5 Key Financial Considerations When Setting up a New Business in the UK
Every year approximately 680,000 new businesses are launched in the United Kingdom. The desire to own a business and financial independence is the driving force for many new entrepreneurs. Businesses like local shops, food trucks, or online services are a few examples of small and medium-sized businesses coming up.
Setting up a new business involves hard work and risks. Statistics show that more than 20% of small business startups fail in their first year. The statistics can be scary, but that is not the only concern. Lack of knowledge about financial considerations and funding is a common barrier.
Small and medium-sized business owners need to establish a good working relationship with financial advisors to help them gain a solid financial bearing. Here are the financial implications of setting up a business and what you need to know.
1. Research Before Setting up a New Business
When you fail to plan, you are planning to fail. Researching and planning will help you to avoid financial obstacles ahead. Look at the various options on how you can finance your business or pay and manage employees. Take time to find out what works for you. When starting a new business, some of the things you need to research are the market-landscape, knowing your competitors, and understanding the starting up costs and your credit score. This information will help you to create a business plan and draw your budget.
2. Understand the Legal Requirements
Understanding all the legal requirements when setting up a new business will save your investment from financial losses and legal issues later. Seek legal advice on things like licensing, obtaining a permit within your area, vendor, or employee contracts. Other legal requirements include intellectual property, safety and liability laws, and labour laws. Keep in touch with your financial advisor and find out some cost-effective ways to get legal counsel.
3. Know the Tax Implications
Each type of business has various advantages and tax implications. For example, in setting up a business, you could be a sole trader, limited liability partnership, partnership, or a limited company. All these businesses have implications for taxation on salaries which could have a knock-on effect when applying for a mortgage. Pay attention to dividends, pension contributions, and any liabilities for future losses. This is perhaps the most important element to get right.
Also, starting a business with reference to the tax year can have implications for when you have to make the first tax payment. This is important for your new business.
4. Consider Your Funding Options
Most business owners do not have money for a down payment when starting their new businesses. Funding to start your business and make sure it’s running can be sourced from various places including family, home equity, credit cards, friends, and crowdfunding. Getting a bank loan is another option, but it might not be the best option for some small businesses. Your financial options when starting a business depend on your needs or the stage your business is in. Traditional lenders may or may not work for you, but you can look at other options like online lenders and credit unions. These options look at factors like your credit score, your income, and loans, among others.
5. Consider Your Marketing Plan
Your initial marketing strategy should start with small goals and specific, measurable targets. Research your customers and find out who they are, the methods you can use to reach them, and your competitor’s method of engaging them.
This information will help you come up with a successful marketing plan. It is helpful to know such information before spending money on marketing. It is essential to market your business without putting too many financial resources or too little into marketing when starting.
Starting a new business can be an exciting and creative time in your life where planning, ideas, and passion come together. The business you set up can have so much growth potential, but you need to make solid financial decisions to ensure you will enjoy long-term success. Make use of the available resources around you, like getting sound financial advice, researching the market landscape and investment opportunities. We are small business owners, so we understand the issues of running a business and can provide real-life experiences. Anyone unsure what key financial considerations they need to know when setting up a new business, contact Claire at firstname.lastname@example.org.
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