Covid-19 is expected to decimate the UK job market. Unemployment will double to 7.5 percent by Christmas. That means many people become redundant months before a vaccine is saved. Once the shock of redundancy wears off – at the time it can feel like you're involved in the act – you could reevaluate your life and career. Do you dare to start your own business? Is it time to turn your sideline into a full-time job?
According to Direct Line, one in five Britons has either started a new business since its lockdown or plans to start a new business by early 2021. The most popular sectors include IT and web design (21 percent) as well as education and training (8 percent) and consulting (4 percent).
Even more encouraging, young people between the ages of 18 and 34 are most excited about becoming self-employed. 48 percent become entrepreneurs or want to become entrepreneurs.
Okay, if this is the time to start your own business, where do you start and what do you need to know?
> See also: How to start a new business when Covid makes you redundant
# 1 – what is your business idea?
Covid-19 has accelerated many trends that would likely occur anyway, whether it be to work from home, shop locally, customers consciously choose independent retail over chains, etc. Of course, you don't have to reinvent the wheel of being an independent person. On the other hand, it might be helpful to start a self-employed business that aligns with the new normal. Here are five inexpensive ideas for starting your own business.
# 2 – How to get your business idea to market
Forget the mantra "If you build it, they will come"; Another truism is that time spent preparing is rarely wasted. Market research is important for any new business, even if you are a self-employed gardener or window cleaner. What's your catchment area? What do people charge for this service? Who is the competition?
The Market Research Society recognizes the importance of market research for even the smallest of businesses and has a small business support page.
# 3 – What's your unique selling proposition?
Even the smallest independent company should have a USP that sets it apart from its competitors. What do you offer differently?
Three questions to ask yourself are:
- Does your consumer want your product / service?
- Is your competitor doing better?
- Are your competitors doing as well as you?
# 4 – Decide on a company name
Now we come to the fun part. So the next time you decide on a memorable company name, set yourself apart from the competition and sum up what you offer. However, it's worth checking with Companies House to see if no one caught the name first, or if it's already registered as a trademark. What you don't want is a cease and desist letter from a lawyer.
# 5 – How do I create a business plan?
Even the smallest self-employed company should develop a business plan. Performing a SWOT test (strengths, weaknesses, opportunities, threats) can be helpful. What equipment or services do you need to buy for your self-employed business? What are your sales forecasts? When applying for a business grant or bank loan, you will need to come up with a business plan.
> See also: 150 UK Small Business Grants currently open for application
# 6 – Are you an individual entrepreneur or a limited company?
If you are self-employed in business and you are not setting up a limited company at Companies House to run your business, you are by definition a sole proprietorship.
If you are a sole proprietorship, you are self-employed and legally you and your company are one and the same.
However, if you run your business through a limited liability company, the company is a separate legal entity from you. You will most likely be a director of the company (you run it) and also a shareholder in the company (meaning you own all or part of it).
Benefits of a Limited Liability Company
- Pay lower taxes
- Limited liability
- More professional image
- Easier financing
- You can sell equity
- Tax-free pension contributions
- Succession planning
Disadvantages of a limited liability company
- Possible tax costs
- More paperwork
- Lack of privacy
More information on retailers and limited liability companies can be found here.
# 7 – Register your company
You don't need to register a company name if you are an individual entrepreneur. However, you should register with HMRC to let them know that they should expect you to submit an annual self-assessment tax return.
Registering a limited company name is straightforward. You can find step-by-step instructions here.
# 8 – Open a commercial bank account
Unless you are a sole trader, you must have a separate commercial bank account. Even then, it makes sense to separate your personal money from your business. Instructions for opening a commercial bank account can be found here. The updated SmallBusiness guide to which banks offer which business accounts can be found here.
# 8 – Find an accountant or bookkeeper
Choose the right accountant and not just find someone to fill out your tax returns. It can also mean that you have a sounding board and advisor on business strategy. It is a good idea to speak to an accountant before even starting your own business. An accountant can help you with every step we've seen so far, from drawing up a business plan to deciding on the best structure for your business – for example, as a sole proprietorship or a limited liability company – and help you get started with advice a commercial bank account.
As a self-employed person, however, it may be sufficient for the time being to only employ one freelance accountant. An accountant can look after your accounts and process your receipts and transaction documents cheaper than an accountant.
> See Also: Best UK Small Business Accounting Software 2020 – Review Guide
# 9 – Design and build your website
You need a website for your self-employed business, even if it's just a virtual business card with your contact information. There are many website builders available off the shelf that you can use to do this yourself. For those of you who sell products, you can add ecommerce functionality by building your website in Shopify.
And then of course you can promote your self-employed business through social media, even though a staggering 25 percent of entrepreneurs have no social presence. You can read a social media business strategy for small business owners here.