One of the most important decisions you’ll have to contend with is the structure and legal status your business will use moving forward: will you operate as a sole trader or as a limited company?

The structure you choose can have an impact on almost every aspect of your business, including how much tax you will pay, what earnings you can make, and even what happens should your company get into difficulty. What might work for one company will not necessarily work for another. So, it’s vital that you weigh up the pros and cons of both and make an informed decision.

In this article, I’ll be discussing the advantages and disadvantages of being a sole trader or a limited company, so you can decide which business model will serve the needs of your company as it develops. Keep reading to learn more.

The fundamental differences between sole traders and limited companies

A sole trader is a self-employed person with full ownership of their business: it does not have a separate legal identity from that of the owner. That means that a sole trader takes full liability. To become a sole trader, you must register using the government portal within three months of founding your business.

A limited liability company is one which is legally distinct from the identity of the owner. It has a unique company identity, which must be registered (for a small fee) with Companies House. Because of this, there may be more than one owner or director, and they will have limited liability — meaning their personal finances won’t be affected should the business struggle financially.

Sole trading vs limited companies: Which is right for your business?

For many smaller businesses or self-employed tradespeople, being a sole trader offers a few financial advantages, but it also brings an increased level of risk. Becoming a limited company can protect owners from these risks by giving them limited liability, but it can also mean a lot more admin and fiduciary duties for the directors.

In this section, we’ll discuss the benefits and negatives of different aspects of both models, including earnings potential, tax efficiency, and liability.

Earnings

Sole traders keep all of their earnings after tax, which is paid via the self-assessment system. This means that your earnings are entirely dependent on your performance that year — so while there’s the potential for large profits, there’s also the risk that you won’t make enough money to earn a decent salary.

The owners of a limited company draw their earnings in the form of a salary, which is taxed at standard PAYE rates. They can also draw their earnings in the form of bonuses and dividends, subject to overall performance. In the last few years, the government has been reducing the tax-free allowance for dividends (from £5,000 in 2017 down to £1,000 in 2023/4 and £500 in the 2024/25 tax year) — meaning that limited company directors have faced a reduction in tax-free earnings from these additional sources of income.

Tax

Because limited companies are registered at Companies House, they must pay corporation tax. For large companies, the rate of corporation tax is actually lower than it is for sole traders — meaning it’s often a far more tax-efficient model for businesses with high turnovers and big profits.

Unlike limited companies, sole traders are not legally obliged to pay corporation tax. Instead, sole traders are required to pay income tax at the standard rate and make National Insurance contributions on all profits: these are set at Class 2 rate if your profits are ££12,570 or more (for tax year 2023/24), and Class 4 if your profits are over £12,570 (for tax year 2023/24). Any business expenses are tax-deductible, meaning only your profits will be taxed. From the 2024/25 tax year, Class 4 National Insurance for the self-employed will go from 9 per cent to 8 per cent with no Class 2 NICs to worry about.

While this form of taxation may be efficient for smaller traders with lower incomes, they’re often less so for higher earners — especially if you begin earning £25,000 or more. So, should your earnings reach a higher income bracket, then you might find that registering as a limited company and paying yourself a salary is a more tax-efficient solution.

Sole traders must fill out a self-assessment tax return and register as self-employed with HMRC, but as a general rule their tax obligations are much less complex than those of a limited company.

However, because they have full liability, they can be held to account for any fines or penalties that result from a late return or making an error in their paperwork.

Responsibilities and personal liability

Being a sole trader allows you complete control of your business, and there’s generally much less admin to deal with, but this comes at the cost of an increased level of personal risk.

Under UK law, there is no legal distinction between your assets and those of the company, so if you run up debts, creditors have the right to claim your personal assets (including any property you own) to balance the books. If a client or customer decides to sue you or take you to court, you could be liable to pay any costs yourself.

Because directors in a limited company have limited liability, it’s very unlikely they’ll be held to account for debts or lawsuits incurred by the business (with the possible exception of criminal activity or negligence). While a sole trader could be made bankrupt if their enterprise fails, directors of a limited company cannot: their personal assets will be protected, while the company goes in to liquidation.

For this reason, it’s vital that sole traders have professional indemnity or public liability insurance in place to offer them some protection. These sorts of policies can be costly, so you should factor this into your decision: it may be a matter of deciding whether the simplicity that sole trading offers is worth the increased risk and insurance costs.

Summary

When it comes down to choosing sole trader or a limited company, the legal model you want to decide on for your company ultimately depends on what sort of company you want to start.

Small enterprises and self-employed tradespeople may prefer the simplicity and control over earnings offered by sole trading, while those with ambitions of starting a larger company with lots of employees might be tempted by the security that registering as a limited company offers, particularly in terms of liability. It all boils down to your individual business model and goals for the future.

Limited Company or Sole Trader - Key comparisons

Mart Abramov is the CEO of digital tax accountancy, TaxScouts

Further resources

• How to become a sole trader
• Can two people run a sole trader business?
• What is the definition of a sole trader and being self-employed
• Tax advantages of a limited company versus sole trader

The post Should you register as a sole trader or a limited company? appeared first on Small Business UK.

Starting a new business can be a daunting prospect, with numerous issues to overcome in order to ensure the smooth transition from fledgling entity to a successful, profitable company. Taking your first commercial premises can be an integral part of this process, bringing its own challenges and obstacles.

Taking commercial space is an exciting step for any business, but it’s unfortunately very easy to make mistakes that could cost the business dearly in the future. Not knowing how to negotiate a commercial lease is stressful for any business owner. However, with the right advice, entrepreneurs can avoid common pitfalls, securing a deal that’s right for their business, with the appropriate safeguards necessary for an ambitious start-up:

#1 – Do your homework and avoid hasty decisions

The first goal is to identify the property that is right for your business – there is a whole host of criteria to consider, some more obvious than others. As well as location and sq. ft. it’s worth taking the time to speak to any other occupiers about their experience. We often speak with business owners who have failed to dig deeper than the façade and the information they’re presented with – you could be avoiding an expensive ordeal down the line.

#2 – Negotiate a comprehensive set of terms

Once a property has been identified, the agent will assist in helping you negotiate a commercial lease. The negotiation of a set of “heads of terms” (a document prepared at the outset of a transaction outlining the terms agreed between the parties) is imperative and is the opportunity for you to negotiate the best deal available.

It’s vital that any requirements you have are factored in at this point (key elements typically might include the lease duration, rent amount, rent escalation clauses, maintenance responsibilities, and any special provisions or concessions) as otherwise it will be much more difficult to negotiate additional elements once terms have been finalised and lawyers instructed.

#3 – Consider which entity is to take the new lease

The entity which takes the new lease will be “on the hook” for all the associated tenant liabilities, including payment of rent, the service charge and ancillary payments, plus any liabilities for dilapidations and such matters. With this in mind, you should also consider as to whether to take the lease in a newly incorporated limited company, rather than – in the case of a sole trader – your own name. This will avoid being held personally reliable for such obligations.

>See also: Five things to consider when converting a property for commercial use

#4 – Push for a rent-free period/appropriate rent incentive

Depending on the desirability of the property, levels of interest and current market trends, tenants are often able to negotiate a rent-free period or associated rent incentive (for example, a period where they will pay a “half rent”) in lieu of the fact that they may need to fit out the property.

Your instructed agent will be able to advise on the likelihood of negotiating such an incentive, however it is certainly worth asking the question – where possible you want to avoid paying rent when you are still fitting the unit out.

#5 – Flexibility, termination and ability to ‘deal’

As a start-up entity, you have no way of knowing in which direction your new business will go. You may find that the business grows rapidly and that you quickly require bigger premises to support such growth. Conversely, you may find that things do not go so well, and that you no longer require as much space or wish to terminate the letting in its entirety. As such it is important to retain as much flexibility as possible. It is advisable to try and negotiate a break clause, either a tenant only break right at a specific point (for example, after three years of a five-year lease term) or better still, a rolling break right, which gives you the ability to terminate at any time after a given date.

It’s also important to consider how you’re permitted to “deal” with the lease. If the property is potentially divisible, it is certainly advisable to try and negotiate the ability to sublet part to a third-party tenant, which would then enable you to “hive off” part of the unit and recover some of your liabilities in relation to it.

#6 – Consider repairing liabilities and protect against onerous obligations

You need to be sure that you are not signing up to lease with an overly onerous repairing liability. To protect against this, it is important, where a property is not in full repair, that you always seek to agree a schedule of condition to be attached to the lease. This shows the state of repair of the property at the date you take your lease, with an associated lease clause, meaning you’re only obliged to put the property back into the state of repair as evidenced by the schedule.

#7 – Consider reinstatement when making alterations

Typically, commercial leases allow tenants to make internal non-structural alterations with landlord’s consent, and often allow the erection of internal partitioning without the need to obtain consent at all. It is important to ensure that where fit-out works are required in order to operate from the premises, landlord’s consent is obtained as part of the initial transaction and that you don’t end up picking up the tab for the landlord’s legal costs in preparing a licence to document such consent.

Always bear in mind that landlords will in likelihood require you to reinstate the premises at lease expiry. This is particularly important to bear in mind where works are significant as removal will be at your cost.

#8 – Seek to agree a cap on additional charges

If, for example, you are taking a lease of a multi-let building, there will likely be common areas and you will in all likelihood be required to contribute toward the cost of maintenance/insurance of the same. Where possible, it is advisable to try and cap such contributions at a fixed figure, so that you know your liability cannot go above that figure. As a start-up business, it’s imperative to keep strict control of your costs and clearly you want to avoid any unexpectedly high liabilities.

#9 – Be aware of SDLT and additional post completion costs

Depending on the length of term and annual rent you agree for the property, it is possible that the lease will generate a stamp duty land tax liability. Normally, SDLT kicks in on lease premiums / transfer values or ‘Net present value of rent’ when these costs rise above £150,001. There are exemptions available, but it is a complex subject and as such it’s important that you take professional advice on these possible liabilities in order that you can factor them in when working out your costings.

In addition, if your lease is over seven years in length it will require registration at the Land Registry, for which there is a registration fee payable.

#10 – Take professional advice

We would always recommend that you instruct a competitive and reputable commercial solicitor who will ensure that these points (and more) are picked up during the negotiation process and that your interests are properly protected.

Summary

Negotiating a commercial lease agreement is a crucial process for businesses seeking space for their operations which can significantly impact a business’s bottom line and operational flexibility. Businesses should carefully review and understand the lease terms, seek legal counsel if necessary, and consider factors such as location, space requirements, and budget constraints. Successful negotiations can lead to a lease agreement that suits your business’s needs and goals, while also helping to mitigate potential risks and disputes during the lease term.

The above points provide a broad flavour of the key elements that need to be considered when you want to negotiate a commercial lease.

Simon Maddox is a real estate partner at JMW Solicitors

Further reading

What to consider when choosing a commercial property

The post How to negotiate a commercial lease – tips for negotiating with a landlord appeared first on Small Business UK.

If you have been reviewing your career and thinking about not just changing jobs but taking the plunge to work for yourself, or if you simply haven’t had the confidence to take the leap before now, Dave Chaplin, CEO and founder of ContractorCalculator, an online site that provides free advice and information for freelancers and contractors, gives you some food for thought that might just give you the push you need to finally go freelance.

Permanent employees considering making the leap into self-employment often think they don’t have the right skills, won’t find work, can’t afford it or are too young/too old. There’s always plenty of nagging ‘reasons’ to justify putting off the fear of the unknown.

However, there are nearly 2 million freelancers currently working for themselves in the UK and many of those would tell any wannabe freelancer, if you have a marketable skill that an organisation would benefit from using on a fixed-term or project basis, then you can become a freelancer.

And sometimes, if you think of the worst possible outcome and how you would overcome it, you discover that the only thing stopping you from taking the plunge is actually fear of the unknown and fear of failure. Do you really want to go another whole year without giving it a try?

1. Skills barriers – having transferable skills

Before you think about freelancing, ask yourself what skills you have that could be marketable. To go freelance, you need to have a recognised and potentially niche skill that is in demand in the labour market, and which can be transferred from your employer to your first and subsequent clients.

Many would-be freelancers might be put off freelancing or contracting because they have heard that only skills that can be applied on a project basis are marketable. This is a myth. There are plenty of roles out there that need a contractor to help manage capacity, or to cover for an employee who can’t work for an extended period, perhaps because of an internal secondment, maternity leave or long-term sick leave. And, if you are a journalist for example, you can work on a number of written briefs for a number of publications – you are a proven writer first and foremost.

2. Lack of experience

Some employees believe that they have acquired the transferable skills that would be suitable for freelancing or contracting, but lack the experience in applying them. And many would be right.

Clients are looking for someone who has been there and done it, and can hit the ground running. They want to know their contractor can run the entire project from start to finish without having to be told what to do or can take a brief and deliver the requisite outcome by a given deadline.

Experience can help and it may only take months and not years, and will make you much more marketable.

Once you have made the transition to work for yourself, then you will find that each role adds to your skills and experience. You can also keep your skills updated through formal training that you will choose and fund yourself. You may also gain ‘experience’ by applying these new skills on current projects, possibly for free as a gesture of goodwill to the client.

3. Selling yourself – ‘I won’t be able to find any contracts’

If you have got the right skills and experience, then finding work should be easy. There are literally thousands of job boards, both broad and specialised, to search, and recruitment agencies that are looking for contractors with exactly your skills.

You will need to create a ‘killer CV’ and hone your contract interview techniques, because they are very different from what you may have been used to as an employee. But there is plenty of help and advice available.

Many first-timers receive some knock-backs and rejections in the first weeks and months of their freelance career, but it is a learning curve. If you persevere and apply the help and advice that is available, then you will find work.

4. Money worries – ‘I can’t afford to start a business’

Starting up on your own in the UK is incredibly cheap. All you need is to:

• Incorporate a company
• Open a bank account
• Buy some business insurance
• Get your life cover arranged
• Get a mobile phone and some technology in place
• Find an accountant

…and you are in business. Potentially, that can all be done in a few hours.

Opening a bank account is free, and you’ll usually get a period with no bank charges. The start-up costs should be no barrier, and a few months of saving will cover these.

In fact, many accountants offer ‘first three months and company incorporation free’ type deals, and insurance can usually be paid monthly and not up front as a lump sum.

The real financial barrier you may encounter is not finding work for the first few months that it takes to find your first contract, and you have to fund your living costs. Many self-help gurus say that, ‘The best time for change is NOW’. This may be true, but it is essential to have a financial cushion because it enables you to have options.

So, before leaving your job, you should ensure that you have at least two and preferably six months of living costs as cash savings in the bank.

Related: Freelancers and gig workers are now entitled to payslips by law

5. Age is just a number – ‘I’m too old/young to go contracting’

Unfortunately, despite the obvious benefits of experience and the legislation in place to combat it, ‘ageism’ persists. If you are older when you take the plunge, play to those advantages and strengths that come with your experience, rather than those that focus purely on cutting-edge skill.

You may believe that you are too young to go freelance, but this is no barrier. If your skills meet the demand curve at the right point, then you will get hired. There are times when demand is high and supply is low when knowledge workers with only a few years of work-place experience get hired. And increasingly, more graduates are setting up on their own straight out of university and this graduate guide will help.

Experience also depends on attitude and circumstance. A fresh graduate working in the right organisation on a cutting-edge project may gain more experience in a year than another will gain in two years in a different organisation.

Clients are increasingly recognising the benefits of experience alongside a fresh perspective, so there is a place for both older and younger freelancers on project teams.

For example, in marketing younger people may be more in tune with the digital aspects of marketing and less on the strategy and business success of a marketing communications campaign. Older freelancers bring deep knowledge and business expertise.

6. Other barriers – credit and security checks

In some roles, you may find barriers that you cannot immediately or ever overcome, but these will not be a barrier to you becoming a freelancer or contractor. Typical examples include credit and security clearance.

If you have a poor personal credit history, perhaps because you had a business that failed leaving you with substantial debts, then it is unlikely you will secure a role with a financial sector client. You can work to improve your credit rating over time so that may get you to the point when your credit history will no longer be a barrier.

There are some assignments that require security clearance. This can be a protracted process taking many months, and you may ultimately fail to secure clearance for reasons that are completely beyond your control.

Neither of these should be obstacles to setting up on your own. There are plenty of contracts available across all skills and disciplines that do not require credit checking or security clearance.

Taking the plunge: The people who went freelance

What is it like to take on a freelance lifestyle after previously working for someone else? Here, we look at the experiences of the people who made it work.

Lauren Pope, Freelance Content Strategist

Website: La Pope

I work with clients to help them make great digital content through a combination of strategy, creative, optimisation and changes to their ways of working.

Before this, I was doing very similar work as head of content at a digital strategy agency. I’d been there for five years and – while I loved my the company and colleagues – I was ready for a change.

I felt that trying to serve my clients, manage my team, contribute to the development of the agency and have a life outside work was becoming a plate-spinning act, in part because I had to travel so much (46 business flights in 2017). I was putting a huge amount of energy and effort in, but wasn’t taking away as much satisfaction as I wanted. I realised that I was lacking a sense of meaning in my work – so I decided to go freelance to see if being my own boss could change that.

In terms of the actual work I do for clients, the skills were totally transferable – I’m doing a lot of the same work as I did before. I’ve had to resurrect some skills I haven’t used for a while (like Google Analytics and Excel) because I worked with specialists who handled those sorts of things before. I also realised that I’d absorbed some skills in things like business development, project management, and client service from my brilliant former colleagues. Knowing how to do a proper proper estimate and how to get to the bottom of what a client needs have been really helpful.

Setting up as a freelancer

I was quite spontaneous when it came to setting up as a freelancer. The idea had been floating around for a while, but I hadn’t thought about it deeply. To paraphrase the immortal words of Craig David: I made my mind up on Wednesday, talked to my husband on Thursday, and handed in my notice on Friday.

As soon as I’d done that, I started planning properly. I spent some time thinking about what my offering would be and who I wanted to work with. I made myself a one-page website as a way of helping me through that thought process. I also spent lots of time talking to friends and peers: using them as a sounding board, and learning from their experiences of freelancing. I wrote a blog post to announce that I was going freelance, which I published and shared on my networks a couple of days after I left my job. This prompted quite a few people to get in touch with leads, which helped me create a pipeline of opportunities. I was working pretty much from day one after I left, which I didn’t expect and was a huge relief from a financial point of view.

“I spent a lot of time researching day rates and agonising about what mine should be”

On the finance and admin side of things, I registered with HMRC early on and tried as best I could to educate myself about tax (I feel like I don’t know nearly enough about this still). I also had a good look at my finances and made myself a new budget for my personal spending to tide me over until I got paid for the first time. I spent a lot of time researching day rates and agonising about what mine should be. A week or two before I went freelance, I set myself up with FreeAgent for my bookkeeping and sorted out my insurance.

There are lots of pros to being freelance. I love being my own boss, the push it’s given me to grow, being able to work when and where I want. The biggest one is that I’m getting the sense of meaning I wanted from my work. My first big new business ‘win’ was for a charity, and it’s really motivating to know that if I do my job right, I can have a positive impact.

The cons are a constant background sense of dread and worry about money, being successful, whether I’m good enough! However, I felt all those things before I was freelance too – the difference is that now, they’re all pretty much solely under my control. That can be empowering or terrifying, depending on the day.

For other people making the switch to freelance, I’d probably suggest not making a decision quite as hastily as I did – I wish I’d spent more time saving up and preparing. I’d also say to try not to take your eye completely off the new business pipeline when you’re getting stuck into a project, you need to have new work coming down the line – this is something I’m trying to get the hang of at the moment too.

Natalie Sharp, Marketing Consultant

Website: Sharp Thinking Marketing

This year I set up Sharp Thinking Marketing, a marketing consultancy based in Tunbridge Wells for small businesses.

Prior to this, I’d been on a career break and had been a full time mum to two girls Lana and Laurel for five years. I had temporarily stepped away from the corporate world, but longed to get back into it. I adore my girls, but wanted to make use of my skills and of course, the money would come in handy.

However, I knew I wanted to do it differently, on my terms, ensuring it fitted around family life. Having moved here six years ago from London, my husband now commutes into London each day and is gone 15 hours each day. So, it was essential for me to still be able to do the nursery and school run, plus I still wanted my children to be able to go to their swimming lessons and dance classes. The natural step was to set up my own business. The plan was to combine my passion for marketing and helping businesses achieve new things, with freelance and flexible working.

“As a marketer, I knew it was important to showcase my skills and practice what I preach”

I found the transition extremely easy and have never looked back. My 15 years’ experience – a mix of agency and client side roles, with some contracting, allowed me to make the move seamlessly. It seemed like the natural transition. I had always wanted to set up my own consultancy.

As a marketer, I knew it was important to showcase my skills and practice what I preach. I started off writing a business plan which helped massively. It enabled me to define my offering and shape my product and services and develop my marketing strategy. I also researched the market to understand my competitors and pricing. Once I had completed this, my first task was to create my brand. I was fortunate enough to be married to a creative director so had access to some invaluable expertise. Although sometimes mixing business with pleasure can be tricky!

I then embarked upon creating a website. This was the exciting part – my dream was finally becoming the reality. Then, I developed all my corporate stationery. Once I felt ready and had a content plan in place, I set up my social media profiles. I now could engage with my target audience. Social media offers so many opportunities, but you need to be committed to it and be patient. Of course, there are all the admin/set up tasks to complete as well so you constantly need to be juggling hats.

The pros and cons of freelancing

There are many pros and cons of flying solo, but the benefits by far out way any disadvantages. You get to choose where and when you work (within reason!). Most importantly, it is extremely motivating and empowering to be your own boss. Only you are in the driving seat and deciding your next move. Plus, it allows me to work flexibly from home around the children.

On the downside, it can be tough generating business and wearing multiple hats – having to do all your own sales and marketing, finance, IT and admin. Of course you don’t get any company benefits such as holiday or sick pay. It is not for everyone. If you lone to be part of a team and thrive off working closely with other team members, then the freelance lifestyle can sometimes be isolating. However, there are things you can do to ensure you don’t feel alone and remind yourself, there are hundreds of people in the same position as you. Being part of a network can help. Join local networking groups in your area and online.

My advice would be, if you are thinking about going freelance, go for it, I’ve never looked back. But, be patient, and be prepared to put the work in. It takes time to establish yourself. Remind yourself continuously, it will be worth it in the long run.

Freelancers in the UK – Who are they?

• There are about 1.9 million of them: They contribute some £150 billion to the broad economy
• There are more men than women: The ratio was approximately 3:2 at the beginning of the 2020s, although the percentage of female freelancers has increased steadily since the 1990s and continues to edge towards parity
• 15 per cent of them are working mums: That’s just over a quarter of a million mothers balancing freelance work and children.
• Almost half of them are aged between 40 and 59: The average age of a UK freelancer is estimated to be 48 years. Over 60s represent c. 22 per cent of the total.
• The biggest group by broad occupation are those involved in the ‘Artistic, Literary, and Media’ sectors: These freelancers represented approximately 17 per cent of the total. The next biggest occupational group was ‘Managers and Directors’ (12 per cent), followed by ‘Teaching and Education professionals’ (7 per cent), and ‘Sports and Fitness’ (5 per cent).
• Self employed workers reached a peak at the end of 2020: After year-on-year consistent growth for two decades, the Covid pandemic saw numbers tumble to 2015 levels (c. 4.4 million as of May 2023)

Further Resources on Going Freelance

Freelancer loneliness and how to tackle it – We explore the extent of freelancer loneliness in the UK and what three solo entrepreneurs do to deal with the issue.

The top 5 UK cities to be a freelancer – Research into which cities are most conducive for those looking to pursue a more flexible work life.

A beginner’s guide to starting a freelance career – Dave Chaplin explains the basics on how to set your freelance rate, the importance of tailoring your CV, and where to find your next project.

Number of self-employed workers in the UK – Statista lays out the numbers from 1992 to 2023. Freelancers typically represent approximately 45 per cent of the self employed total in any given year.

Healing the relationship between businesses and freelancers – George Olver, co-founder of Movidiam, explores why poor practices regarding freelancers could be stifling the global creative industry.

Useful organisations for support and advice

IPSE – The Association of Independent Professionals and the Self-Employed
FCSA – The Freelancer & Contractor Services Association
Leapers – Supporting the mental health of freelancers and the self-employed

The post A small business guide to going freelance appeared first on Small Business UK.

So, you have made the decision to start your own business, great! Let’s work on turning your idea into a reality. There is a lot to starting your business properly, this is why we have put together this 18-item checklist you’ll need to do before you start your company all the way through to your regular routine once you have formed your limited company.

Small Business Pro is the ideal tool for you when you’re starting your business. It will help with the heavy lifting of managing customers, taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.

You can find out more about Small Business Pro here.

Contents

The steps before you start:

1. Research
2. Think of a name
3. Secure website domain
4. Write a business plan
5. Work out finance needed
6. Define directors and responsibilities
7. Assess strengths and weaknesses
8. Define business structure
9. Form a limited company

 

The steps after you start:

10. Open a business bank account
11. Build a brand
12. Create a website
13. Plan your marketing activities
14. Find premises
15. Get Insurance
16. Buy tools to help you do the job
17. Hire employees
18. Become a creature of habit

Checklist for before you start your company

#1 – Research

You should research the viability of your business idea, as well as who your target market is. You will also need to research who your competitors are and how your business idea differentiates from them. Once you have done this you should test your product to make sure your product is right for your target market and there is a need for your product or service.

You can find some testing methods in our previous article Escaping the nine to five: can I turn my passion into my business?

#2 – Think of a name

Your business name can come to you instantly or it may take longer to come up with. Either way you need to carefully consider what your business name will be as it can have a huge effect on how your business is received by your customers.

Here are a few tips to take into consideration when deciding on your business name:

• Keep your customers in mind – the name must appeal to your customers
• Think big – don’t restrict yourself to things like location, your business could go global
• Web friendly – how will your company name look as a web address and is it available?
• Be precise – choose a name that reflects your products or services and is not confusing
• Be unique – differentiate yourself from your competitors and stand out.

When you form a limited company, your business name is protected.

#3 – Secure your website domain

Securing a domain name should be considered before starting your business. Your domain name should be easily relatable to your business as well as memorable. Domains are relatively inexpensive.

#4 – Write a business plan

Writing a business plan gets everything to do with your new business idea in order. It helps keep you organised and focused at the critical development stage of your business.

A typical business plan includes:

• Market research
• Customer analysis
• Competitor analysis
• Product / service information
• Organisational structure
• Financial information

#5 – Work out finance needed

Some business can be started by using personal finances, some require more. You need to realistically figure out how much you will need to successfully start your business, this includes everything from premises to cost of living. You also need to consider the fact you may not make a profit for some time.

#6 – Define your directors and responsibilities

You may be starting your business alone, great, you will be the director and know that you hold all responsibilities. If you are starting a business with two or more people, you need to choose your company directors and what their responsibilities are when you form a limited company.

#7 – Assess your strengths and weaknesses

If you are starting your business on your own, you will need to be a master of certain skills in order to give your business the best chance of success. By figuring out if you have the necessary skills in areas such as organisation, communication, finance, IT, sales will give you a good idea if you need training to effectively run your business.

#8 – Define your business structure

Deciding what sort of business, you want to own is very important, you could be a sole trader, partnership or a limited company. Each one has its advantages but as limited company you have limited liability, they are tax efficient, potential credibility and prestige and pension possibilities.

#9 – Form your limited company

Once you have checked off all the above, it’s time to form your limited company. See the following articles for advice on this:

• Registering a company name

– A Small Business guide

• Forming a company: Choose your trading type

– Joanne Harris of accountants Nixon Williams shows you the different options when it comes to setting up on your own and working for yourself

• Employing company formation agents to ensure success

– Reasons for your small business to employ registered limited company formation agents.

Checklist for after you’ve formed your company

#10 – Open a business bank account

Now that you have a limited company, your finances must be separate. This is where business bank accounts come in. When selecting your business bank account keep an eye out for charges that may apply and what facilities the bank offer. A lot of banks offer other perks such as cashback too.

#11 – Build a brand

A brand is like your company’s identity or personality. This means you need to convey more than just your logo and themes; you need to convey your brands core values and beliefs in everything that you do and make sure your stake holders and customers understand them.

#12 – Create a website and get online

Building a website is not necessarily essential for every business, but a website has its advantages. It extends your reach to potential customers and customers tend to check out a business’s credentials, products and services by looking at a business’s website and online reviews. If your budget does not cover building a full website, you could consider building a holding page with key information and contact details.

#13 – Plan your marketing activities

You have a great product or service, but how will people know about it? With a marketing plan you should aim to increase your brand awareness and grow your business. Your marketing strategy should have clear objectives, messaging and target audience, as well as the marketing channels you will use.

#14 – Find your premises

You may need to start your business in commercial premises should you need the space for your business to grow, or you may only need to work from home. Either way you should consider the facilities, the proximity to your target market, transport links, licences required, and insurance policies needed.

If you decide to start your business from your home, you should take a look at The GOAT (greatest of all time) guide on how to start a home business. This guide will help you in setting up your business at your home.

You should also consider that your private address will be on the Companies House public register for everyone to see, should you have your registered address as your home address. To protect your private address, when you form a company with LegalZoom, you will get exclusive access to our Registered Agent service which protects your privacy.

#15 – Get insurance

Insurance for your business is critical and you need to get professional advice on what policies you need as they vary from industry to industry, such as liability insurances like professional liability and products liability which vary depending on your industry. You will also need to consider property and contents insurance, business interruption and theft.

#16 – Buy the tools to help you do the job

You will need tools and equipment that help you effectively produce products or enable you to provide a high-quality service. You will need to shop around to find the best deals and find out which tools and equipment are best suited for your needs. This can also administrative requirements e.g. telephone and IT requirements as well as fixtures and fittings.

Make sure you are on top of your financial data from the start. Accounting software will help you with minimizing you administration time. A few tools for Startups we recommend are:

#17 – Hire employees

You should hire someone to fulfil a role that requires a specific skillset. You will not only need to consider the financial implications of an employee’s salary; you will need to consider PAYE and National Insurance contributions along with pension contributions.

#18 – Become a creature of habit

There are certain aspects of your business that are one-off tasks. There are also other tasks that will require regular attention, some of which are:

• Updating your business plan
• Adapting you marketing strategy based on successes and failures
• Refine your target market
• Research new competitors and potential target markets
• HMRC returns
• Confirmation statements
• Up to date insurance policies

Summary and More Guides

Hopefully this checklist has helped get an idea of how to get your business off to the best start, even before you start your business, and the key areas to focus on and organise once you have started your company.

You should also check out our Start a New Business section which contains one set of guides on ‘Setting up your business‘ and another on ‘Getting your business going‘.

The post The complete checklist on starting a business the simple way appeared first on Small Business UK.

Thinking of starting a business online? Or maybe you have a side hustle that’s taking on a life of its own? Then you’re in good company. A recent study by FreeAgent revealed that 64 per cent of British adults have plans to start their own business in the future, while insurance giant Aviva has discovered one in five of us have started a side hustle since 2020.

Despite the challenges businesses are facing at present, a new generation of entrepreneurs is emerging as people look to create a new lifestyle or a new income stream to supplement their main job. And increasingly, thanks to the internet, these ventures are being launched online. In this digital age, often no physical shop front is needed to sell goods, skills and services.

Although starting a business and trading has been revolutionised by the internet, consumer laws and obligations still apply. And making sure your venture stays on the right side of the law is more complex than many realise.

Just like traditional brick and mortar operations, online start-ups need to understand all their obligations to ensure they trade fairly, protect their customers and avoid penalties for breaching consumer law. This is why Business Companion, a free online resource published by the Chartered Trading Standards Institute (CTSI) and backed by the Government, has created a new guide to Starting an Online Business.

Small Business Pro has a 24/7 legal and tax line that you can call if you need dedicated expert support. It will also help with the heavy lifting of managing customers, taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.

You can find out more about Small Business Pro here.

The resource is designed to give businesses and individuals an accessible and easy-to-understand introduction to the UK’s consumer and trading laws.

Structured in easily digested sections, the guide explains the differences between selling goods online as a business or as an individual and explores the different obligations that must be adhered to under consumer protection law.

In the ‘Am I in business?’ section, the guide discusses how actually being ‘in business’ is defined in law. And an easily referenced flowchart is included to walk you through the different circumstances and what you need to do to comply with the relevant laws. There’s also a very useful FAQ section.

Not only is it invaluable information for an online start-up, but if you’re an individual selling items through an online marketplace such as eBay or Instagram, once you reach a certain scale, you could be considered to be a business. Consumer law will then apply to your activities.

Once you’ve established the nature of your venture, the second section of the guidance takes you through what you need to do next, covering the creation of terms and conditions and areas of legal compliance.

Part three of the guide discusses the model terms that can be used in contracts for selling to consumers online. The resource explains why contract terms are important and provides terms that can be used as a template by traders to help ensure they comply with consumer protection law.

This essential resource is available in website format and as a downloadable PDF booklet. Starting an Online Business is a must-have guide for anyone who requires quick, reliable and up-to-date answers to a query about the nature of their business and their legal obligations. As with all the information available on Business Companion, it is written by consumer law experts in plain English – and it’s free!

—

About Business Companion

Business Companion is a free online resource published by the Chartered Trading Standards Institute (CTSI) with the support of the Department for Business, Energy and Industrial Strategy (BEIS). It provides businesses of all sizes and across all sectors with expert guidance on a wide range of consumer protection law issues.

Read more

Top five online businesses you can start today

The post Make sure your online start-up complies with consumer law with Business Companion appeared first on Small Business UK.

Starting a coffee shop is at once exciting and daunting – there’s a lot to factor in before you even start writing your business plan.

This guide will take you through the main steps of how to start your own coffee shop, with comments from experts in the industry and links to further information.

What should be included in my coffee shop business plan?

The first part of your start-up is always the same: your business plan.

Your coffee shop business plan will look very similar to any other. It should include:

• Your business proposition
• Unique selling point (USP)
• Target customer
• Marketing strategy
• Sources of funding
• Overheads
• Financial forecasts

What’s different with a coffee shop is that you’ll need to talk about what kind of coffee you’re going to use and what’s included in your menu. Is it food or drink that you expect to be your biggest money maker?

Along with the proposition, you should include your business’ purpose. Many businesses now launch with an ethical core. Not only will having your purpose in your business plan keep you on track with fulfilling your goals, but it will also help to attract ethical investors.

You must have these points nailed down before you approach partner companies. “The first questions we ask are, ‘What food are you going to serve? What kind of volume do you want to do?’ Sometimes they haven’t quite got that down on paper,” said Lloyd, founder of takeaway packaging supplier, Catering24. “They need to work out the portions of food to costings, to then work out what volume they need to do per day to cover their premises or their van rental or pitch space and rental.

“It’s the nitty gritty details that we try and get down to because sometimes we can offer them a container that’s 30p per portion or one that’s 10p per portion. That starts to make the difference between whether the takeaway or coffee shop is actually going to be profitable from day one.

They need to know the cost per unit of everything that it takes – from ingredients all the way through to a stirrer to go with that coffee. It must be all priced in. “I can go to a van on the side of the road and get a £1 coffee from a polystyrene cup,” said Lloyds. “The cheap cup costs 10p and is not very ergonomically friendly. It’s actually got quite good insulating in the cup. If I go for that same quality of coffee in a 15p cup, I can sell it for £1.70 from the same brand, but it’s the perception of value that the customer is getting. Now it’s paper, it has a better fitting lid, you can actually sip out of it without it going over your clothes.”

Your business proposition and USP

Coffee shops are a popular trade and it’ll take ingenuity to stand out. This is where your business proposition and USP come in.

People watching, a popular pastime in cafés, could be illuminating here. “If you find this shop that you like, grab a coffee, sit outside for a few hours and just see how many people will pass,” said Stuart Wilson, founder of Lost Sheep Coffee. Yes, that’s a bit weird. But you can get an idea for them and who your target customer is.”

It’s also wise to know about current and upcoming trends in coffee and beyond. “For me, the next big thing is going to be your speciality coffees and your iced coffees. If I was a coffee shop owner now, I’d be planning for my iced coffee offering to be strong next year,” said Wilson. “All those sorts of things and your alcoholic coffees, like espresso martini. We talked to a few brewers actually about doing coffee-infused drinks, beers and stuff.”

Lloyd has noticed another trend coming from the rise in takeaways: “Afternoon tea boxes are massive at the moment. I Imagine someone starting out at the minute might not think of that first thing. They might think about takeaway coffee, because that’s what the norm is for a coffee shop.”

Décor can bring people into your coffee shop and support your USP. Think palm trees, retro arcade games or neon signs. For the basics, you can keep costs down buying furnishings second hand – it has added bonuses of being sustainable and giving your coffee shop a quirky charm.

Small Business Pro is the ideal tool for you when you’re starting your business. It will help with the heavy lifting of managing customers, taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.

You can find out more about Small Business Pro here.

Where should I should set up my coffee shop?

This will depend on a few things: where you’re based, what units are available to you and what your goals are for the business.

Most will go for a traditional coffee house set-up. This a bricks and mortar café with indoor seating. Finding a location rests on what you want your business to be and where your customers are. Try Rightmove as it can show you spots that could potentially become your coffee shop while sites like Floorplanner will help you visualise where everything will be placed.

The other option is somewhat more mobile. Having a cart, kiosk or van has the advantage of being in a busy area like a train station or bus terminal for a much lower cost. Plus, you can opt for a fixed spot every day or, in the case of the cart or van, choose different spots and hit popular events like festivals. Lost Sheep Coffee started as a micro van back in 2012. Wilson tells us more: “For us, the cheapest way to do our [then] hobby was small, hence why it started with a three-wheeled coffee van. I set the whole thing up for less than £10,000. We were able to get a pitch slap bang in the middle of the high street in Canterbury, which, to this day, people still remember the cart. From a marketing perspective, it was fantastic.”

Why do people go for bricks and mortar coffee shops? “I think to be honest, it’s tradition,” said Wilson. “A lot of people don’t think of kiosks as a proper business. It’s just like a glorified market. Some people want the bricks and mortar, if you will, to feel validated.

“A kiosk doesn’t always bring that for someone. They are becoming a lot more popular now that you’ve got your Costas and your Greggs in the service stations. It has been popularised in the last four or five years.”

How much money will I need?

Start-Up Loans says that it can cost £20,000-£100,000 to start up a coffee shop depending on its size, offering and location.

Though it needn’t be as pricey. “A lot of people these days are taking on affordable units. So actually, they can start becoming a bit more accessible,” said Wilson. “A good selection of people who are starting out as a coffee shop these days are taken on premises that might be rates exempt, basically, because of the current government’s side of things.”

These could have perks like giving you three months free rent. They’re already fitted with water and electricity too. “I’ve got a customer who’s just launching one in Folkstone and she’s pretty much doing it for less than £15,000. It’s a full-size shop,” he added.

There are properties like this in the south east of England, but you should be prioritising areas that you know and like. If you do find such an affordable unit, just ask what your landlord can do for you.

However, it can be done more cheaply if you opt for a kiosk. “That chaos in Canterbury, that is a lot of work still done by me to be honest with you, but it’s still less – more like a £30,000 project” said Wilson. “The shop we had in Ashford was a 750 square foot shop and to kit that out from a shell with everything came in at around £15,000-60,000.”

He added that they’re looking into a bricks and mortar shop and it would cost £100,000 a year just on rent. The kiosk, just around the corner, costs a fraction. It could be worth going for the full shop as they generate more revenue. “You’ve got the kiosk, which you’d take X amount a year, and then your shop should be probably taking more like 700,000x,” said Stu. “You pay more, but you actually end up with a higher revenue stream.” Again, weigh up the costs and see which option works best for you.

As for your overall cash flow, if the rent is 15 per cent more than your projected rates and sales, it’ll be difficult to make a profit. Staff should not exceed 50 per cent of overheads, according to Start Up Loans.

Choosing the right coffee

Now, arguably the most important part of your coffee shop business.

Are you going single origin or a blend? Does the target customer decide the coffee or vice versa? Are you targeting regulars or passing trade?

“The product itself needs to be relevant to the to the person who owns the business, but also the person drinking it,” said James Sweeting, founder of coffee roasters, Lincoln & York. “These tend not to be one off purchases. They have a very high level of repeat client. I’m guessing that 90 per cent are likely repeat visitors.”

He added that you should really know your customer. “I think these days, you tend to think of an artisanal-type coffee shop, with hand-roasted coffee and healthy cake and all that kind of stuff,” said Sweeting. “Of course, it could be a coffee shop in a shopping centre, or it could be in another format that’s not necessarily Metropolitan. That’s why the coffee needs to be relevant.”

He does stress that there should be a ‘high-quality aspiration’, no matter if the coffee is espresso-based, filter or cold brew. “It should probably be a 100 per cent Arabica coffee blend, or singularity, or a blend of Arabica and Robusta beans that will produce a great espresso coffee. Quite often, you do need an element of reverse engineering to do that. Anyone who says otherwise doesn’t really know the full 360 degrees of the coffee business.”

The coffee shouldn’t just reflect you as a business owner, it should also reflect the values and purpose of the business, as discussed earlier. If you’re claiming that you’re ethical, you need to root through your supply chains to make sure they have the same standards as you.

“You’ve got to have an idea of the standards – where it’s grown, some story element. Have you paid a fair price to your supplier? Has the supplier, in turn, paid their fair price to the grower?” said Sweeting. “if you buy something cheap, somebody has possibly been exploited. Can you defend yourself as a business if somebody walked in and said to a coffee shop and asked, ‘Where do you get your coffee from?’ If you can’t at least give an answer, you haven’t done the homework.”

A quick way to spot a supplier or roaster’s standards is to look out for certifications, which they’ll likely display on their website. Fairtrade means that the group of growers has been paid a known price level as well as covering elements of training and origin. Rainforest Alliance is more focused on the environmental management of the growing.

You should ask your supplier how the coffee will be roasted and how it behaves under certain types of roast. “You should ask questions on along those lines and say, ‘Well, what difference does it make if you roast it slowly and roast it dark? What does that do to the taste? And what will my consumer think of that when I make coffee to it with themes like that?’” said Sweeting.

Don’t forget to factor in the freshness of coffee. “There are one or two myths around whether coffee should be freshly roasted or not,” he added. “Well, of course, if you see ‘freshly roasted’ on a pack, well, it was definitely true when the rest of the pack was freshly roasted. By the time the consumer gets it, it might not be the case.

“Now, for a coffee shop, the ideal gestation period is probably two weeks to six weeks. The reason for that is and you could say well, ten days to 30 or 35. If coffee is very fresh, i.e. roasted one day, then consumed the next, the blend itself hasn’t had chance to settle down. When you get it into a grinder, you know the grinding characteristics will be different if you roast today, it’s a day old versus one that’s ten days old.” Ensuring it’s settled for around the same period each time will give your coffee more consistency, giving a consistent taste experience to your regulars.

Finally, there are questions about what certain roasters can offer. Some of the craft roasters can do very small quantities, perhaps up to six kilos. However, other businesses would want to be able to drop off around 20 kilos plus artillery products to make it worthwhile. “There’s a balance between pure coffee freshness and sensible logistics as well,” said Sweeting. “I think a coffee shop probably should be able to get a delivery every fortnight.”

If you’re struggling to commit to one supplier, you can sample a variety to see what their offerings are like. “Another good little way of coming across roasters you might want to work with is setting up subscription services,” said Wilson. “There are so many companies now that will send, say, three bags a month from different speciality coffee roasters from around the country. You could look into setting up a speciality coffee shop. Sign up for one of these for a few months or go old school and pick up the phone and just ask for samples.”

What coffee shop equipment should I be buying?

Now you want to ask yourself what equipment you’ll be buying and whether it will be new or second hand. It’s also important to look at the lifespan or warrantee.

Depending on what you’re offering, this could include:

• Espresso machine – £1,500 to £10,000 to buy. You can also lease for around £5 a day
• Cooking appliances
• Tea brewer
• POS system
• Water softener, depending on location
• Dishwasher
• Coffee bean grinder
• Fridge/freezer
• Blender
• Microwave
• Toaster/panini press
• WiFi router

It’s not just the purchase you’re thinking about. It’s also what you need to clean your equipment and how costly that’s going to be time-wise. “There are a lot there’s lots of great choices of coffee machines out there. It can be fully automatic, or semi-automatic or fully manual, but maintain them very well. It’s got to be scrupulously clean,” said Sweeting.

Some firms offer hospitality of coffee shop-specific point of sale (POS) systems. Read more at The essential guide to point of sale (POS) systems.

Finding the right suppliers for goods other than coffee is overlooked. Spend some time researching different suppliers, focusing on their story and values as well as their products.

“Try and get an idea of their history, how many years they’ve been trading. You want them to be big enough to support you when you’re starting out,” said Lloyd. “The long-term supply is lots of knowledge. They usually have customer service and salespeople that have been speaking to businesses for decades. Often, they have great ideas.”

Look for positive testimonials and third-party certifications to tell you what your supplier is like. “These are little cues to tell a customer that this is a reputable company, something that they can rely on,” said Lloyd. “They’re doing things properly in terms of sourcing supply. These products come from all over the world, sometimes it’s very difficult to for a café or coffee shop, to know where their products genuinely come from.”

Hiring staff and training

The size and goals of your coffee shop will help you decide which staff members you need to hire and who comes first.

You’ve got baristas and chefs/cooks of course, but your staff could extend to managerial roles, marketing and accounting, to name three. If you’re hiring them, your manager and marketing specialist should be recruited first, according to Rebecca Siciliano, managing director of hospitality recruitment firm, Tiger Recruitment. They’ll help you lay out the ground-level stuff before your café even opens.

It’s a good idea to have barista training yourself, even if you’re not the one making the coffee. But your baristas are incredibly valuable to your business – coffee shop owners often look for somebody who is already trained. However, training can vary, so it’s up to you to ask the right questions. “If it’s a coffee shop [they worked at before], fine.” said Wilson. He would then ask for the name of the coffee shop and look them up on Google and/or TripAdvisor to read the reviews and see pictures of the coffee. “You know, if it’s a greasy spoon or something, and they’ve made a couple of coffees that are frothy, that’s not barista training,” he said. “If they’re working for a well-known coffee shop, and you know they take their training seriously, then great.

“I then say, ‘Have you got any photos of your art?’ With someone who’s a barista who’s proud to be a barista, I guarantee you has photos on their phone. I then say, ‘Can you email it to me?’”

He added that the final thing during interview is getting them on the machine to make a coffee in front of you – the one they’re most comfortable making. “You can see what level of training they’re going to be at straight away,” he said.

If you can’t get hold of staff who are already trained, speak to your coffee roaster. They may offer training themselves or at least be able to give you some reputable names.

Attracting and retaining staff can be a real task across the hospitality industry, so try and offer what perks you can. “You have to offer a little bit more to be able to attract those candidates, like higher pay,” said Siciliano. “Then it’s also some of the other benefits. In fact, there’s one coffee shop we know of where they’ve got one designated day that all staff have been told that they can have the day off, just to acknowledge that they know how hard they’ve been working.” Flexible working is important too, with staff looking for leeway to have days off for important events or to be able to work during the day and have evenings off.

She also recommends posting roles on social media to target people who may already be interested in your brand.

With all this said, you should avoid overstaffing. “I’ve walked into a new café and they’ve got a 15-seat café and they’ve got five people working,” said Wilson. “The biggest, quickest way to kill any new business is to waste all your money on staffing costs. I mean, don’t get me wrong, you want to recruit people, but you’re no good to anyone if you go out of business.”

One way to tackle this is to hire temporary staff for busier periods. “Temporary staff can be ‘dialled up’ and ‘dialled down’ according to demand,” said Novo Constare, co-founder of Indeed Flex. “This makes them invaluable during busy periods when it’s hard to find enough permanent staff. Their flexibility means there’s no requirement to keep using them during quieter periods.

“Having ready access to good temporary staff also gives a coffee shop a defence against staff absences. A big pool of trained, vetted – and above all, available – workers can save the day at short notice if the shop’s regular staff call in sick.”

Legal considerations

This section will be dry but could save you an inordinate amount of hassle later on.

First off, register your business. This can be done as a limited company, as a sole trader or a legal partnership.

> See also: Should I go sole trader, partnership or limited company?

You must register your coffee shop through the government website at least 28 days before opening. It’s free to register and you can’t be refused.

Next, coffee shop licences. If the premises is not already classed as a coffee or a tea shop, you’ll need to get planning permission. Coffee shops will mostly be classed as an A3 premises which permit food and non-alcoholic beverages to be consumed on the premises. Find out what need with gov.uk’s licence finder.

There’s a lot of health and safety paperwork to get through. Visit the Food Standards Agency (FSA) for more information about your business’ needs.

The right insurance is crucial and there are a few different types.

Public liability insurance: Cover for claims made against you from employees or clients if something happens to them or their property is damaged as a result of your work. It can be an event which took place on your premises or off-site

Employers’ liability insurance: Protects you against claims for accidents involving staff and customers and covers issues with appliances and other breakages.

Deterioration of stock insurance: Covers damage to goods stored in specified cold storage spaces, which can happen because of a change in temperature caused by a breakdown of refrigeration equipment or accidental damage to it.

Contents insurance: Covers the contents of your coffee shop if they’re lost, damaged or stolen, including fixtures, fittings and your employees’ personal possessions.

Business interruption insurance: Could cover Covid-like events as well as weather-based events like flooding.

Different insurers will have different core packages and add-ons. Remember that, if applicable, your business insurance will need to cover takeaways as well as your delivery drivers. This also applies to alcoholic takeaway drinks and the provision of late-night refreshments in your establishment.

A couple of extras, should you need them. Get an entertainment license if you plan to play music in your caff. See PRS for more.

Finally, know about your staff’s employment rights – this includes working hours, holiday and other leave.

Marketing your coffee shop

Let’s start off with your branding – make sure it’s consistent online and offline. Having an instantly recognisable logo that you can put on all of your marketing material will help customers remember you.

For your offline marketing, this could be well-placed signage like bus stop advertising near your site. You’ve likely seen something similar with fast food restaurants who have signs with their logo and an arrow pointing towards their nearest restaurant.

Entice locals and passing trade into your shop with free samples of cake (Covid restrictions apply at time of writing). Drive more brand loyalty by joining a food event or hosting a coffee making/bakery classes. This can be in-person or online. Give participants an exclusive discount on their next coffee and cake or your in-store products.

Of course, it’s essential to establish regulars – they’re a great source of word-of-mouth advertising too. Treat them well by getting to know them and learning their regular order. Try getting in contact with local groups such as parent and toddler clubs or a nearby sports team – you can look at meetup websites for this – and offer them a regular space at quieter time to build up that customer base, making yourself the go-to for the locals. Having discounts and deals for quieter times and a loyalty scheme for regulars will drive footfall.

As for your online offering, you really need to consider having a website and being on at least one social media platform. This is especially true if you’re in the city and have a lot of competition. An easy starting point is getting on Google My Business. This is the widget you see when you type something like ‘coffee shops near me’ into the search engine. It includes your opening hours, images of your café and customer reviews.

Make sure you have a user-friendly and detailed website for customers to visit. They can find out more about you and your business story as well as your menu and info on upcoming events. We’ve got loads of guides to building a website, but here’s one tip: remember your keywords. This is what people will be searching when they’re trying to find businesses like yours. For example, include ‘afternoon tea’ and ‘high tea’ if that’s one of your main draws.

Take beautiful pictures of your food and drink for your website and social media. Customers will get a better sense of what you’re offering, and pictures may tempt them into coming to your café. Driving loyalty is important online too – you can achieve this through your newsletter. Offer an exclusive discount off their first booking or order when they sign up.

Plan for bigger events when your coffee shop will be busy. “They need to be looking ahead to Christmas. Big style,” said Lloyd. “This Christmas will be the biggest hospitality boom we predict for years. You need to be looking to Christmas and what’s going to make you unique.” He suggests speciality coffees like gingerbread lattes or other special syrups.

“We do our own Christmas cups for the independents. They can then play a massive part in the café’s own marketing.”

He warns of a ‘humongous drop in January’. “You’ve got to make it really work October, November, December. Then cash off, have a good Christmas. February and March will be when it starts to pick back up again.”

So, is opening a new coffee shop right for me?

As you can see, setting up a café is quite a process but don’t let that put you off if you believe in your idea.

Reading industry magazines like Caffeine and going to coffee events with other baristas and roasters will give you an introduction to the community. If you’re still unsure, try working in someone else’s coffee shop for a few days to gauge if it’s something you could do long-term.

For a transition into the coffee shop world, you could open a franchise such as Costa instead. Read Buying a franchise: the key considerations to find out more.

Trade Shows

Here are some of the key trade events for coffee shop or cafe owners. As well as the speciality coffee-focused shows there are also the more general events featuring foods and related drinks products of interest to shop owners.

Food & Drink Trade Shows for Coffee Shop Owners

Further reading

Five successful business ideas for 2021

The post How to start your own coffee shop appeared first on Small Business UK.

The Launch Lessons podcast from Airwallex is aimed at entrepreneurs who are navigating the rocky road to success, and offers advice from people who have been there, done that, and got the company branded t-shirt. 

Each episode is a conversation with a startup founder, and delves into the good, bad and ugly lessons they learned whilst launching their businesses. 

Here are our biggest takeaways. 

Connections will get you far, but only if your product is good

Larry Gadea founded Envoy — a workplace visitor booking platform — at the height of the pandemic. 

Having previously worked as an engineer at Google and Twitter, Larry leveraged his connections to get his product into 15,000 offices worldwide, including Slack, Pinterest and Hulu. In January 2022, the company reached unicorn status with a $1.4bn valuation. 

“You get to know a lot of people by working, I guess, at Google and Twitter,” says Larry. “When I needed them, I just went up to them like, hey guys, look at this, and they’re like, oh, this is really cool. It’s that cycle that has gotten us now into crazy amounts of offices.”

Having a network of Silicon Valley employees is certainly useful, but Larry is keen to stress that it can only get you so far. If your product isn’t slick, your friends aren’t going to recommend it to their employers. 

Larry takes UX very seriously, and even started hanging around his client’s offices for hours on end to see how people interacted with his product. 

“Me and the receptionist would have a deal, if anybody asks, just say I’m an interview candidate waiting for my slot or something,” he says. “You have to be borderline maniacal at just making sure you are doing the absolute best possible thing, because software is only software.” 

Listen to the full podcast episode here: Reaching Unicorn Status During a Pandemic, with Larry Gadea, Founder and CEO, Envoy 

Just because you fail, it doesn’t mean it’s the end of the road

Kevin Spain launched an internet business right before the .com crash. 

Straight out of business school, he set up a company called adMadison which offered a set of online tools to help small businesses design and execute advertising campaigns. 

“Unfortunately, by the time we got that up and going, the whole market was really crashing,” says Kevin. “And the customers we had, many of them started cutting marketing campaigns. And so there was less of a need for what we were building at that point and also much more challenging at that point to raise capital. So our business evaporated.”

As his company unravelled, Kevin dealt with feelings of failure and loss of identity. But ultimately he picked himself back up, capitalised on the learnings he’d gained from his experience, and moved on to his next project. Since then he has held senior positions at EA and Microsoft, and he is now a General Partner at Emergence Capital, a venture capital firm specialising in early-stage enterprise software companies. 

“I think a founder’s identity is wrapped up in the company that they have created,” says Kevin. “I’m not going to say [failure] doesn’t matter, right? It does matter in the sense, I think you actually learn a lot from it, but it doesn’t matter in the sense that it’s not who you are. You are not a failure, right? There’s so much in your future to be excited about. And I always encourage people to reflect on failure. What have they learned from it?”

Listen to the full podcast episode here: The Venture Capital Perspective with Kevin Spain, General Partner, Emergence Capital

Be honest about the challenges in your startup during early-stage recruitment

Ajeet Singh has founded two multi-million-dollar companies, Nuntanix and ThoughtSpot.  

During the first two years of ThoughtSpot’s growth, Ajeet had countless coffees with potential employees at a Starbucks near his office. During those meetings, Ajeet was careful not to do a sales pitch. He didn’t just want to recruit people that would help him achieve his goals, he wanted to recruit people that would get the most out of working for his company. 

“I spend a lot of time just learning about people. What drives them, what motivates them, and not everybody’s a fit for a startup because it comes with a certain risk, reward, commitment, etcetera,” says Ajeet. “You have to make sure that you are recruiting the right people who will thrive in that environment.” 

Ajeet is honest with the people he interviews, he tells them about the challenges they will face if they join his company. His aim is to find employees whose life goals fit with the opportunities he can give them.

“I do my best to make sure that people are not feeling that, oh, ‘I made a mistake’. I want them to know the good, bad, ugly. I want to tell them about all the problems we have, because we have problems. And that’s why we are recruiting direct people,” says Ajeet. 

Listen to the full podcast episode here: Differentiating on Culture with Ajeet Singh, Co-Founder and Executive Chairman, ThoughtSpot

Being a good mentor matters

Brett Allred is an entrepreneur and software developer, he is currently Chief Product Officer at MX. 

Before he started working at MX, Brett met Brandon Dewitt. Brandon was the Co-Founder and CTO at MX. On meeting him, Brett was blown away by his intelligence and his deep understanding of the principles of computer science. He knew immediately that he wanted to work with him.

“I am a believer that you are the average of the five people that you spend the most time with,” says Brett. “Just by being around good people and being open and flexible, you’ll level up. That’s a good, strong way to level up your own skills.” 

Brett counted Brandon as a friend and mentor for many years, before Brandon tragically lost his life to cancer in 2021. Brett credits Brandon with teaching him to be a better leader. 

“I could sing Brandon’s praises my whole life and what I learned from him, but he just had this really profound ability to look at the individual and see the next three iterations of that individual and then show them the next three iterations of themself,” says Brett. 

Listen to the full podcast episode here: The Founder’s Legacy with Brett Allred, Chief Product Officer, MX

You can listen to all episodes of the Launch Lessons podcast on Spotify.

The post What we’ve learned from startup founders on the Launch Lessons podcast appeared first on Small Business UK.

Following COP26 and in the lead up to COP27, awareness of environmental issues continues to grow as governments, brands and activists lead more and more public campaigns.

This is impacting consumer purchasing habits, including where they shop and how much they are willing to spend. It is therefore vital everyone, from large organisations to smaller microbusinesses, improves their sustainability practices.

This shift towards addressing the urgent challenge of climate change has impacted nearly every aspect of our lives, especially commerce. Shopping ‘with a conscience’ from more sustainable and ethical brands remains a priority for consumers in spite of the cost of living crisis.

Recent research by GoDaddy revealed that 58 per cent are more likely to shop with a small business if it has strong sustainability credentials, while 50 per cent have already made a conscious effort to shop with small, sustainable businesses over the past year.  

>See also: Your customers care about sustainability: here’s how your business can too

GoDaddy aims to support microbusinesses to embed sustainability into their operations and drive growth. We also recognise that the entrepreneurial journey isn’t the same for everyone, however when speaking to microbusiness owners there are a few challenges they have encountered when it comes to sustainability.

The first challenge is that they rarely have the right expertise when it comes to sustainable business practices, so developing a strategy to achieve this can be overwhelming.

The second is financing. Switching to environmentally friendly suppliers can impact revenue. Sustainable packaging can be more costly than alternatives and microbusiness owners have expressed concerns that by increasing prices they risk losing customers to cheaper competitors.

>See also: The importance of custom and sustainable packaging when growing your brand

The final barrier is that many businesses, especially microbusinesses, operate out of spaces that are not under their control. For example, builders and handymen operate in the workplaces of their clients whereas sole traders may run their business in a shared office space.

But while some microbusinesses may be daunted by the prospect of going greener, they should consider the long-term benefits it brings. Thirty per cent of consumers say they plan to shop exclusively with sustainable businesses in the future, so investment now could mean increased customers and profits later.

Small business owners are often competing with large businesses that have more suppliers, cheaper products, and greater funding. Tapping into sustainable practices provides a unique opportunity for these smaller businesses to stand out against larger competitors. Our research shows that 42 per cent of consumers said they are more likely to shop with a small retailer over a larger cheaper competitor if it has strong sustainability credentials.

As expectations around corporate responsibility rise, transparency becomes a necessity for businesses of all sizes, and microbusinesses are in a unique position to embed sustainable practices from the outset.

At GoDaddy, we are focused on empowering entrepreneurs everywhere and making opportunities more inclusive for microbusiness owners. Fundamentally, we aim to change the way people around the world work and live for the better, and over the years as our customers and their needs have evolved, we have also moved with the changes.

That is why we are proud to support a whole host of impressive entrepreneurs who are helping to pave the way for a more sustainable future.

One entrepreneur helping small businesses take these first steps is Hannah Mills MBE, the most successful female Olympic sailor of all time.

Having won gold at Tokyo 2020, Hannah has now turned her attention to her other passion – The Big Plastic Pledge. Hannah launched the initiative to eradicate single-use plastics in sport through simple and easy-to-deploy solutions.

What started as a sport-specific initiative is now making waves amongst small business owners. We at GoDaddy are proud to have partnered with Hannah to create and launch a micro-business toolkit that helps empower entrepreneurs to embrace sustainable practices. It has been rolled out to our two million small business customers in the UK to futureproof enterprises and work towards a more sustainable, plastic-free world.

By incorporating sustainability, small businesses are reducing their environmental impact, operating their business ethically and managing risk appropriately. Not only are they helping the environment and our planet but opening themselves up to the possibility of more customers and more revenue.

At GoDaddy we are privileged to have a global reach, and with that reach comes global responsibility. Like many of our customers, we’re also working towards a more sustainable future. We are committed to reducing our scope 1 and 2 green house gas emissions by at least 50 per cent by 2025, and are actively working on a longer-term goal.

More on sustainability

2m small firms don’t think cutting their carbon affects climate change

The post How microbusinesses take the first steps toward sustainability appeared first on Small Business UK.

Having a workplace pension is an essential for your employees.

Not only will it build up their pot for retirement, but it will give them greater financial wellbeing in the short-term which can improve productivity.

Finding one, on the other hand, can prove challenging. Since auto-enrolment was introduced, more and more providers have been getting on the opportunity and offering workplace pensions of their own.

In this article, we’ll take you through some of the legalities and show you how to find the best workplace pension provider for you, complete with a list of workplace pension scheme providers to give you some steer.

Do small businesses have to provide a pension?

By law, yes. Under the Pensions Act 2008, all employers must put staff on a pension scheme and contribute to it. Businesses employing for the first time need to comply too.

Any employee over the age of 22 who earns over £10,000 a year, £833 a month or £192 a week must be placed on an auto-enrolment. This still applies if you only have one eligible employee. If you don’t set one up, you’ll incur fines from The Pensions Regulator and you may have to backdate payments from when your employee started working for you.

If you’re in any doubt, The Pension Regulator has an online tool to help you figure out your duties.

What is auto-enrolment?

Auto-enrolment is a pension scheme required by the government where employees are automatically put on a scheme and a certain percentage of an employee’s wage is put in their pension scheme, with an additional percentage being put in by you, the employer. At the time of writing, contributions must total at least eight per cent of qualifying earnings and at least three per cent of that needs to be paid by the employer.

There are a few types of pension scheme, so here’s a quick jargon buster.

Defined Contribution: Sometimes known as money purchase schemes, these are based on employers and employees agreeing on defined percentage contributions into a pension pot. The contributions are then put into investments by your pension provider. It’s the most commonly offered scheme.  

Defined Benefit: These are based on a member’s salary and the period of time that they’ve worked with the employer. Unlike DCs, the amount of income produced isn’t based on market performance.

Group Personal Pensions: GPPs are run by a pension provider. Employees will join said provider’s pension scheme. The employer gathers member data and then passes it on to the provider. Members build up their pot through employer and employee contributions and the funds are distributed through a combination of stocks, shares and other investments.

Master Trust: This is a type of Defined Contribution run by a board of independent trustees to provide pensions for a number of unconnected employers. Choosing a master trust means that you don’t have to decide on who will run the scheme or draw up individual rules. That makes it easier to administrate and you’ll still be able to make decisions on contributions, where the money in the scheme is invested and what benefits your employees get.

Self-Invested Personal Pension (SIPP): A SIPP is a do-it-yourself pension which lets your employees decide how their contributions are going to be invested. It’s better for more savvy staff members who already know the market and have larger quantities to invest. When researching, you’re more likely to see is a Group SIPP, which is a collection of individual SIPPS that are grouped together.

How much does it cost my business to match employee contributions?

It depends on how much your employee pays in. Matching your employee contributions does act as an incentive for them to pay in more.

Employer contributions count as an allowable business expense too – so you can deduct them from your taxable profits to reduce your corporation tax bill. There’s no need to pay National Insurance on pension contributions either.

Choosing a workplace pension provider

First of all, it’s important that you don’t rush this process and find something that’s suitable. “As they’re starting to do their incorporation, setting up the business, it should be part of their plans at that point,” David Pye, client consulting director at Broadstone told Small Business. “We often get contact from a business that has got an employee starting next week, and they need a pension scheme legally. But obviously, it’s a rush. It’s not the nice, comfortable [period] where you can make a rational decision.”

“When looking for a pension provider for your workplace scheme, it’s very important to assess exactly what is included as part of the proposition on offer,” Jonathan Sidlin, managing director of HSC Financial Advisers told Small Business.

“You should make sure that the pension provider has access to a wide fund range and can offer other investment options. Many providers have competitive schemes in place specifically for small business owners and we find that particularly useful for our clients,” he added.

So, what should you be looking out for?

Eligibility

It may not be very clear at a glance, but chat with the provider about eligibility. Some of the larger firms may have restrictions on the size of business they allow depending on employee numbers. “A number of the major providers will actually have a five employee minimum,” said Pye. “That doesn’t mean to say that five people need to be in the scheme, but there has to be five employees.”

He also said that if you have fewer than five employees, you would tend to look towards the Master Trust providers: “Master Trust providers tend to be Smart Pensions, The People’s Pension, NEST, to name three that are very common for very small businesses to start with.”

Fees

As a lot of pension plans are bespoke depending on the needs of the business, it’s often difficult to get a sense of costs upfront. There may be a tiered charging structure depending on the assets being managed. Sidlin also said that you need to get a sense of annual management charges and total expense ratio (the measure of the total cost of funds to the investor) on any funds available in the scheme.

“Most of the charges will come out from the membership, particularly with very small schemes,” said Pye. “Some providers will set up an implementation charge, usually £300- £500, something like that, to put something in place.”

There could be charges if large sums of money are being held. “Some of our clients have over £100m in their funds, and that money needs some governance structure around it, though it’s not legally the employer’s responsibility. So you’d have an annual review put in place. Those sort of things can be put in place around for £2000 a year,” said Pye.

Investment opportunities

Think about the nature of the business and the staff you want to attract, now and in the future. If it’s within finance or tech industries, for example, employees may be grabbed by more compelling investment opportunities in their pension scheme. Equally, if you’re an ethical brand then a pension provider which puts contributions into eco-friendly investments or allows employees to choose more ethical investments, that could give you an edge over your rival firms. Take notice of the returns over, say, five years as well.

The National Employment Savings Trust (NEST) is a worthy starting point if you just want to make sure you’re compliant, so ultimately could be a simpler and better option for you.

Communications

Check out what practical information is provided for you and for employees. This could be elements like written or video guides, interactive tools or a financial wellbeing hub. It’s also worth asking how the provider communicates changes and important correspondence with you and your staff.

ESG credentials

More and more workplace pension providers are focusing on their environmental social governance (ESG) as more investors express an interest. This could be achieved through actions like carbon offsets or through shareholder power.

Changing workplace pension provider

You may very well be clued-up about all of this and just looking to change your provider. In that case, give the switchover process three months. It could probably be done more quickly, but just to be on the more comfortable side.

The snag comes with moving your employees’ funds across. “In terms of picking up the funds that have already been invested, that might have been invested for two or three years or longer, the employer doesn’t have the power to do that, it has to be an employee choice,” said Pye. “Ideally, you would help the employees with that. It’s not a difficult process, but they need to be made aware.”

Who is the best workplace pension provider?

When you compare workplace pension providers, there is a lot to consider. Start with an online search to get a sense of what’s out there. It’s best not to be too reliant on it though as you could miss out on a company offering a more suitable package further down the search engine rankings. With this comes the peril of too much choice. “There is a danger of a three-man business that’s been been operating for six months getting a full market review and probably 60-70 per cent of the market wouldn’t entertain them because they’re too small.”

If you’ve got any co-directors or consultants, go over it with them and see what they think. It’s also worth seeking out a financial advisor if you can.

List of workplace pension providers

To help you out in the meantime, here are some of the main workplace pension providers and a table of key features.

Aegon

Types of pension: Master Trust, Direct Contribution Contracts

Fees: Up to 0.60 per cent annual percentage charge based on fund value.

Aegon is one of the largest pension providers in the UK, supporting over 10,000 employer schemes and managing savings of over 920,000 members. It says it provides a full range of savings options ‘that can meet every employer’s requirements, whatever the size, complexity or future plans.’

Features

• Financial wellbeing hub for employers
• SmartEnrol supports the enrolment and re-enrolment of eligible employees into your pension scheme so your employees don’t have to
• Integration with HR and payroll systems

Aviva

Types of pension: Master Trust

Fees: Dependent on scheme. Employees also pay a fund charge between 0.2 per cent and 0.75 per cent per year.

Aviva has a selection of online guides to help you sort out your employees pension scheme without having to talk to a customer services team. A minimum number of contributing employees may be required to sign up with Aviva.

Features

• No set-up fees
• Easy to set up
• Free online management dashboard
• 200 investment fund options

Cushon Master Trust (formerly Salvus Master Trust)

Types of pension: Master Trust

Fees: Standard annual management charge is 0.55 per cent for companies with ten or more employees and 0.65 per cent for companies with fewer than ten employees.

Hailing itself as the world’s first net zero pension, Cushon promises a true investment in your employees’ future as well as a jargon-free experience so that they can understand what they’re getting. However, there are only 90 investment options, fewer than some of the other providers.

Features

• Integrates with your existing benefits platform
• Support to encourage employees to reach savings and retirement goals
• App-enabled ESG voting allows employees to have their say in how organisations they invest in conduct themselves
• Help for employees who are hindered by the Lifetime Allowance, Money Purchase Annual Allowance or the Tapered Annual Allowance

Fidelity

Types of pension: Master Trust and Group Personal Pensions

Fees: Based on client needs

Flexibility is the name of the game with Fidelity. Funds from Fidelity and other leading fund managers across a variety of management styles, asset classes and risk profiles. Though Fidelity has no eligibility criteria, it said that its focus tends to be on larger corporate clients.

Features

• Flexible retirement options
• Investment-only solutions
• Workforce management capabilities
• In-scheme flexible options, including regular income drawdown

Hargreaves Lansdown

Types of pension: Group SIPP

Fees: Not stated

This is definitely a pension for employees who are interested in investment opportunities. The Group SIPP is similar to the Group Personal Pension in that payments are invested in a low-cost investment fund. However, HL experts help employees to make their own investing choices by providing investment ideas and ready-made portfolios. The scheme is open to most small businesses, but it’s typically businesses with 50+ that use it.

Features

• Thousands of funds and investment options
• Multiple ways to apply
• Flexible retirement fund options for employees

Legal & General

Types of pension: Master Trust, contract and trust-based pensions

Fees: Not stated

Legal & General have multiple savings options and you can opt to do a salary sacrifice arrangement if it’s more suitable for employees. There’s a big focus on employees with a financial wellbeing hub as well as flexibility at retirement with the choice of cash lump sum, a flexible income, annuity and transferring pension benefits.

Features

• Wide range of investments including standard, bespoke and investment-only options
• Bespoke enrolment service
• Retirement planning tool
• Budgeting tool
• Online scheme management system

National Employment Savings Trust (NEST)

Types of pension: Master Trust

Fees: Annual management charge of 0.3 per cent of total value of member’s fund and a contribution charge of 1.8 per cent on each new contribution made into a member’s pension scheme

The National Employment Savings Trust (NEST) is set up by the government and is a popular starting point for most businesses, especially microbusinesses. It helps firms meet basic compliance but doesn’t come with the investment options that some of the other providers do. Its low fees make it one of the cheapest workplace pension providers.

Features

• No shareholders or owners
• Low fees
• One of the few schemes open to all businesses

The People’s Pension

Types of pension:Master Trust

Fees: Annual charge of £2.50 – equivalent to 21p a month, management charge of 0.5 per cent of the value of a member’s pension pot each year, rebate on the management charge, giving back between 0.1 per cent on savings over £3,000 and 0.3 per cent on savings over £50,000.

One-off set-up fee of £500 + VAT for employers – this can be reduced to £300 if you go through a business adviser. Employees will be subject to an annual 0.5 per cent management charge.

The People’s Pension, as the name suggests, aims to be straightforward and accessible for the people. It has the reduced focus on shareholders that NEST has, with many more investment options.

Features

• Support to make sure your small business is compliant with auto-enrolment
• The default fund, which the vast majority of members are invested into, is MSCI AA rated, making it an ESG leader
• Compatible with leading software providers
• All new contributions go into net zero investments

Royal London

Types of pension: Group Personal Pensions

Fees: Not stated

Royal London can tailor its pension offering to meet the needs of your business. There’s flexibility in retirement and contributions for employees. They can move to another plan that gives them the flexibility to take a regular income when they need it through income drawdown. They can also do contributions through salary exchange, where your employees agree to exchange part of their salary, bonus or redundancy package for an increased employer contribution package.

Note that it’s only sold through financial advisers so will likely be more costly upfront.

Features

• Training and personal support is provided
• No charge for transferring from another provider
• Profitshare – Royal London aim to share profits to scheme holders when the firm is doing well
• Create your own branded employee engagement hub
• Receive scheme governance reports to show you how engaged your employees are

Scottish Widows

Types of pension: Group Personal Pensions

Fees: Average 0.46 per cent charge per year (2020)

Scottish Widows is working to integrate ESG considerations into their pension portfolios as well as giving you ongoing support throughout the time of your pension plan.

Features

• Free digital pension transfer service for employees
• Wide range of investment options
• Tailored bulk annuity solutions, i.e. an insurance policy that is purchased by pension scheme trustees to better secure members’ benefits

Smart Pension

Types of pension: Master Trust

Fees: Monthly account charge of £15 + VAT. No charge if you pay contributions by direct debit, £30 a month if you pay by BACS. Members whose employers have signed up directly have an annual management charge of 0.30 per cent and a monthly fee of £1.25

Smart Pension prides itself on being a digital first option which makes it easier for employers to run with its automated ongoing processes. It’s also ISO27001-certified meaning that data is safe and secure.

Features

• 70 per cent of default investment strategy invested into sustainable investment funds
• Payroll integration
• Set up account within minutes
• Rewards which help employees save at major retailers

Standard Life

Types of pension: Master Trust, Group Pension Plans, Group SIPPs

Fees: Not supplied

Big player Standard Life provides a lot of guidance on auto-enrolment for those that are new to it. You’ve also got the option to switch if you’re already with another provider. They plan to make things as easy as possible for your employees, giving them retirement planning support and assistance when their retirement comes around.

Features

• In-scheme drawdown scheme for employees
• Competitive annual management fees
• Annual pension benefit statements for employees
• Online administration hub

True Potential

Types of pension: Master Trust

Fees: Fund cost is 0.31 per cent plus a platform fee of 0.40 per cent, totalling of 0.71 per cent

True Potential says that it’s auto-enrolment on auto pilot. It can take care of lots of different elements for you including communications with employees, managing contributions and enrolling eligible workers.

Features

• Payroll integration
• Employees can invest in exclusive True Potential portfolios
• Easy to transfer from NEST
• Offers range of risk-rated investment funds 

I still can’t decide on a workplace pension provider – where can I go for further advice?

It’s a complex and important decision to make so you should take the time to ensure it’s right. Have a word with an independent financial adviser (IFA). You can find them through unbiased.co.uk and you can edit your preferences to find one who deals with pensions specifically.

Read more about workplace pensions:

Workplace pensions and keeping staff auto enrolled

The post How to choose a workplace pension provider appeared first on Small Business UK.

With over 660,000 new businesses registered between 2019-2020 in the UK – which equates to over 70 per hour – it goes without saying that start-ups face some stiff competition on their journey to success.

The Telegraph reported in 2019 that 20 per cent of new ventures will fail within just 12 months of opening their doors, with that figure climbing to 60 per cent within the first three years. In fact, failure is so widespread at the start-up phase that many entrepreneurs have taken to writing a “failure post-mortem” to assess where they went wrong in the hopes that other aspiring entrepreneurs can learn from their mistakes.

Being aware of some of the most common setbacks and obstacles facing a new business is vital for recognising the weak points in your own model, enabling you to do something about them before your start-up becomes part of that growing 60 per cent.

#1- Cement your vision

Start-ups face many challenges in the initial stages, and without a clear vision in mind of where you and your company are heading, you can easily lose motivation.

Defining a mission statement isn’t simply stating what your vision is, but actively laying out the framework to achieving that vision, so you can establish clear goals and start to measure progress. Not only this, a clear vision also acts as a foundation for your entire business, allowing you to develop a strategy for the long-term that engages and unites your staff in what you are working towards and why.

#2 – Take control of cash flow

Poor financial planning is one of the primary reasons so many start-ups fail before they truly get off the ground.

Why? Businesses in their infancy can often appear profitable on paper, but money owed is not the same as money in the bank, and the gap between the delivery of your product or service and receipt of actual payment can leave you in a financially precarious situation.

Without a healthy cashflow and firm grasp of costs incurred, growing and scaling your business, or securing additional funding will be an uphill struggle. Developing strict budgets and cash flow forecasts can help mitigate these issues, enabling you to keep on top of your finances so you can plan for both the short and long-term.

#3 – Build your brand and market your business

The importance of a strong brand identity cannot be overstated. So many start-ups neglect this crucial aspect of their company, when it should be part of their vision from the start. Your brand is what communicates your values and is what will help you build trust and recognition, and effectively tap into your target customer base.

Though a strong brand identity is what will differentiate you from your competition, this is futile without a solid marketing strategy in place to ensure people actually know about your business. Without proper marketing, you might have the best product or service on the market, but your ability to generate leads, acquire clients and ultimately convert them into sales is going to be severely hampered.

Successful companies, no matter their size, understand the importance of both brand identity and marketing. Though start-ups often operate on tight, limited budgets, omitting or severely cutting your marketing budget is always to the detriment of your own business. Instead, look at cost-effective ways to get your product or service out there, or outsource to a marketing provider.

There are plenty of opportunities for small companies to market themselves without breaking the bank, and however you choose to do it, always have a strategy in place, and regularly measure your marketing efforts to track their effectiveness and ensure you are getting a good ROI.

>See also: Why every entrepreneur needs their own mentor

#4 – Hire the right people

Having the right team in place can make or break a business in the early stages, so having a clear idea of the kind of people you want in your business is key. The hiring process can be an arduous one, more so when you have limited capital to spend on personnel, so ensuring you take a discerning approach to your first hires can save a lot of time and resource in the long-run.

Bringing in too many people too quickly can create problems – particularly if you don’t have the cash and income to sustain payroll. In the early days, it’s often better to have a small, dedicated team who understand the vision and direction of the business and can help you establish a positive working culture that will pay dividends in recruitment further down the line.

High rates of staff turnover can also be avoided by establishing clear lines of communication with your employees and ensuring they know what is expected of them from the start while developing a workplace culture that makes them feel appreciated and valued.

#5- Create a scalable business model

The goal of every entrepreneur is to ultimately grow their business into something bigger and better, but growth that your business is not prepared for could be damaging if you don’t have the structure in place to support it. You may find your business is proving to be a success, but don’t let this tempt you into jumping headfirst into scaling without any strategy or plan.

Take the opportunity while your business is still in its infancy to create the structures it needs to scale. By implementing the right procedures and systems in the early stages, you will avoid the headache of playing catch-up later on as your company expands, and without negatively impacting customer service and/or product delivery.

#6 – Never, never give up

Navigating the many pitfalls of building a new business may seem like a daunting task, but resilience and a readiness to change tact when something is not working are hallmarks of a good entrepreneur. And finally – in the words of Winston Churchill – never, never, never give up.

Mark Wright is a winner of BBC’s The Apprentice and director of digital marketing agency Climb Online

More by Mark Wright

5 steps to bolster your business finances

The post Overcoming obstacles to start-up success appeared first on Small Business UK.

Starting a financial-focused business in 2021 is challenging enough as the full impact of the Covid-19 pandemic has yet to be fully understood. This is especially true in the money exchange space as the industry is dominated by multi-billion pound giants like Wise (formerly TransferWise) who compete against multi-hundred-billion pound banks.

Anyone thinking now is an opportune time to enter the currency brokerages space may not fully understand how crowded the space is and just how much power the industry titans have.

The currency brokerage industry: many big and small players

One of the first steps in evaluating a business idea is understanding the competitive environment. Starting a business knowing there are few companies in the space offering a competing service makes the entrepreneurship journey just a little bit easier.

But looking at the global foreign exchange space shows this is far from the case. There are at least two dozen FX exchange providers in London alone. London is the epicenter of the global foreign exchange industry so it is natural for a large number of companies to be based out of the United Kingdom.

There are other major global money exchange hubs, including New York City, Singapore, Tokyo, among others. In total, there are certainly more than 25 large money exchange providers in the world that can easily cater to a global client base.

Sounds like an uphill battle for new entrepreneurs? It is even worse. On top of the several dozen large and global money exchange providers, there are many smaller competitors. Add to that the even larger number of even smaller competitors that have already built a presence in the market.

These smaller competitors take advantage of platforms like Currencycloud. Currencycloud is a provider of financial infrastructure and solutions to any business that wants to exchange currencies. In other words, Currencycloud acts as a white-label provider of a financial ecosystem that facilitates FX transactions.

Good luck standing out against dozens upon dozens of rivals.

How big is big? Wise wants competitors to know

Wise is set to become a public company on the London Stock Exchange and could be worth £9bn to £10.5bn. As part of the IPO process, Wise released some key details about its business and outlook. This could be seen as a cautionary tale against new companies who are tempted to compete against an industry giant.

Wise says it “developed a modern global payments infrastructure to replace the outdated correspondent banking system.” This is a true statement as the company is a pioneer in offering customers a transaction cost that is very close to the mid-market rate.

In total, Wise serves 10m customers that range from individual people that need to send money across borders to businesses of all shapes and sizes. The company has been profitable since 2017 and management re-invests profit back into its business.

Aside from that, Wise has more than 500 engineers and launches more than 90 production deployments per day, or around 3,000 a month. Think you can keep up with that? What about Wise’s focus on artificial intelligence that it describes as its “bread and butter”.

Entrepreneurs are known for having ambitious plans and executives with notable industry experience aren’t afraid to take on a company like Wise. But what if we told you that as big as Wise appears to be, it is in fact a very small player in the global FX transfer business.

Banks are the market share winners

By Wise’s own admission, banks still account for a 97.5 per cent market share when it comes to international payments and transfers. Banks are notorious for being slow, outdated, expensive and offering a generally unpleasant experience, yet it still dominates the industry.

Wise further states its vision to disrupt banks will take “years, probably decades”.

And throughout these decades, banks have the ability to react quickly and adapt by simply lowering their fees. They aren’t the ones fighting to gain market share, rather they are the ones fighting to keep it. And keeping customers is certainly a lot easier and cheaper than finding new ones.

Are banks paying attention? Absolutely. Jamie Dimon, CEO of JPMorgan, said in early 2021 that traditional banks should be “scared s—less” about fintech rivals. But the company is certainly up for the challenge. The CEO said it boasts “plenty of resources” to catch up and overtake fintech rivals. He added:

“I expect to see very, very tough, brutal competition in the next 10 years. I expect to win, so help me God.”

Competition where no one thought to look

While evaluating the competitive landscape within the FX exchange business, many are surprised to find out that some of the major players include stock brokers. For example, Interactive Brokers brokerage allows customers to exchange one currency for another as an investment.

Clients can also close their foreign exchange investments and withdraw cash in the currency of choice. This process might be a bit more complex for individual investors as withdrawing cash in a foreign currency requires a bank account that can accept the foreign currency.

For example, a British investor who exchanges their pounds for yen via their Interactive Brokers brokerage account will need a second account denominated in yen to close the transaction.

Conclusion: think twice about your currency brokerage venture

Having established the currency brokerage space is very competitive where even an industry leader like Wise is a very small player, it is worthwhile to think twice about starting your own company. This isn’t to say that a new entrepreneur can’t make a lot of money, rather it is to say that there are likely better opportunities to pursue elsewhere.

Read more

Five successful business ideas for 2021

The post Starting your own currency brokerage firm is a horrible idea appeared first on Small Business UK.

Alice Douglas offers 13 tips about running a B&B derived from her 15 years of experience.

13 tips on running a B&B

I was apprehensive at the prospect of welcoming strangers into my house and kept imagining one might be an axe murderer. However, I soon realized the best part of running a B&B is all the wonderful people you get to meet. Guests are rarely savage keyboard warriors out to immortalise you with a damning review, but on the contrary are mostly extremely forgiving of the odd mishap. I’ve had my fair share, like an escaped hamster paying a midnight visit in one of the four poster rooms, and other mundane but unavoidable dramas like boiler issues or hot tub breakdowns, but guests on the whole are very tolerant.

They are also in residence when good and bad life events happen to you, such as your child’s birthday celebrations or that sudden phone call when in the blink of an eye a loved one is lost. When that happened, a guest took over the breakfast service and persuaded me to go to London straightaway while they stayed to run my place for the next three days. I gave them free stays for life! My son actually left a week after his fifteenth birthday with two regulars for a five-month trip to sail the Northwest Passage. I could write a book about my brilliant, wonderful guests and the adventures and opportunities we’ve had as a family knowing them.

>See also: 5 ways you can increase revenue by using your extra space

#1 – You have to like people

Liking people is essential. I was given some pre-opening advice from another host, which was to “keep them [guests] at arms-length and avoid conversation”. I understand why this was said, as my kitchen is a whirlwind of activity from early mornings when I serve 14 full cooked breakfasts to bleary late-night bottles of wine discussing mountains summited to ingrown toenails and everything in between. However, I have always felt blessed to meet so many fabulous people.

#2 – Your B&B needs to have a wow factor

I stumbled into running a B&B, in an unplanned, slightly chaotic how do I survive as a single mum trajectory, but in hindsight if I’d meticulously researched where to be, I couldn’t have come up with a better area and building. I converted a disused church into a bed-and-breakfast, which was a huge undertaking on not much money. The internet means guests now scrutinize where there will be staying, and there is less demand for a B&B within a conventional house. I have extremely experienced host friends offering a great package, but they have struggled with declining occupancy because they don’t have a wow factor. Guests want something Instagram worthy, so they search for unique places like a barge, pod, treehouse, castle turret, lighthouse, portaledge (suspended platform on a cliff reached by abseiling) or a gypsy caravan.

Having a B&B in a quirky space is a great selling point and I am lucky to have a church with a mosaic apse, stained glass windows, pulpit, font, grand piano, garden zip wire, amphitheatre seating for music events, climbing wall, pizza oven, obligatory hot tub and not to mention Great Dane. It has also helped being situated in the Snowdonia National Park and being one of the closest B&Bs to Snowdon, the highest mountain in England and Wales and a major tourist destination. The view from our garden of the Snowdon Horseshoe is apparently one of the most photographed spots in Wales. If you are setting up a B&B a great location and space really helps.

#3 – Breakfast can be complicated

There is a lot of debate within the hospitality community about whether the second B is necessary. Breakfast is hard work and nowadays needs to be quite a gourmet photo-worthy affair. Cereal and toast won’t do. Guests want overnight baked oats, homemade granola, fresh fruit salad, elaborate vegan feasts, salmon bagels with poached eggs, asparagus and hollandaise sauce, kippers or a traditional organic, locally sourced full cooked breakfast.

Every dietary requirement needs to be catered for which is tricky as you might have to serve gluten free or a vegan equivalent of hollandaise sauce without warning. It is also truly scary when someone has a serious allergy.

There is no doubt that if guests are given the option of booking room only or with breakfast 90 per cent will choose the latter option and don’t mind paying but not over £10 per person. However, most hosts find the early mornings, shopping and cooking a chore, especially after a few years when the novelty of trying to be exceptional has perhaps worn off a little. It is easier to not offer breakfast or to do a simpler continental breakfast or takeaway bags. B&Bs still get the same amount of bookings without including breakfast but obviously guests prefer for it to be included.

>See also: 3 things small businesses should know to successfully sell online

#4 – Encourage guests to book direct

Increase direct bookings is the best tip I can give. If the bulk of guests come through Booking.com or Airbnb then 15 per cent to 20 per cent will be going to the online travel agency (OTA). I list the church on all these platforms but mostly as free advertising or to fill last-minute gaps. I entice guests to book direct by offering them perks such as an early check-in or free breakfast if they come through my site. The reason guests usually book through an OTA is ease and therefore owners must have a website where customers can book.

A useful training programme for hosts is Boostly, which charges a monthly fee for a support package that shows hosts how to create a website with a “book now” inbuilt facility, how to increase direct bookings, market on social media and lots more great advice. A free DIY option for learning the ropes is to join a group like the hospitality FaceBook group where other hosts will answer all the what/how questions. To implement direct bookings on a B&B website it needs to be linked to an online booking management solution. This way hosts can show availability and offer rooms on multiple sites at the same time, but as soon as one gets sold the channel manager will automatically close that date off on every OTA platform.

#5 – Be able to take online payments

Online payments means guests can pay for a room there and then so it’s vital to take card payments on your website. This also avoids unnecessary administration or having to send out invoices and means customers can book 24 hours a day without needing to contact you.

#6 – Set up automated replies to emails

Have automated replies set up so enquiries are met with an immediate response and create template emails that can be tweaked to respond to specific questions. When I first opened, I would get in the region of 600 phone calls for a bank holiday weekend and might come home from a two-hour food shop to 70 messages. The wonders of having a website showing availability is that potential guests immediately know you are almost completely full to November.

#7 – Create an online guidebook

Create a detailed digital guide that can be sent to all guests when they book. Ours includes arrival instructions, kit list to climb Snowdon, the best wild swimming spots, scrambles, places to eat, grocery shops, where to eat, how the oven and heating work etc. A welcome guide that is automatically sent on booking is invaluable.

#8 – Stamp your B&B with your style

If guests want a nondescript clinical room, then they can book into a Travelodge. A B&B should be your space and stamped with your style. I find artists and photographers who want to sell their work and so have fabulous pieces hanging on the bedroom walls. I have a four-metre farmhouse table that seats 16 for raucous breakfast discussions and quirky chapel chairs. We have an old record collection and trinkets from my travels like Turkish rugs, vintage William Morris cushions and Indian throws. We have guitars and other instruments for guests to use and plenty of walking guides, a box of climbing shoes, a dressing up box, games, art supplies and toys.

When I started I thought it would be helpful to be graded and arranged an inspection through Visit Wales who suggested I replace my antique furniture with Ikea bedside cabinets and made sure everything matched. I decided a star rating wasn’t compatible with what I wanted to create. When I stay in a French gite, I want to sample the unique character and charm of my host’s home. I think it’s important for B&Bs to be a true reflection of their owners and keep all their British eccentricities and rustic touches! Yes of course it’s nice to include a bedside lamp but not to make rooms a tick list of contents. My guests don’t get a suitcase stand, but they get a drying room for kit, bike and kayak storage, a round window and pulpit in one of the rooms.

#9 – You can rent bedlinen

Bedding can be rented, which saves on washing and ironing. There are companies all around the UK who deliver high quality white linen in neatly ironed bundles and at the same time take the dirty ones away. There are also laundry services that will wash and iron hospitality bedding. I do the washing and ironing myself as I prefer a splash of colour and use Bassetti linen, which is made from a beautifully soft mako-satin cotton and is far too nice for an industrial washing service. I’m also slowly upgrading to Vispring mattresses, which are heavenly to sleep on. I hate the look of zip and link beds so got a joiner to make mine, as this gives me the option of using rooms as either a double or twin for visitors.

#10 – Offer half price in low season

Don’t hibernate in low season but instead look for ways to be busy. In the winter months I offer discounted rates up to half price, as I’d always prefer to have guests rather than be empty. I also contacted local companies and now work with a a training centre who use the church to run swift water rescue courses for the emergency services from October to March. This has been a great way to create a good source of income all year round.

#11 – Offer creative workshops or experiences

We create stays where guests can have workshops in song writing, film, photography, or do a fitness boot camp, go scrambling, climbing, brush up on navigation skills, have a photoshoot in a pop-up studio or in the stunning mountainous landscape. We have live musicians or themed stays like the Mountain Leider that include an intimate classical concert, guided hikes and are fully catered. We also do pizza experiences, have visiting chefs and sell homemade jam and other locally sourced products.

#12 – Tell guests about other activities

Let guests know what there is to do nearby. I offer advice on where to climb, hike, fish, kayak, go wild swimming, horse riding and canyoning. I send links to websites and recommend other local businesses. The National Mountaineering Centre, Plas y Brenin, is only a few hundred meters from the church and they run outdoor courses. I can arrange bike rides through EBike Adventures Snowdonia or a caving adventure with Go Below and we have three ZipWorld sites nearby which includes the fastest zip wire in the world and a Fforest coaster. Another attraction is Adventureparcsnowdonia, which has the world’s first inland surfing lagoon and lots of other great indoor and outdoor activities and I also recommend Bounce Below which has huge trampolines in underground caverns. Make sure guests know where to go and what to do in your area.

#13 – Take one day off each week

Make sure you schedule a day off each week and have holidays or you will burn yourself/selves out. I now alternate between running the church as a B&B and letting it out as a self-catering property to groups. When it’s the latter I’m not needed and so can getaway myself to stay in a B&B where I’m the one being pampered and not doing the looking after myself!

Alice Douglas is a freelance journalist and owner of B&B St Curig’s Church

Further reading

4 tips for promoting your business online when you’re on a budget

The post Tips on running a B&B appeared first on Small Business UK.

The Chinese word for ‘crisis’ is ‘wēijī’ in the latin alphabet. It’s become (after JFK used it in a speech) a cliché that it’s made up of two Chinese characters signifying ‘danger’ (wēi) and ‘opportunity’ (jī).

The second character is part of the Chinese word for ‘opportunity’ (jīhuì), but that has multiple meanings, in isolation it means something more like ‘change point’.

Another cliché is that recessions are great time to start businesses. The poster children are Uber and Airbnb, both set up during the global financial crisis around 2007. Further back General Motors launched in 1908, after another financial crisis and McDonald’s was founded during the second world war and grew into the efficient franchise model just after (whilst being joined by arch competitor Burger King). I could go on.

But, more to the point, you could name any year and any context and there would be examples of the birth of great businesses.

Whilst the generalisation is unhelpful, thinking about whether you are stronger or weaker over time or more relative than your competition is always helpful and especially so when we are at a change point (‘ji’).

Nature gives us a couple of examples. Think about stumbling across a bear in the woods. The danger is not being able to run faster than the bear, but the danger disappears if you can run faster than your companion. Staying in the forest, it helps when dead wood dies and gives younger shoots room to grow. Whilst large businesses have many advantages in stable times, a start-up should always be more responsive and adaptive when times are changing.

Worth Capital have an investment in a direct-to-consumer bedding business called Bedfolk. It was already growing fast but really accelerated during 2020, as shops closed and a home, nesting, wellness proposition was hugely relevant. The team responded nimbly to demand and maintained customer satisfaction, fulfilment speed and availability all through the year.

But, more critical is the longer-term systemic changes in the market. The growth of e-commerce and the physical retail market share with the department stores (Debenhams closing, House of Fraser in trouble and John Lewis retrenching) will shift, and a change in sentiment regarding consumers’ relationship with their home makes an even more attractive market to grow a business.

That is an example of relative strength within a market, but another consideration is relative attraction between different markets and different customer groups. The pandemic has not only ravaged the health of different populations inequitably, but the economic fall-out is even more disparate. Whilst we can expect the macro-economic headlines to be bleak, there are huge populations of consumers and businesses that have had a ‘good’ pandemic.

Many consumers have had little impact on their salaries but have saved hugely. Governments the world over have found plenty of innovative ways to stimulate the economy, but none have managed to ensure that only the truly impacted and needy are the recipients of unprecedented stimulus. So we can expect a huge increase in consumer spending in some categories that will last for some time (years not just months), for example holiday spending will be redirected — probably to the home and garden.

Habits have been broken by the repeated lockdowns. With many consumers and enterprises questioning the status quo and open to new products and services. An example, of course, is the change in working practices. Whilst the majority of jobs in the UK (in services and manufacturing) will not have a choice about changing their working location, the professional, white collar classes with the most highly paid jobs (and highest levels of spend) will have a choice. We are starting to see businesses state their new policies — BP going for a 40%/60% split remote to office time, and Lloyds and HSBC targeting cutting 20% and 40% of office space respectively. Businesses dependent upon commuters or office populations will suffer. But there will be more opportunity outside of the big commercial centres and for businesses serving remote workers.

One of our investments, Weekly10 allows managers to understand engagement, sentiment and performance of their teams — very useful when they are sitting next to their people less. Whilst Weekly10 entered 2020 with a marketing plan prioritising different sectors, they are now prioritising remote working and particularly their technical integration with Microsoft Teams which gives them access to Team’s huge and very fast-growing user base.

So, if I was starting a business now, I’d think about these questions:

• What is happening in my market to create change (and systemic long-lasting change not just the headwinds or tailwinds associate with lockdowns)?
• Where and why is there more or less danger — over time and between incumbents or new entrants?
• Where and why is there more or less opportunity?
• What can we do — with our product or service, our marketing, and the way we behave – to seize the opportunity whilst it is there?

The post Starting a business during changing times: danger and opportunity appeared first on Small Business UK.

The last two columns I’ve written were about showing investors you have an irresistible team and then some thoughts on how to build up a team on the back of raising funding. To close this ‘team trilogy’, how about looking beyond the day-to-day team for expertise?

Being an entrepreneur can feel lonely. Particularly for a someone founding a business by themselves. But even for a pair or threesome, discussions can soon get stuck in a rut.

So it’s super useful to tap into objective external input and support. But there are watch-outs. Often as an investor I see a page of a pitch deck full of headshots and names, sometimes with a brief biography, under the title ‘advisors’. I know the entrepreneur hopes to impress with all the expertise and experience they have gathered around them. But very often it’s a turn off, as I cannot see any thought given to what is hoped to be achieved by each individual, and only see the risk of:

• a pointless list of people without commitment, time or proper understanding of the business (sometimes just on a vanity project to burnish their own credentials)
• a minefield that slows down decision making

and/or

• confusion born from random conflicting advice & direction.

There are some questions to ask yourself that help avoid these common pitfalls and gain the most value:

1. What do you need from external input?

Particularly at the start of a business you might be looking for consumer insight and/or sector insight and expertise. The obvious hunting ground being someone currently or recently retired from an established business. The watch out here is their ability to adapt what they know from a large, mature business into the context of a resource constrained high growth start-up.

A network is hugely valuable for any start-up — connections lead to serendipity, and it’s remarkable how this ‘luck’ translates into investors, customers and other help. Again, someone from within the industry is likely to have a useful network.

Think about whether this is a one-off need, such as finding suppliers, or an ongoing requirement, such as building a pipeline of customers. When it is the later, this might be best to be an agreed and remunerated role.

2. What is the role — director, mentor or coach?

A director in a business is a formal role. Given the obligations on the director it shouldn’t be taken lightly by either party. A substantial investment is very likely to require the oversight of an investor director. Do your due diligence and get references to ensure the suggested director has relevant skills & expertise, with facilitation and judgement to help make effective decisions and is someone with whom you’d have good chemistry — you will, and should be, seeing a lot of them.

One to be avoided is the ‘board observer’ — someone giving investors some oversight but not committing to actually understanding or contributing to decisions being made. This invariably ends up making the board meeting a highly inefficient information sharing exercise rather than strategic decision-making forum.

‘Mentor’ is an oft used word — and often utterly meaningless, or worse, positively destructive. Google think their team can ‘mentor’ a start-up during a 30-minute conversation. Compete tosh. Real mentoring needs longevity, so the mentor understands the business, the market context and the strengths and weaknesses of the team in place.

Although it may not be as broad a role as a Director, mentoring is similarly hands on – contributing expertise, helping to create and explore possibilities, helping explore decisions and ensuring robust decision making and all the time ensuring the entrepreneur is developing their own capability.

Coaching also needs a long-term relationship with the entrepreneur but uses the generic questioning skills of the coach, without industry or functional expertise, to help the individual, or team, to recognise their strengths & weakness and to develop their capability.

Specific ad-hoc advice can be sought from experts. I always value the advice of entrepreneurs that have been in a similar position growing a business, more than that of an industry expert who has climbed the greasy corporate ladder or from an investor that is clearly great moving money around and counting the beans, but with little real-life consumer or operational experience. With anyone that is just dipping into a question, remember that however forcefully they are making their point, it is their context not yours that will be most influential in their opinion. And too many different views can confuse an issue. Ultimately you need to become adapt at sifting using other people’s opinions as good insight and stimulus, but trust your own instincts to make the right decisions for your business.

Sometimes an entrepreneur just needs some moral support – a shoulder to cry on, someone looking out for their personal well-being and motivation. Friends and family can be good for this. Then again, the stresses and strains of growing a business is sometimes best left out of the closest relationships.

3. What is the commitment?

To be effective, any director needs to commit to more than just attending board meetings. As a minimum the preparation and intimacy to be up-to-speed on the business between board meetings. But they’d ideally also have some real involvement in the areas where they bring expertise, for example finance, marketing, sales, production or funding.

For Worth Capital, whilst we are never making the operational decisions, where we have expertise that can quickly fill a gap, we really roll-up our sleeves for our portfolio companies. In the last couple of months, we’ve been negotiating rents & contracts on a large fulfilment centre in Bristol; creating a forecasting and inventory tool for a direct-to-consumer e-Commerce business for whom demand was growing very fast and where the big risk was product availability; and re-examining the customer proposition and ending up with a much stronger name and brand identity for a B2B SaaS product.

4. What should a board look like?

It is useful to ensure a very tight board in the early days. Nimble decision-making and executional agility are more important than strategic navel gazing. The founders plus one other is ample.

But as a business grows the board may need wider experience, or additional investment may require representation. Any meeting of more than five or six people requires facilitation to be efficient. So, at this stage you may nominate one board member to lead the board or take on a formal Chairman. A Chairman role is useful if they have credibility to be a figurehead, particularly with potential investors. But again, the commitment and expectations need to be clear.

5. What is the agreement between the parties?

Once you’ve decided ‘what’ and ‘from who’, you need formalise the expectations.

If someone has contractually committed (either to payment in cash, kind or with equity or options) then there needs to be a formalised two-sided agreement where both parties can hold each other to account for the time and expertise that is being committed.

Are you interested in equity investment?

The Start-up Series, hosted by smallbusiness.co.uk, gives company the chance to secure equity investment of £150,000 to £250,000 every month. To find out more, go here.

Further reading

Small Business and Worth Capital partner to relaunch The Start-Up Series — with £250,000 equity funding up for grabs each month!

The post How your start-up can access valuable advice beyond the day-to-day team appeared first on Small Business UK.