Choosing your business structure

Choosing your business structure

Sole Trader

What is a sole trader?

A sole trader is a self-employed individual who is solely responsible for their own business. It is most common to start as a sole trader as it requires minimal set up, cost and administration.

When and why should you register as a sole trader?

If your business is a low cost start up and you are not going to need to borrow money to grow your business then being a sole trader may be right for you at this moment. However, it is important to understand that you alone are responsible entirely for all costs of the business.

As a sole trader it can be quite a lonely and exasperating journey. However, the advantage of being in full control and being your own boss and doing what you are passionate about may be what makes up for the uncertainty and heavy responsibility that comes with it.

How to register

Although you are not required to register at companies’ house, you must notify HMRC that you are self-employed within 3 months of starting.

You will need to register for your self-assessment and then file a tax return yearly.

You’ll need to keep a record of all your business transactions preferably on bookkeeping software.

You’ll also need to pay Income Tax on your profits and Class 2 and Class 4 National Insurance

ClassRate for tax year 2017 to 2018
Class 2£2.85 a week
Class 49% on profits between £8,164 and £45,000
2% on profits over £45,000

As a sole trader your business is not thought of as a legal entity therefore you will be solely responsible for all debts and legal action taken out against you.

So whilst you may benefit from having less regulations and paperwork to deal with, the high risk that comes with being a sole trader may make you think about registering as a limited company instead.

Private Limited Company (LTD)

What is a private limited company?

A Private limited company is a business that is owned by its shareholders and run by directors. The ownership of the company is split into shares and is owned by the shareholders. The directors run the company and are required to perform certain duties for the company and its shareholders.

What does ‘limited liability’ mean?

This means that all debts that are incurred are the liabilities of the company and not of the shareholders or the directors. So if the company was to go bankrupt, the shareholders would only lose the investment they put into the company, but their own personal assets would not be affected.  The directors also do not incur any personal liability as the act as agents for the company.

Requirements for forming a Private Limited Company

  • To set up a private limited company you need to register with Companies House. This is known as ‘incorporation’.
  • At least one director over the age of 16 must be appointed.
  • The company must have a registered office in the UK.
  • The company name must comply with Government regulations
  • At least one share must be issued at the time of incorporation.
  • An address for the company
  • Details of the company’s shares (At least one shareholder is needed)
  • To check what your SIC code is (identifies what your company does)
  • Shareholders to agree to create the company and the written rules (known as ‘memorandum and articles of association’)
  • Details of people with significant control over your company

Register your company

Once you have these details, you can register your company.

It costs £12 to register online and £40 by post

Your company is usually registered within 24 hours online and 8 to 10 days by post.

After you’ve registered

Once the company is registered you’ll get a ‘certificate of incorporation’. This confirms the company legally exists and shows the company number and date of formation.

You’ll also need to register for Corporation Tax within 3 months of starting to do business.

Business legal structure comparison table

 

(www.startups.co.uk)

TypeStructureForAgainst
Sole traderExclusive owner of the business, entitled to keep all profits but liable for all losses

·         Low cost, easy to set-up

·         Full control retained

·         Very little financial reporting

·         Full liability for debt

·         Pay more in tax

·         Lacks credibility in market

PartnershipBetween two or more individuals who share management and profits

·         The above, but with more heads

·         More potential to raise finance

·         The above, affecting all partners

·         Can be messy to wind up

Limited companyPrivate company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested

·         Less personal financial exposure

·         Favourable tax regime

·         Ability to work for corporate clients

·         Administrative and regulatory demands heavier

·         Annual accounts and financial reports must be placed in public domain

Limited liability partnership (LLP)Some or all partners have limited liabilities, and exhibits elements of partnerships and corporations

·         Flexibility: can be incorporated in members’ agreement

·         Advantages of limited company and partnership combined

·         Profit taxed as income

·         Partners must disclose income

·         LLP must start to trade within a year of registration – or be struck off

Extremidy is a business management company. Our aim is for small businesses to, connect, grow and succeed, by providing them with support, networking and assistance. Please like our Facebook and Twitter page to keep informed of all our news and helpful business advice.
Extremidy Team
www.extremidy.co.uk

How to Create an Effective Marketing Plan

How To Create An Effective Marketing Plan

A marketing plan is another vital document that all business owners should have and works hand in hand with your business plan. Where your business plan gives you a roadmap to direct your business a marketing plan allows your business to understand how it will get there by providing necessary steps to help you establish strong customer relationships. A marketing plan will also need thoughtful planning and research to produce a useful, beneficial document. Marketing plans are vital to marketing success. They help to focus the mind of companies and marketing departments on the process of marketing i.e. what is going to be achieved and how we intend to do it.

What you need to think about when creating your marketing plan:

Market identification

It is important to clearly identify the market for your products and services, as well as explain your Unique Selling Proposition (USP). Your plan should include:

Market analysis – what is your market? What is your position within that market? Is it a niche market?

Sector growth – is your market growing, declining or has it reached a plateau? Is it becoming more specialised?

Customer base – what are your customer demographics (e.g. age, sex, income, location) and psychographics (predisposition, influences, lifestyle)? What customers offer the best prospects for you? What evidence do you have that they need or desire your product or service?

SWOT analysis – identify your business strengths, weaknesses, opportunities and threats

Which segment? How will we target the segment? How should we position within the segment?

Why this segment and not a different one?

Define the segment in terms of demographics and lifestyle. Show how you intend to ‘position’ your product or service within that segment.

Marketing mix

Once you have identified your position in the market, you next need to formulate your marketing mix. This is the combination of:

Product – this refers to the products, services, add-ons, installation, upgrades, after-sales support, etc that you offer the customer. Is the product Sold individually, as part of a bundle, in bulk, etc?

Price – putting your product or service on the market at the right price is crucial. How tight are your margins? Will you cost plus, skim, match the competition or penetrate the market?

Place – do you sell your products from a fixed physical location or do you sell over the phone or internet? How far does your business stretch geographically? Will you market direct, use agents or distributors, etc?

Promotion – Which media will you use? e.g sponsorship, radio advertising, sales force, point-of-sale, etc? Think of the mix elements as the ingredients of a ‘cake mix’. You have eggs, milk, butter, and flour. However, if you alter the amount of each ingredient, you will influence the type of cake that you finish with.

Brand Positioning

Brand positioning describes how a brand is different from its competitors and where, or how, it sits in a market. What is your brand-positioning statement for your target customers? It should be a simple declarative sentence of how you will meet your customer needs and beat the competition.  The best positioning statements are those that are single-minded and focus on target customer needs. Ultimately, your brand and what it symbolizes for customers should be your strongest competitive advantage.

Competitor analysis

Your marketing plan should also include a thorough assessment of the competition:

Who are they?

Where are they based?

What are their product lines (services offered)?

What are their prices?

How many employees do they have?

What are their strengths and weaknesses?

What is their market share?

What ads or promotions are they running?

Objectives

You should have SMART objectives/goals.

Specific – Be precise about what you are going to achieve (set real numbers with deadlines)

Measurable – Quantify your objectives (Ensure you can track your goals)

Achievable – Are you attempting too much? (It can be challenging but make sure it is possible)

Realistic – Do you have the resources to make it happen (Be honest with yourself, are you capable)

Timed – State when you will achieve the objective (Set a deadline)

If you don’t make your objective SMART, it will be too vague and will not be realized. Remember that the rest of the plan hinges on the objective. If it is not correct, the plan may fail.

Promotional activity

Clearly state whether you will use direct marketing, public relations, advertising or sales promotions to carry out your marketing campaign. Be warned – advertising and public relations campaigns can be expensive, so it is important that you spend wisely and evaluate the effectiveness of your campaigns.

 Budgets

Your marketing plan should state the annual marketing budget, as well as an itemised list of expected expenditures. A projection of expected returns on marketing expenditure should also be included.

Once strategies have been identified for each channel, you need to figure out your strategy. How much are you willing to spend in each channel? What outcomes do you expect to see? What tasks do you need to accomplish for each step in your process? Creating a well-defined list of budgets, goals and action items, with appropriate personnel assigned to each, can help make your marketing plan a reality.

Flexibility

Your marketing plan should not be set in stone; certain factors may make it necessary for you to adapt or modify your plan, for example, changes in:

Trading environment

Government policies

Lifestyle trends

Technology

Competition

Employees

Suppliers

Multiple Channels

While these steps are a good starting point, companies also need to incorporate multiple channels into their marketing plans. Some of the most popular channels for today’s businesses include:

Social media marketing

Social media has become an essential part of businesses’ marketing plans. Businesses that have yet to realize the opportunities that Facebook, Twitter, Google+, LinkedIn and other networks provide them are missing out. First you need to work on the content you will be delivering, find where your customers are and then consistently post relevant useful, branded information to your customers.

Email marketing

Though email marketing may not be as new of a concept as social media marketing, it is an effective and popular choice for many small business owners. Companies can implement email-marketing techniques in a number of ways, including newsletters, promotional campaigns and transactional emails. Companies such as MailChimp and Constant Contact make it easy for companies to manage their email campaigns.

Mobile marketing

The popularity of smartphones and tablets has helped to change the way companies target their customers. As a result, companies are looking to implement strategies that reach customers on their devices.

Mobile marketing should not be considered a mere extension of email or online marketing, however. Since many consumers have a mobile device with them at all times, texts and push notifications will almost certainly be seen by the recipient.

Next steps

In order for your marketing plan to be effective you need to, discover what you would like your marketing efforts to achieve. Are you hoping to see increased sales or traffic, or new client contacts? Set six-month milestones for each channel, and compare the results against prior efforts and your expectations. How will you measure your success? What do you do when a marketing platform is under-performing? If your efforts have fallen flat short, go back to the basics. Asking your customers to complete an email survey about their social media habits in exchange for a coupon or discount may give you useful insight into relationships between customer demographics and your marketing efforts.

Finally, write a brief summary at the beginning of the plan. This will help others to get acquainted with the plan without having to spend time reading it all. Place all supporting information into an appendix at the back of the plan.

Extremidy is a business management company. Our aim is for small businesses to, connect, grow and succeed, by providing them with support, networking and assistance. Please like our Facebook and Twitter page to keep informed of all our news and helpful business advice.
Extremidy Team
www.extremidy.co.uk

Decide on what sources of finance you will use

Decide on what sources of finance you will use

Written By Naomi Fisher

At some point all businesses will need money invested in them. Sources of finance is the origin of that money. This is where the money in the business will come from.

Your business may need financing for many different reasons, such as, whether it’s to start-up, hire staff, purchase a huge asset or expand. So, it’s very important that you choose the best source for your business, you may lose your company if you take it from the wrong source or be stuck repaying back the money instead of being able to grow your business.

How do you know when it’s time to finance your business?

In order to know when its time to pursue the financing option, you need to decide:

How much finance is required?

When and how long the finance is needed for?

What security (if any) can be provided?

Whether you are willing to give up some ownership of your business in return for investment?

Although it may seem like the easier option to head to your nearest back to acquire a loan, this may not be the case for all business, if you don’t have a solid financial history and a great business plan, you may not be able to secure a great deal. However, there are other sources of funding available, such as Start Up Loans, government grants, regional and community funding, and even business angel investors.

What are your finance options?

There are several different finance options that are available for small businesses, but only you can decide what its best for your business. Here is list:

Short term Financing (Less than a year)

Short term financing should be used for your working capital requirements and to cover you until you start generating enough income.

Types

Bank Over Draft

This is an effective short term finance option and is the most common. The bank agrees to a set overdraft limit and the business can use it to help day-to-day short-term requirements.

Pros

Its flexible

The business borrows only what it needs

Cons

It’s an expensive way of borrowing

Hire purchase/leasing

A business may lease a new fixed asset from a company to avoid having to buy it new outright which they may not have the funds, so they essentially rent it from the company for a predetermined period and price. However, the asset never becomes the businesses property.

If the business would like to own the assets at the end of the period, they could consider using the hire purchase option. They pay the monthly fees and interest rate and at the end of the agreement there may be a nominal fee.

Medium-Long term loans

Business loan

Banks offer several types of loans, medium to long term. Despite a fall in lending, the traditional business loan route is still a popular option for start-ups, and you have the advantage of retaining equity in your business.

The government is trying to increase the availability of these loans for small business, through initiatives such as Funding for Lending, Start-Up Loans and the Business Bank.

Small business grants

There are many different grants available to businesses. They are highly sought-after, and hence difficult to come by. If you can obtain one, however, the benefits are obvious and numerous.

Crowdfunding

Crowdfunding sites allow members of the public to pool their resources, investing as little as £10 each in start-ups. Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people. Take a look at www.crowdfunder.co.uk and see what it is all about.

Angel investors

Angel investors can provide huge injections of capital early in a business’ life to propel it to new heights, as well as using their experience and connections within a sector to great effect.

Bootstrapping

Building a business out of very little or virtually nothing. Boot strappers rely usually on personal income and savings, sweat equity, lowest possible operating costs, fast inventory turnaround, and a cash-only approach to selling. The term derives its meaning from the expression “lifting oneself up by one’s own bootstraps”, referring to raising oneself up by one’s own means

Bootstrapping means less money needs to be borrowed and interest costs are reduced. Bootstrap financing really begins and ends with your attention to careful management of your financial resources. Be aware of what you spend and keep your overhead low. If you need to go the top-dollar route, make sure you can justify the expense. Don’t choose an overly expensive office or location unless it’s really going to pay off in increased sales.

To obtain a loan or overdraft, you must be able to prove to the lender that the business will generate the income and cash to both repay the facility according to the terms of the loan, and service the loan by meeting interest payments.  This is where your business plan is essential.

Extremidy is a business management company. Our aim is for small businesses to, connect, grow and succeed, by providing them with support, networking and assistance.
Please like our Facebook and Twitter page to keep informed of all our news and helpful business advice.
Extremidy Team
www.extremidy.co.uk

Choose business idea/Research business idea/Create business name

Brainstorm ideas

Every new business starts with an idea. Maybe there’s something you’re really knowledgeable and passionate about, or perhaps you think you’ve found a way to fill a gap in the marketplace. Wherever your interests lie, it’s almost guaranteed that there’s a way to turn it into a business.

Another option is to open a franchise of an established company. If you choose to go this route, a lot of the legwork has been done for you. The concept, brand following and business model are already in place; all you need is a good location and the means to fund your operation.

Once you’ve narrowed your list of ideas down to one or two, do a quick search for existing companies in your chosen industry. Learn what the current brand leaders are doing and figure out how you can do it better. If you think your business can deliver something other companies don’t (or deliver the same thing, but faster and cheaper), you’ve got a solid idea and are ready to create a business plan.

 

Research your market

Market research is all about testing your business idea with the general public to see if there is any interest in what you will be offering. There are two types of research, one is qualitative and the other is quantitative.

Quantitative research

Quantitative research is used when you need to identify a numerical output and involves statistical analysis and mathematics. You may need to use this when you are calculating your market size for your product.

For example,

If you asked 1000 university student if they would buy your product and 850 of them said yes they would, which equates to 85%.

Then say that there are 25000 university students in the uk

Therefore, your potential market size will be 21250 university students.

If you know that the value of your product/service is £10, then this indicates that the total market value for your product/service in the UK is 21250 multiplied by £10, which equals £212,500.

So this is how quantitative research may be useful to your business.

Qualitative research

Qualitative research on the other hand is based on opinions, it can be used to explain and understand quantitative research it expresses what your potential customers think or feel about your product/service.

You can gather data from this type of research, through focus groups, surveys and questionnaires.

Ideally, you need a mixture of both quantitative and qualitative research to gain a reliable picture of the market and to define and hone your proposition.

Other places to gather information

 

ü  There are a whole host of places you can find statistics on your chosen market.

ü  Office for National Statistics website

ü  YouGov Sixth Sense,

ü  The British Library Business & IP Centre

ü  British Library’s workshops and events section for opportunities to network with others at the same stage as you and get advice from experts

ü  Direct competitor

ü  Internet

 

If you find all of this a bit much you may require expert assistance it might be worth paying for research tailored specifically to you, a professional service might be helpful in targeting the right people and asking the right questions if you are unsure.

It’s always worth checking out a few to make sure you are getting the best possible price, but you should make sure you use an accredited company.

A good place to start is the Market Research Society’s Research Buyers Guide, which lists all of the accredited companies in the UK.

 

Choosing a name for your new business

After you have decided on your business the next thing you will have to decide on is a name. It’s a good idea to spend some time when choosing a name for your business because it will be one of the first things your customers hears and sees.

It’s a good idea to have your company reflect the type of business that you’re in, but try not to restrict your name to something that may not still match your business in the future. For example, ‘’Benjamin’s tables’’ you may choose that name because at the moment you only sale tables, but in the future you may want to add other types of products, so you need to be mindful of this.

You will also need to abide by the various rules and restrictions imposed by company law when making your choice.

Considerations for limited companies

If you are going down the Limited Company route, you will need to register your new name with Companies House.

The Companies House website contains detailed information on naming conventions to ensure your name passes various tests for suitability. For example, all Ltd company names must end in ‘limited’, ‘plc’ or ‘ltd’. The name must not be offensive or too similar to an existing name.

When you don’t have to use ‘limited’ in your name

The names of most private limited companies in the UK must end in either ‘Limited’ or ‘Ltd’.

You can apply to leave ‘limited’ out of your name, for example if you’re a charity or sports club.

Sole trader or partnerships

People operating as sole traders or in general partnerships can trade under their own names, or choose a different business name.

Before using your chosen name, check that it isn’t already being used.

If a sole trader at the other end of the country is using it, there may not be a problem. However, if another local business, company or national firm is using it, you should choose a different name.

You should do the following checks:

check local phone books, business directories and the internet

make sure that your proposed name – or something similar – hasn’t been registered by a company

make sure that the name isn’t too similar to a word or expression that has been registered as a trade mark.

Business names

You can trade using a different name to your registered name. This is known as a ‘business name’.

Business names must not:

include ‘limited’, ‘Ltd’, ‘limited liability partnership, ‘LLP’, ‘public limited company’ or ‘plc’

be the same as an existing trade mark

contain a ‘sensitive’ word or expression unless you get permission

You’ll need to register your name as a trade mark if you want to stop people from trading under your business name.

You can’t use another company’s trade mark as your business name.

Use of sensitive words and expressions in business names

There are some words and expressions that you can’t use in a business name unless you have official permission. These are words that might give a false impression about your business. They are known as sensitive words.

The rules about sensitive words apply to all types of businesses and fall into five main groups:

words that suggest your business is of national importance or status – e.g. British, National, International, European

words that suggest a special status – e.g. Association, Authority, Chartered, Council, Institute, Society

words that suggest a particular function – e.g. Charity, Insurance, Register, Trust

words that suggest a specialised activity – e.g. Health Centre

words that suggest connections with government or royalty Parliament – e.g. Government, Royal, Queen, Prince

Displaying and disclosing your chosen name

Every business must display its business name – and other details – to inform customers and suppliers who they are dealing with. You should not print your stationery until you’re certain your proposed name is acceptable.

  • Limited companies and limited liability partnerships (LLPs) must wait until registration is complete and a Certificate of Incorporation has been issued.
  • A sole trader or partnership must obtain prior approval to use a sensitive word in their proposed business name.
  • You must display a sign with your company or LLP name:
  • in characters that can be easily read
  • in a place where visitors can easily and clearly see it at any time and not just during business hours continuously
  • You must also include your company’s or LLP’s registered name on all hard copy and electronic business correspondence including:
  • letters, notices and other official publications
  • emails
  • bills of exchange, promissory notes, endorsements and order forms
  • cheques signed by or on behalf of the company
  • orders for money, goods or services signed by or on behalf of the company
  • bills of parcels, invoices and other demands for payment, receipts and letters of credit
  • your website – you do not need to include the company name on every page but it must be displayed so it can be easily read
  • You do not have to state directors’ names on business letters unless you want to do so. However, if you do decide to include directors’ names, then you must state all the directors’ names.
  • If you are an LLP with more than 20 members, you don’t need to display the members’ names. However, you must keep a list of members at your principal place of business and state that the list is available for inspection.

Displaying a name online

If your business has a website, you must display:

general information about your business – including business name, address, email address, VAT registration number (if applicable)

details of any relevant professional body that you belong to or any authorization scheme to which your service is subject

Lastly

Be careful if your business is selling overseas since your business name may not go down so well in translation if you’re not careful! Check and make sure it does not translate into anything offensive.

 

Extremidy is a business management company. Our aim is for small businesses to, connect, grow and succeed, by providing them with support, networking and assistance.
Please like our Facebook and Twitter page to keep informed of all our news and helpful business advice.
Extremidy Team
www.extremidy.co.uk

Next Step After Deciding On Chosen Business

Next Step After Deciding on Chosen Business

Written By Naomi Fisher

Build a business plan

Now that you have your idea in place, there are a few important questions you need to ask yourself. What is the purpose of your business? Who’s your target market? What are your goals and aspirations for your business? Where will you get your source of funding for your start-up costs. These questions will be answered in your business plan.

A business plan helps you to understand what your business is about, what you can offer your customers, your future and current plans, ways to deal with the challenges your business may face and how you will continue to make your business grow and become successful.

  • What your business is about and how you will accomplish your goals.
  • Your extended goals, and how you will fulfill your market’s needs.
  • Your research on your target market.
  • Organization and management of your company.
  • Your service or product line, including copyright information and R & D activities.
  • Strategies for market penetration and growth.
  • Estimated costs and funding request.
  • Assess your finances.

Why should you have a business plan

  • Setting out an accurate plan will help you determine whether your business idea is feasible.
  • A business plan sets out in detail exactly how and why you will run your business.
  • A business plan is vital to helping you get finance.
  • Your business plan will include financial forecasts. A well-written business plan containing relevant figures will help you convince investors your business is a reliable proposition.
  • A well-researched business plan which includes the right figures and realistic forecasts will also reassure potential investors you are a sensible investment opportunity.
  • Your business plan will help you manage and understand your business finances, including managing cash-flow and determining your break-even point.
  • A business plan can help you to prioritize.
  • Developing your business plan helps you to step back and look at what’s working in your business and what you can improve on.
  • You can set specific goals, time frames for achieving them and show how you’ll measure performance.
  • You can make sound business decisions that focus your activities, maximize your resources and give you a competitive edge.
  • A business plan can give you control over your business.
  • A business plan will allow you to map the future of your business. You can come up with a detailed strategy on how you will deal with various scenarios.
  • Your business plan gives you a place to list specific goals and objectives for your business, helping you to set out clearly, how you plan to meet these goals and on what sort of timescale, and helping you to commit to that course of action.
  • Many business plans help determine how many employees you will need.
  • If you have employees, the planning process can be a good opportunity to seek their feedback on possible ideas and improvements. Your employees will value this opportunity to contribute to the business.
  • Your business plan includes detailed market research which will allow you to learn about your industry, market and competitors.
  • You can write down exactly where you are in the market and where you’re headed.
  • You can identify challenges you may come across and work out strategies to avoid or overcome them.
  • The planning process helps you learn about the different forces and factors that may affect your success. If you’re already in business, it helps you to step back and look at what’s working and what you can improve on. Instead of worrying about the future, a business plan helps to give you a sense of control over your business and your livelihood.
  • Update your business plan regularly It’s important to have a business plan, but it’s just as important to keep it up to date.
  • To write an efficient business plan you’ll need discipline, time and focus. The whole process may seem challenging; however, it will give you sense of control over your business.

Extremidy is a business management company. Our aim is for small businesses to, connect, grow and succeed, by providing them with support, networking and assistance.

Please like our Facebook and Twitter page to keep informed of all our news and helpful business advice.

Extremidy Team

www.extremidy.co.uk