Start Your Own Business: Part Two

Five years ago I decided to start my own business. Here’s my practical nuts & bolts guide on how to do it yourself for freelancers and small businesses. You can find Part One here, in which I covered Research, Legal Set-up, VAT registration, Insurance, and Business Bank Accounts.

Please note the following advice is for businesses in the UK and some aspects such as legal set-up may be different for other countries. 

Decide on your business name

Your business is a brand. Even if it’s just you freelancing under your own name, you are a brand. That name conveys something. Is it memorable? What associations can be made from it? Is it difficult to spell (and therefore type into a search engine like Google)? If your name is difficult to spell correctly, it may be worth having a pseudonym. I don’t mean that anything more exotic than John Smith should be ditched because exotic and unusual can be good. Just consider it. 

As a soletrader you don’t need to make sure no other business has your name, but it’s still worth making sure that there are no local businesses or people in your field of work going by the same name. This will hurt you in terms of people being able to find you over that other person and potentially cause mix-ups otherwise. When I started Bees Make Honey as a soletrader, a year or so into trading I discovered there was a upcycle designer-maker in the same damn city who went by the same name. People mixed us up all the time both online and in the real world. It was embarrassing and no doubt annoying for Debra, who eventually changed her business name to Honey Bee. You can find her here, she’s a wonderful human, very supportive of other creative businesses. I was really lucky she was nice about it, but I still feel bad she felt she had to change her name.

If you are incorporating your business, e.g. as a limited company, you must register it with Companies House. In this case, you need to make sure no other businesses are registered with a similar name. If you’ve set your heart on a particular name you want to go by, but find it’s taken, you can register under an official business name, but use something else as your trading name (provided you’re not breaching Intellectual Property rights). But as with the above sob story, consider outcomes carefully.

Identify your target audience with market research

Who is your ideal target audience? Why is your product or service right for them? It may be helpful to actually imagine one individual as your example and then broaden out from there. Where do they hang out? What do they do online? Can they afford your product or service? How can you become visible to them? This is key to identifying the demand for your product. If there isn’t sufficient demand, it will fail. Knowing your target audience is the basis for starting your marketing plan. One way to find out the big answers to your questions is to ask your audience through direct research.

Prepare a marketing plan

Marketing plans can consist of 17 colour-coded spreadsheets and a powerpoint presentation. Or they can just be a colourful mind map drawn on a page of a notebook (although if you’re applying for a loan with a bank, maybe don’t use the latter). They can be as simple or as complicated as you need them to be. To establish a good foundation the main things to consider (besides your target audience) are your SWOT analysis, analysis of competitors and your Unique Selling Point (USP).

SWOT. Take a good critical look at your business idea. What are the Strengths, Weaknesses, Opportunities and Threats? Write a list of each. Remember strengths and weaknesses are internal, while opportunities and threats are external. For example: when I started Bees Make Honey, my strengths were a great work ethic, organisational skills and strong capability to innovate, my weaknesses were a lack of experience in the field and lack of confidence in phoning strangers and public speaking. The opportunities were good funding and business support available, a good demand for the services I was establishing and the increase in connectivity offered by the digital revolution. The threats were other businesses offering similar services and (as it turns out) the EU referendum’s potential to dramatically alter the creative industries. Obviously, if my SWOT analysis was going to be viewed professionally I would reword my weaknesses here, to omit the phone thing. The important thing is that you are honest with yourself. If you stick your head in the sand about your weaknesses and any threats to the business, you will be unlikely to succeed. Be brave and show self-compassion when you mess up. Messing up is part of the game.

Competitor analysis. Again, be brutally honest with yourself and take an objective critical approach. Don’t do one really woolly online search for similar businesses and reassure yourself with few results. Look at this as an opportunity to see what other people are doing right and wrong. How can you do better? What can you offer that they can’t? Can the audience demand support more competition in the market? The good news for freelancers in many areas is that businesses are tending towards cutting back on permanent staff and employing more freelancers. You still need to stand out from the crowd and work out the key to your marketing plan: your Unique Selling Point (USP). More on USPs here on Creative Boom.

Once you have established your target audience, USP, SWOT analysis, and competitor analysis, you’re ready to do a marketing plan. Create a strategy of where to start and how to develop the business. Creative Boom also has a great list of 100 Inspiring Ideas to Market Your Business, from the very basic and simple like carrying business cards, to techniques for getting repeat custom and testimonials. Make sure your strategy is focused on your strengths, opportunities and USP, rather than being a scattergun approach.

Set up an accounting system

Every business needs some sort of accounting system to record money coming in (income), money going out (expenditure), and how much money you actually make once you’ve deducted your expenditure from your income (profit or net profit). Technically this can be a handwritten accounts ledger, an excel spreadsheet, or a more elaborate digital accounting system. But heads up, in a year or two the UK government are bringing in Making Tax Digital (MTD). Then even soletraders will be required to submit quarterly digital accounts. So my best recommendation is to start as you mean to go on and get proper accounting software. You can get free versions of this, but I don’t know how good they are. I recommend using one of the cheaper big names such as Sage One. These will cost you £5-£25 per month and once you’ve got the hang of them are easy to update and produce reports from. You can even link them to your bank account so they record much of the information you need automatically. Just remember you still need to keep receipts and invoices for the past 3 years in case your business gets audited.

Accountants

As I mentioned in part one, if you’re a soletrader, non-VAT registered, and your accounts are pretty simple, you probably don’t need an accountant if you’re okay with maths and working out basic online systems. But for anything more complicated e.g. a limited company, a VAT registered business, a business with a payroll, or just terrible at maths, then I do recommend paying for some help. Depending on what your needs are they start from around £200-£700 per year. You still need to keep a good record of income and expenditure, if you go to your accountant at the end of the year with a bag of receipts which haven’t even been sorted into date order and an empty spreadsheet you will be looking at a hefty bill. (If you really are terrible at organising this sort of thing, it may be worth employing a bookkeeper. Bookkeepers charge a smaller hourly rate than accountants, so they’re worth consideration for the more week-to-week tasks that need completing.)

If you need an accountant or a bookkeeper, shop around and try to get a recommendation. If you’re a very small business you shouldn’t be paying big bucks for this.

Seek funding and investment

Where is the money coming from to set up your business? What does this cover? Quite often people start out initially with savings or an inheritance, if lucky. In terms of other forms of investment, it falls into three main brackets: money you don’t have to pay back i.e. grants funding, money you do have to pay back i.e. investment loans, or sale of equity so that other people or organisations own share in your business. There are also several sub-categories to all this, it can get a little complicated.

Grants: It’s definitely worth looking into getting a small grant to help start up your business. Grants vary on what they cover and are always specific about what the money can be spent on e.g. often the money can be used to buy a key piece of equipment for the business or delivery of a specific project or event, but not to cover paying staff for general day-to-day running. Major grants funders include Arts Council England, Big Lottery Fund, and Heritage Lottery Fund, but there are many smaller organisations, trusts, and government initiatives for supporting start-up businesses in the very beginning. These often include business mentoring, which you should take advantage of. There are also grants more specific to certain areas and industries, digital development being a big one. It’s worth taking a look at the likes of NESTA and Creative England to see what’s on offer.

Investment finance: The most common form of investment finance is a business bank loan. However, there are several other options worth researching.

There are also other types of crowdfunding that may be more suitable than Equity Crowdfunding, for example, if you’re developing a unique product or community initiative. We’ve written an explanation of crowdfunding here, alongside input on our own experience of it.

Bootstrap your business

My final chunk of essential start-up business advice is to ‘bootstrap’ your business. The old saying ‘you have to spend to accumulate’ is absolutely true. However, the number of businesses that fail in the first few years because they get overexcited and spend money in non-essential areas for investment is pretty high. Make sure you budget for things which will definitely add value to your business first before splashing out on fancy stationary or office furniture. Bootstrapping means that where possible you should beg, borrow or steal (not literally steal, though, it’s just an expression). Invest money and time in the parts of your business that are customer facing, that make an impression. If you’re a freelance graphic designer, a bad ass website and good design software are more important than a fancy office and a brand new laptop. The stuff you want can be bought once the stuff you need starts making you money.

Part of your bootstrapping in the early days/years should be to make a Personal Survival Budget (PSB). Forget the business for a moment, this is totally about you as a human. Make a list of your cost of living for an average month: rent, bills, direct debits, insurance, average food spend, average spend on things like clothes, birthday presents and entertainment. From this, you need to work out how much personal income you can survive on without falling behind on rent and bills. If your PSB starts to look unrealistic for the business to support, you may need to downsize and make compromises. Could you rent somewhere smaller? Could you get a lodger or put your house on AirBnB? Could you cut back on clothes or gadgets?

The most weighty cost on start-up businesses tend to be the people it needs to pay at the end of the month, be that employees or yourself as a soletrader. It may be worth employing freelance staff or working an additional part-time job yourself while the business is getting off the ground.

That’s all for now, folks. Remember to do your research and look for affordable or free business support in your area. It’s more common than you think. If you do live locally to us (East Midlands), we do offer 1:1 advice. More on this here

 

 

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