How to start a small business

When you’ve decided on the type of business you want, you’re ready to start getting it up and running. 

1. Register a business name

Naming your business can be a bit of fun but it can also be frustrating if you find someone else has the same or similar name to the one you wanted. Your business name needs to be unique, it must not be offensive and it must appeal to your target audience.

It’s worth carrying out a search on Google before you become set on a particular business name. That way you’ll know whether anyone else has a similar name to yours. 

2. Establish a legal structure

The next step is to choose your legal structure. The structure you choose will impact how your business is taxed and how much tax you’ll pay. Setting up as a sole trader is the simplest option. You’ll need to register your business so that you can pay income tax through your self-assessment tax return each year. Note that being a sole trader means you’re personally liable for any business debts.

If you’re starting your business with a partner or partners, setting up a partnership will be more appropriate. You’ll share responsibility for your business’ debts and its profits and losses. Each partner pays tax on their portion of the profits through their own personal self-assessment tax return.  

Alternatively, you might prefer to set up a limited company. This means your business finances will be separate to your personal finances and you’ll need to pay corporation tax on your profits. This could work out cheaper if you’re a higher rate taxpayer. 

Setting up a limited company can also be more suitable if you plan to hire employees as you can pay salaries through the pay as you earn (PAYE) scheme. 

3. Write your business plan

A business plan is an important document that outlines to potential investors what your business does and what your future plans are. Even if you don’t plan to apply for finance yet, a business plan can help you get a better idea of your strategic goals and any potential problems that could arise. 

A business plan should include the following:

• An executive summary: This should go at the start of your plan but needs to be written last. It should describe your business and outline your objectives. 

• • Products and services: This needs to outline what products or services you’ll be offering, how you’ll source the materials and how much they will cost. 

• Market analysis: Show that you’ve examined the market and looked at competitors to establish that there is a demand for the service you’ll be offering. Be sure to include your target market, as well as market size, growth rate and trends. 

• Financial projections: This should include revenue, expenses, cash flow and profit. Usually, five years of projected financial statements are enough. 

• Management team and strategies: Highlight all the key players involved in the business and what qualifications they have. Also include the risk management strategies you propose. 

• Marketing plan: This should outline how you’re going to promote your business and how much you expect to spend on marketing. It can also be worth including a SWOT analysis. 

4. Secure funding and finance to set up and grow your business

When starting a business, unless you have a significant sum of savings lurking in an account somewhere, it’s likely you’ll need to borrow funds to help get your business set up and later expand.

You could think about approaching friends and family to see if they would be willing to loan you the money as this can be cheaper than going to the banks. But this also has the potential to ruin your relationship if your business fails to take off and you can’t afford to repay the money.

Another option is to find out whether you qualify for a startup loan. This type of loan is designed to help new businesses launch and expand and will give you a lump sum that you then repay in monthly instalments over a set term, with interest on top. To qualify, your business must have been trading for no more than 36 months and you must be able to prove that you were unable to obtain a loan from alternative sources and that you can afford the repayments. 

Further finance options to consider include:

• an unsecured business loan, which lets you borrow a lump sum from a high street bank or online lender;
• a business credit card, which enables you to borrow flexibly up to your set credit limit;
• a business grant that you won’t have to pay back, but you’ll usually need to be working in a particular industry to qualify;
• asset finance, which enables you to lease or hire business equipment;
• crowdfunding, which lets you raise money from a large group of people via an online platform. 

5. Establish a marketing strategy

Once you’ve got your funding in place, it’s time to think about how you’re going to market your business. 

As a first step, it’s important to build a website for your business. Website builders can help guide you through the process and you can choose to have a standard information website or an e-commerce site if you’re selling products online. 

You’ll also need to optimise your website for search engines so that people can easily find your website and understand what it offers. 

Additionally, it’s worth building a social media presence through platforms like Facebook, Twitter, LinkedIn and/or Instagram. Post content that’s interesting and relevant to your target market and also helps drive customers back to your website. 

Finally, consider writing regular blog posts, sending emails and newsletters and using flyers and print marketing to advertise your business. 

6. Secure business insurance

Having the right insurance in place is crucial to running a successful business. Some of the business insurance policies to consider are outlined below:

• Public liability insurance. This covers you if you’re taken to court because your business activities caused damage to someone’s property or resulted in injury. It can cover your legal costs and any compensation you might be required to pay.
• Employer’s liability insurance. You’ll need to have this type of insurance if you employ staff. It provides cover for compensation claims if an employee becomes ill or injures themselves due to the work they carry out for you. 
• Professional indemnity insurance. This will protect you in the event a client loses money as a result of negligence in the services you’ve provided. It can cover legal fees and compensation payments. 
• Contents insurance: This protects your business equipment and other physical belongings in the event they are damaged or stolen. Some policies will also offer cover for items you take outside the business premises. 
• Business interruption insurance: This covers you for loss of income during periods where your business can’t operate due to an unexpected event such as damage to your premises by fire or flooding, or the breakdown of essential equipment. 

7. Register for tax

Before you start trading, you must register your business. If you’re a sole trader you’ll need to register to be able to file a self-assessment tax return. 

If your VAT taxable turnover exceeds ₦85,000 in any month over the last 12 months, you’ll also need to register for VAT and complete a VAT return each quarter. 

Finally, if you’re hiring staff, you will need to register for PAYE.

8. Establish secure record storing

A big part of making sure you pay the correct amount of tax is to stay organised and keep accurate business records. Without this, completing your tax returns can be extremely time-consuming and you’re more likely to make mistakes. 

Opening a business bank account will help you keep your personal and business accounts separate, making it much easier to see what’s what when it comes to completing your tax returns. There’s also a wide range of accounting software that can help make record-keeping a lot easier. Many of these tools will also help you streamline your invoicing process, helping you to chase late payments and make paying invoices a lot quicker and hassle-free for your customers.