Ecommerce Startup
12.05.2022 Ecommers and micro business online For some time, you have been thinking about starting a company? Hoping for the dream come true of eventually
12.05.2022
Ecommers and micro business online
For some time, you have been thinking about starting a company? Hoping for the dream come true of eventually working for yourself? If so, you are not alone. In 2020 there were nearly 6 million small businesses in the UK, which clearly shows how many people are interested in becoming their own boss. There are many different types of businesses you can go for, including online ventures. If you are planning to open an online store or provide digital services, in order to ensure your business runs smoothly, you are going to need some business and tax advice. Surely, we you can count on us!
Surely, we you can count on us!
Market Research
If you already have an idea of what you want to do, it is important to ensure your time, effort and money committed to the business are well spent. Market research will help you refine your business idea and understand what are the leading trends in the industry, for example.
But also how are other people getting prepared and eventually addressing common challenges. Competitor research allows you to note their strengths and weaknesses, to understand who their customers are, the things they’re doing that you haven’t thought about, etc. It will help also define your target audience since you can better see what people are looking for.
Regarding your target audience, it’s crucial to spend some time analysing your potential customers – how old are they? What are their jobs? What is their income? What hobbies do they have? The answer to these and other questions will help you further understand who to target, be it with online ads or with special offers.
You may also want to consider getting feedback on your business idea. A fresh pair of eyes may be able to tell you what you’re missing, and if there are any concerns you haven’t thought of before. This can be done by asking people you know or by doing a questionnaire or poll, for example.
Right Business Model
Adapting the right business model is equal to putting the right plan into action by creating and implementing the best strategy for you venture.
The most straight forward model where you can promote and sell other people’s products via affiliate marketing will be great solution for a start. In this case you do not need your own products since you will make money on commission.
However, there are many other models to follow. If you plan on making and selling physical products online, then investing and creation an eCommerce site is probably the right decision; this type of platform allows your customers to buy and pay through your site easily.
Through this kind of dedicated and well-designed website or platform you can also offer many types pf services, such as consulting, in which you offer your time, expertise and your support. Selling digital products (ebooks or online courses, for example) are also a popular business model, as is selling your own software. Many people also try their hand at freelancing, be it writing books, designing websites, programming tools, and so much more.
Sole Trader, Partnership or Limited Company
Choosing the right operating structure is a key step as dealing with taxes in very different ways may bring different consequences and responsibilities. Therefore, you need to decide ahead what will fit your online venture best. Whether to start business as a sole trader, form partnership or incorporate a limited company.
Read about differences on the above in our article “Company setup”
In principle as a sole trader, you pay taxes by submitting a self-assessment tax return, and you do not have to deal with the extra admin that limited company directors have. This is why many people opt to start their self-employment career as a sole trader – it is easier to set up a business and close it this way, so it is useful to dip your toes while learning the ropes.
On other hand there are many benefits to incorporating a business. So when you achieve a certain turnover or believe a limited company is best suited for your particular venture, we can help. Forming a limited company can take up some of your time, so let us handle it for you instead, freeing you up to focus on the business instead.
When offering services (undertaking work from contractors) you should also consider legislation such as IR35 before accepting contracts. This is in order to exclude a deemed employment nature of the contract in question.
Raising Funds
Another key component of getting a business up and running. You can raise capital in many different ways, so it will be up to you to decide which option works best. From asking friends and family to using crowdfunding services or investors, make sure you’ve got what you need to succeed.
For this, you’ll need to have a concrete business plan in place, which will also help guide you through the process.
Getting Paid Online
Deciding how you want to get paid is crucial. And planning for it ahead can prevent a headache later. You may want to create an eCommerce website, set up a subscription service, offer PayPal or simply send out invoices.
There are many ways to go about this, but as long as your clients are aware of how to pay you (and you choose something convenient for your customers), you can just opt for the one that makes your life easier.
Budgeting and Keeping All Expenses and Fees in Mind
Businesses have all sorts of expenses and overheads. If you own a bricks-and-mortar business, you must consider rent and utility bills – but if you have an online business, there are other fees to think about. For instance, having a website is crucial because it’s where you advertise and sell your services and products, but websites are not free. Website expenses do not have to break the bank
and push your budget to the limit, but you still need to account for the cost of hosting and owning your own domain. You must also consider shipping fees, especially if you’re going to give free shipping to your clients, so build them into your prices from the start.
Another thing you can add to the pricing of your services and products from the beginning is VAT. You don’t need to pay VAT until you meet the annual turnover threshold of £85,000, but you may want your prices to reflect the 20% anyway. This is to prevent you from having to raise the cost of your products months into running your business, which can be off-putting to some customers.
Learning Digital Skills
Online businesses – or businesses with an online presence – require you to develop some skills you may not have known before. For example, for a website or site pages to appear on the first page of search engines like Google, you will need to learn digital marketing.
People do not find your website by chance. There are billions of pages online, so yours will need to come up with the way how to stand out and ensure that people can find you.
Set aside some budget for marketing if it is something you would prefer to hand over to a professional. This may be the best solution because digital marketing can take up a lot of time, and things can go wrong (or there can be a lot of trial and error).
Once the website is up and running, it is important not to forget about it either. Websites must be updated regularly to follow the latest practices and be compatible with the latest updates.
You will also want to check whether your pages are performing well or need to be revamped if sales have dropped, for instance.
So, whether blogging, writing the content for your website to make sure it is optimised for search engines or creating Google ads to sell your products, digital marketing is an essential part of having an online business.
Following Regulations for Data Protection
When handling customer data, you must ensure that information is protected and complies with the latest legislation. Before Brexit, the UK had to comply with the EU GDPR but, now that the nation has left the EU, businesses need to follow what are known as UK GDPR rules.
This UK-specific law comprises several privacy notices, data protection assessments, and international data information, so you must be up to date with it. If you do not, you risk having to pay a massive fine or even be prosecuted.
Social Media Presence
Setting up and managing your social media accounts are steps you cannot miss. Even if you do not have a personal profile online, you will want to create one or several for your business – after defining your audience, it will be easier to know which social platforms best suit your venture.
Taxation
Value Added Tax
If your turnover is below £85,000 / year, you do not need to register for VAT. This applies to both sole traders and incorporated bodies (eg limited companies). You must timely register with the HMRC and the tax office will issue your VAT number that should be quoted on all your sales record (invoices).
You MUST NOT charge VAT if you are not registered to do so. There are severe penalties.
If you are a business supplying digital services to UK consumers, these are liable to UK VAT. If you supplied to consumers outside the UK these are not liable to UK VAT. They may be liable to VAT in the country where the consumer is based.
The treatment of VAT for the supply of services to the EU changed on 1st July 2021. Now, any goods delivered to an EU country will attract value-added tax.
The rules for e-commerce transactions with the EU have also changed at the same time. It is an area of some complexity.
The other types of tax your business may need to pay include:
– National Insurance contributions
– PAYE (Pay as you Earn) – Income Tax deduced from an employee salary
– Dividend’s tax
