here.
Crowdfunding is an increasingly common way for new businesses to generate funding – websites such as Kickstarter, Indiegogo, and Crowdfunder are popular for product-based businesses, as they allow you to set up a page for your business and ask for donations from the public. In exchange, you can offer them incentives, usually in the form of one-off rewards. Platforms such as Crowdcube and Seedrs allow supporters to contribute cash in exchange for shares in your company.
This type of approach can potentially kill two birds with one stone, as it generates funding while also spreading the word about your business and attracting customers. However, it is arguably less reliable than the other two methods, as it is hard to guarantee that you’ll raise the amount you need.
4. Don’t underestimate the power of social media
The importance of social media in everyday life is undeniable at this point – it’s almost unheard of for companies to exist without some kind of social media presence in this day and age.
As we alluded to earlier, it’s important to understand your demographic and which social media platforms they tend to favour. For example, Facebook can be extremely valuable for marketing to people in their 40s, 50s and beyond, but is unlikely to get much traction with a younger audience. If your target audiences are teenagers and young adults, it might make more sense to focus on platforms such as Instagram or TikTok.
One major benefit of marketing on social media over traditional advertising is that it allows direct communication with the public, meaning your company can build a rapport with potential customers. While it’s fairly common practice nowadays for start-ups to hire social media managers to keep these channels active, create new content and respond to customer inquiries, these platforms fortunately make it easy for you to do this yourself when you are just starting out.
5. Look for help with design and marketing
It’s a common mistake for new business owners to underestimate the importance of a strong brand, and attempt to cut costs by handling the design and marketing themselves.
The reality is that there’s a lot that goes into branding that most people don’t even notice or think about. It might be tempting to try and put together a company logo yourself for example, but if you’re competing with businesses with bespoke, professional branding, yours may well pale in comparison.
After all, the visual side of your company is the first thing that anyone – from potential investors to clients – will see, and if it looks rough around the edges, this is likely to give them a negative impression of your entire business.
Increasingly, there are services that allow you to put together a website using professional, convenient templates, such as Squarespace. However, even with this you will want to be able to populate your website with unique, eye-catching material. There are always design firms and freelancers looking for work in this field, so you’re sure to find someone whose work matches your vision.
6. Be realistic about your own pay and benefits
If you’re used to being an employee rather than an employer, there’s a lot you’ll need to think about when it comes to setting up how you and your employees (if you have them) get paid, along with other workplace benefits you’ll offer.
You may well have to get used to a lower salary during the first year or so of your new business while it gets off the ground. A shaky start or a bad month could even mean you have to go a month with reduced or no salary. Be prepared for periods of stress and unpredictability while your business finds its footing.
Bear in mind as well that you will be losing your entitlement to employee benefits such as sick pay, paid holiday, and employer pension contributions. If your previous job included workplace benefits such as income protection, life insurance or a workplace pension scheme, think about if, how and when you will replace these as well. You can find out more about setting up a pension as your own boss in our article Self-employed pension options explained.
If you have employees, you’ll be obliged to auto-enrol them into a company pension scheme, into which you and they will contribute. Find out more about how auto-enrolment works in our guide How does pension auto-enrolment work?
7. Be thorough when keeping records
As an employer, you will be responsible for keeping clear records from the outset. If you can’t afford to hire an accountant straight away, you may have to manage this yourself for a while, and it’s crucial to get it right.
The records you’ll need to complete will depend on the legal structure you’ve chosen for your business. The main options are a limited company, sole trader or a partnership.
Being a sole trader effectively means that you and your company are treated as the same legal entity, which means your finances are the same and you don’t need to open a separate business account. As a sole trader, you will have less paperwork and fewer costs and obligations. However, it also means that any of the business’ debts will be yours as well, so your personal assets may be at risk if something goes wrong. Sole traders need to complete a self-assessment tax return at the end of every tax year (April 5th) and submit it by the end of the following January.
Setting up a limited company means that your business will be a separate legal entity from yourself. This has certain advantages, but can involve more admin, with several sets of accounts you will need to file regularly. These include:
- A yearly confirmation statement (previously known as an annual return), which confirms information about your company and keeps records up to date, submitted to Companies House. This will include the company name and registration number, the registered office address, the location of your company records, staff and shareholder details and information about your business activities.
- Annual accounts, also submitted to Companies House, which report your company’s financial activities at the end of each financial year. The larger your company, the more detailed these accounts will be. You will have to pay corporation tax on any profits.
- As a company director, you must complete a self-assessment tax return at the end of every tax year (April 5th) and submit it by the end of the following January. When filing your taxes, remember to deduct any expenses that you incurred purely for running your business.
- If you have employees, you will be responsible for paying income tax on their behalf. Employers can use HMRC’s Pay As You Earn (PAYE) online service to see what they owe and pay the relevant bills. You will also pay National Insurance contributions (NICS) on their behalf – this is deducted partly from their pay and also paid partially by you.
Our article How to understand company accounts explains more about the records you’ll need to keep.
Though the prospect of increased paperwork can be off-putting, a limited company structure will give you access to other benefits, such as greater credibility with other companies and investors, protection over your business name and limited liability (meaning you are not legally responsible for losses made by the business). If you set up a limited company, you’ll need to register it here at GOV.uk.
Limited company owners also need to set up a business bank account, in order to keep company finances separate from their own. A business account is different to a current account, in that it keeps track of the company’s balance, any money owed to and by the business, and employee payrolls. As with a current account, you should compare different banks to see which one can offer you the best deal on a business account.
It typically takes between one week to one month to set up a business account, as the bank will need to confirm your identity and also that of the business and any registered directors – this may be quicker if you already have a current account with the same bank, however.
The third main business structure is a partnership, where the business is owned and operated entirely by the partners and shares are not issued. This is generally an option for those who do not require investors and want to share control of the business with people they trust. However, like sole traders (and unlike limited companies), partnerships have unlimited liability, which again means that the owners are directly responsible for debts incurred by the business.
8. Consider your work-life balance and build a support network
It goes without saying that being an employer is an enormous responsibility, and will likely have a big impact on both your work and home life. You will likely have to commit more hours in your average week to your company, particularly in the early stages when you will have fewer people to delegate responsibilities to.
Consider the effect that your business will have on your relationships with family and friends, your free time, and any other responsibilities in your day to day life. If you have a partner, it would make sense to have a conversation with them about how your life may change moving forwards, so that you can both be on the same page and avoid tension later on.
At the same time, it’s important to have a reliable support network in place in your personal life, so that you are not left feeling adrift, particularly if the pressure of running a business proves emotionally taxing.
Stuart Lewis of Rest Less says: “We always recommend speaking to friends and family in advance to make sure that everyone is on board with your plan. When things get tough, it’s vital to know you have the backing of friends and family for emotional support and understanding. Things will inevitably crop up unexpectedly, and if you have to postpone your anniversary dinner for the second time because you’re working late to win a key client then it’s helpful to have had open conversations upfront about the excitement, and the challenges, of setting out on your own.
“Support networks also extend beyond immediate family and friends and will often include ex-colleagues, mentors, previous bosses and team members – the wider your support network, the greater your chance of making extraordinary things happen and the greater your chances of success.”
Our article How can I achieve a healthy work-life balance goes into more detail on the topic of maintaining a good relationship with your job and avoiding burnout.
Additional help
Our article A complete guide to self-employment contains even more information on starting your own business, and goes into comprehensive detail on a range of topics. If you know you want to be your own boss but haven’t hit on the perfect idea yet, our article Popular self-employment ideas might give you some inspiration.
If you’re interested in starting a franchise business, then we offer franchising opportunities with several trusted affiliates. You could start a business as a business consultant with Auditel, become a self-employed exercise instructor with Move it or Lose it, or find out more about franchising with the Quality Franchise Association.
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