Starting a U.K. Business on a Shoestring Budget? Here's How Not to Blow It.
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Despite a somewhat uncertain political climate, the U.K. remains the place to turn your business dreams into a reality. Intuitive taxation for startups and a solid variety of financial schemes to help you keep afloat ensures that these shores are the place to make it.
Sometimes a little bit of perspective is all that's needed for even the most organized of CEOs to batten down the hatches and prepare to pinch their budgets -- and in that spirit, I've created a list of four essential tips to avoid going overboard with your finances.
Revise, revise, revise.
It's important to do your homework when setting up any business, let alone one that needs to be precise in avoiding miscalculations. Even if you have the best niche, or are tapping into the most untapped of markets, there's bound to be competition in many forms around every corner.
Take the time to investigate the market that you're about to dive into. Look at how your closest competitors shape up and how their services perform -- this gives you a strong platform to optimize your operations based on what you've found. One effective way of doing this is to analyze your competitors' websites and see what they're doing.
It's also imperative to get into the heads of your target audience. Think of their needs, wants, expected price ranges -- you'll be scoring a big own goal if you're not sure of who you're marketing to.
Gaining an informed idea of your competitors and customers will pave the way for an understanding of how to price your goods and services up. It's a popular practice to offer different levels of subscriptions and products. Being able to competitively price up your Basic package while identifying a large potential audience that'll have an interest in your Pro service and creating an attractive premium price can make all the difference between returning a profit and loss in your first few years on the scene.
Squeeze every penny.
It probably goes without saying that every penny needs to be squeezed when you're operating a business on a tight budget, but it's still worth hitting home the point and looking at how this can be achieved.
Cutting your expenses is vital, and your advertising campaigns need to be smart. Rather than paying through the nose for a wide-reaching television or billboard campaign, choose to target the audiences that will bring you the best conversion rates. Get into the minds of your target market and advertise to them in the places they're most likely to see it, through targeting the types of Facebook groups they're likely to be part of, reaching them on Twitter or targeting professionals on LinkedIn.
When it comes to taking on employees, think carefully about fair salaries that will entice competent workers, or look for capable and willing freelancers who can produce quality work within your budget.
There are plenty of platforms where you can find freelancers for pretty much any type of work, be it social media management, administrative work, data entry or graphic design. Here are some I've used in the past:
- Fiverr: A cheap platform with plenty of options. On the other hand, there are a lot of low-quality offers that should be avoided.
- UpWork: Generally more expensive. Freelancers are paid on an hourly basis.
- Humans: Straightforward and easy-to-use platform. Unlike many other platforms, they have no fees.
- People Per Hour: U.K.-based freelancing platform serving businesses from all around the world.
- 99Design: Great for finding designers for pretty much any work.
Finally, it's imperative that your office essentials and supplies are affordable. Buying software packages, stationery and hardware adds up, too. So, be sure to look for discounts wherever possible. You'll be amazed at the volume of coupons and online codes that are available from websites, and there are plenty of ways you can hunt for great deals without creating too much of a distraction from your work. Browser extensions like Honey don't just find the best discount codes automatically while you browse, but can also point you in the direction of bargains and tell you when is best to make a purchase on sites like Amazon. By the time you're ready to expand your company, you could have already saved thousands.
Venture capital or bootstrapping?
Brexit brought its forecasts of a slowing down of venture capital funding, but the U.K. has been averaging 69 venture capital deals per quarter since 2016's referendum -- a significant increase on the 45 reported before the landmark vote.
At over £4.3 billion, British startups still attract the most venture capital in Europe, and business owners that are looking for that little helping hand would be well-positioned to turn to the U.K. to build their business -- but is it a better path than a bootstrapping alternative?
Take a moment for introspection. Will your business benefit from an early cash injection? If you're capable of demonstrating a clear and logical business model, you could be given a healthy amount of money for growth. But, creating a venture capital deal will involve substantial repayment, and some will involve giving up a stake in your business.
A bootstrapping alternative, some argue, helps growth because you retain full ownership of your startup and learn to avoid spending money needlessly. However, some business plans are more expensive than others, and if you find that an early windfall justifies later repayments, then it could be time to make a pitch to the U.K.'s vast array of venture capital firms.
Plan for taxes.
The tax on patents in the U.K. is also an impressive 10 percent. These figures have enabled the government to declare that England, Scotland, Wales and Northern Ireland are the easiest places in Europe to do business, noting that £919 million is saved annually by U.K. businesses thanks to reductions in red tape.
If your startup is planning on selling goods or services, then it will likely need to start charging Value Added Tax (VAT). Most businesses must pay VAT on their sales in the U.K., however, in exceptional circumstances, their products can be exempt.
VAT is typically set at 20 percent of the price that a consumer pays for your products or services, and you can register your company for VAT at any time -- though this becomes a legal requirement once your turnover exceeds £85,000.