Want to start a business? If so, you’re not alone. At the start of 2020, there were 5.94 million small businesses in the UK, which goes to show many people are interested in becoming their own boss.
There are many different types of businesses you can set up, including online ventures. If you’re planning to open an online store or provide digital services, this article is for you. As small business accountants with many years of experience, we know just what to do to ensure your business runs smoothly.
Performing Market Research
One of the first things you must do before creating your business is performing market research. If you already have an idea of what you want to do, it’s important to ensure your time, effort and money committed to the business are well spent. Market research will help you refine your business idea and understand what’s popular in the industry, for example.
It will also help to know what other people are doing. Competitor research allows you to note their strengths and weaknesses, to understand who their customers are, the things they’re doing that you haven’t thought about, etc. It will help also define your target audience since you can better see what people are looking for.
Regarding your target audience, it’s crucial to spend some time analysing your potential customers – how old are they? What are their jobs? What is their income? What hobbies do they have? The answer to these and other questions will help you further understand who to target, be it with online ads or with special offers.
You may also want to consider getting feedback on your business idea. A fresh pair of eyes may be able to tell you what you’re missing, and if there are any concerns you haven’t thought of before. This can be done by asking people you know or by doing a questionnaire or poll, for example.
Picking a Business Model
Think about how you’re going to put your plan into action by creating and implementing the best strategy for your venture. This means having the right business model in place.
You can promote and sell other people’s products via affiliate marketing, for a start, so you don’t need your own products since you’ll earn money on commission – this can be a form of passive income, requiring little of your time once set up.
However, there are many other models to follow if this doesn’t work for you. If you plan on making and selling physical products online, then having an eCommerce site is probably the right decision; this type of platform allows your customers to buy and pay through your site easily.
You can also offer services instead, such as consulting, in which you offer your time, your expertise and your support. Selling digital products (ebooks or online courses, for example) are also a popular business model, as is selling your own software. Many people also try their hand at freelancing, be it writing books, designing websites, programming tools, and so much more.
So, knowing how you want to run your business can help you to figure out the rest.
Choosing Sole Trader or Limited Company
You’ll need to decide on the type of operating structure you want as well – and the one that best fits your online venture. This is because you’ll be dealing with taxes in very different ways (and have different responsibilities), whether you choose to be a sole trader or set up a limited company.
Sole traders are not a separate legal entity, which means that HMRC sees you and your business as one and the same. If you incur debts, you’re personally responsible for paying them. On the other hand, a limited company owner has limited liability, so you’d be considered legally separate from your business; therefore, you wouldn’t have to make up for losses from your own pocket.
Limited companies, however, must pay corporation tax and have many other obligations that sole traders don’t have, such as registering with Companies House and submitting Confirmation Statements. As an employee of the company, you’re also paid through the PAYE system and will need to pay income tax and National Insurance contributions.
You must also consider legislation such as IR35 before accepting contracts.
On the other hand, as a sole trader, you pay taxes by submitting a self-assessment tax return, and you don’t have to deal with the extra admin that limited company directors have. This is why many people opt to start their self-employment career as a sole trader – it’s easier to set up a business and close it this way, so it’s useful to dip your toes while learning the ropes.
There are many benefits to incorporating a business, so when you achieve a certain turnover or believe a limited company is best suited for your particular venture, we can help. Forming a limited company can take up some of your time, so let us handle it for you instead, freeing you up to focus on the business instead.
Another key component of getting a business up and running. You can raise capital in many different ways, so it will be up to you to decide which option works best. From asking friends and family to using crowdfunding services or investors, make sure you’ve got what you need to succeed.
For this, you’ll need to have a concrete business plan in place, which will also help guide you through the process.
Getting Paid Online
You’ll need to decide how you want to get paid, and knowing this early on can prevent a headache later. You may want to create an eCommerce website, set up a subscription service, offer PayPal or simply send out invoices.
There are many ways to go about this, but as long as your clients are aware of how to pay you (and you choose something convenient for your customers), you can just opt for the one that makes your life easier.
Keeping All Fees in Mind
Businesses have all sorts of expenses and overheads. If you own a bricks-and-mortar business, you must consider rent and utility bills – but if you have an online business, there are other fees to think about. For instance, having a website is crucial because it’s where you advertise and sell your services and products, but websites are not free.
They don’t have to break the bank and push your budget to the limit, but you still need to account for the cost of hosting and owning your own domain. You must also consider shipping fees, especially if you’re going to give free shipping to your clients, so build them into your prices from the start.
Another thing you can add to the pricing of your services and products from the beginning is VAT. You don’t need to pay VAT until you meet the annual turnover threshold of £85,000, but you may want your prices to reflect the 20% anyway. This is to prevent you from having to raise the cost of your products months into running your business, which can be off-putting to some customers.
Learning Digital Skills
Online businesses – or businesses with an online presence – require you to develop some skills you may not have known before. For example, for a website or site pages to appear on the first page of search engines like Google, you’ll need to learn digital marketing.
People don’t find your website by chance. There are billions of pages online, so yours will need work to stand out and ensure that people can find you.
Set aside some budget for marketing if it’s something you’d prefer to hand over to a professional. This may be the best solution because digital marketing can take up a lot of time, and things can go wrong (or there can be a lot of trial and error).
Once the website is up and running, it’s important not to forget about it either. Websites must be updated regularly to follow the latest practices and be compatible with the latest updates. You’ll also want to check whether your pages are performing well or need to be revamped if sales have dropped, for instance.
So, whether blogging, writing the content for your website to make sure it’s optimised for search engines or creating Google ads to sell your products, digital marketing is an essential part of having an online business.
Aligning Your Business with Legal Data Regulations
When handling customer data, you must ensure that information is protected and complies with the latest legislation. Before Brexit, the UK had to comply with the EU GDPR but, now that the nation has left the EU, businesses need to follow what are known as UK GDPR rules.
This UK-specific law comprises several privacy notices, data protection assessments, and international data information, so you must be up to date with it. If you don’t, you risk having to pay a massive fine or even be prosecuted.
Considering Social Media
Setting up and managing your social media accounts are steps you can’t miss. Even if you don’t have a personal profile online, you’ll want to create one or several for your business – after defining your audience, it will be easier to know which social platforms best suit your venture.
Instagram is a highly visual platform, so it can be useful if you’re selling products with a lot of visual appeal. People of all ages use Facebook, but it’s more prevalent in the 24 to 35 demographic, so you may want to dedicate more time to this platform if this is your target audience.
Gorilla Accounting Can Help
When you become our client, you get access to a host of benefits, including the FreeAgent accounting software, a Making Tax Digital-compliant tool to help you manage your accounts and stay on top of all transactions, expenses and invoices.
We also provide answers to your urgent questions on the same day, so you can make quick business decisions with all the information you need on hand. In addition to this, you can have peace of mind knowing that you’ll always feel supported – not only will you get a dedicated accountant, but you also get unlimited support and advice in person or via email, phone or video calls.
We can also offer one-off services if you prefer, such as company incorporation, a registered office address service and a self-assessment tax return service.
As a client, you’ll also benefit from our many perks, like contractors’ insurance. We’ve built strong relationships with companies that can help you grow your business, so you don’t have to shop around to get an IR35 review or learn more about financial planning. Searching for reliable and reputable partners can be time-consuming, so we’ve already done all the legwork.
Want more information about how Gorilla Accounting works? Drop us a message or give us a call on 0330 107 9676, and we’ll be happy to discuss your business.