Types of market research to plan or launch your business

Daniel Callaghan of MBA & Company looks at the different types of market research and offers some tips on selecting the right type for your business
Written by The Startups Team
Published on 15 April 2012

Market research is a fundamental part of preparing to launch a business, and assessing the importance of external factors – that is, those outside your office or workshop. Researching the market you’re intending to enter is paramount to making sure your business is heading in the right direction, and should be used to answer questions such as:

… Will anyone be willing to buy my product or service? … How many people out there would buy it, and does this equate to an attractive market? … Who are these potential customers? … What are they currently using, and how much are they willing to pay? … Do they really like my product, and do they have to buy it?

Without the answers to questions like these you might find that you have worked tirelessly for six months and been doing completely the wrong thing. As such, it is important to get it right from the beginning to ensure your business grows at its maximum capacity and achieves its full potential.

Market research is a broad term and there are a number of different techniques you can use. However, generally speaking, market research falls under one of two categories:

What’s the difference between quantitative and qualitative research?

  • Quantitative research is simply defined as research that involves statistical analysis and mathematics. As such, quantitative research should be used whenever you need to identify a numerical output.An example of when it is more appropriate to use quantitative data is when calculating market sizes for your potential product. For example, you might ask 1,000 professionals if they would need your product.From these 1,000 responses, you might receive 780 positive responses (or 78% of the total), indicating that professionals would need your product. You know that there are 10,000 of these professionals in the UK. Therefore your potential market size is 7,800 professionals.

    If you know that the value of your product/service is £5, then this indicates that the total market value for your product/service in the UK is 7,800 multiplied by £5, which equals £39,000.

    It is when looking for this specific figure, value or percentage result that quantitative research is at its most powerful.

  • Qualitative market research differs from quantitative market research in that it is not numerically-based, but opinion-based.  Qualitative research can be used to explain or understand quantitative research, as well as offering insight to help you improve your proposition, by uncovering how people feel and what they think about your product, and identifying trends within the written or spoken work.For example, one common type of qualitative research is a focus group, where a company gets a number of their target customers (perhaps six to eight people) together and presents them with a new product – say, a new yoghurt.One member might come out and say, “eugh, this product is far too fruity” and another might say, “I find the texture of this yoghurt far too runny”.  It is these nuggets of feedback, and the quotes, that will be reported back to the client – especially if the majority of the group expresses the same point of view and they identify a consistent theme throughout.

There are strengths and weaknesses to each option. Quantitative analysis will give you a hard, cold answer as to the attractiveness of the market, the probability of success or the final outcome of your business opportunity.

Qualitative analysis, on the other hand, will help you to add colour to your insight and build a bigger picture of the scenario you are looking at, which will be more useful when creating your marketing materials and developing your idea, working out your position in the market, your pricing – and crucially, what sets you apart from the competition.

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.

Daniel Callaghan is the founder of MBA & Company, an online marketplace which enables companies to hire MBA-level talent on a freelance basis. 

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Young Entrepreneur Society calls for government to become an angel investor

Campaign demands investment in Britain’s young entrepreneurs
Written by The Startups Team
Published on 15 April 2012

Would you accept angel investment from the government?

That is the question being asked by the Young Entrepreneur Society (YES) today, as it launches a campaign for the government to “put its money where its mouth is”.

The Entrepreneurial Government campaign, which is currently open for public discussion, proposes that the coalition could encourage youth entrepreneurship by becoming an angel investor itself.

Under the proposals, the government would help 10 of Britain’s brightest young entrepreneurs (each year) raise investments of up to £50,000, in return for equity in their businesses.

The final 10 would be screened by a yet-to-be-announced panel of high profile entrepreneurs and experts, and the investments would be accompanied by mentoring from YES and the panellists.

If successful, the scheme would reinforce existing government initiatives, such as the recent Business in You campaign, by providing start-up capital for Britons to springboard their business ideas into reality.

The idea is that, as an angel investor, the government would receive a return on its investments, which can then be reinvested into other promising businesses.

YES’s 22-year-old co-founder Carly Ward, a young entrepreneur herself, explained:

“Young people have fantastic ideas for great businesses that can provide wealth and jobs for our country and the government wants to encourage this.

“YES is calling for the government to stop talking about it and become more entrepreneurial themselves by investing in Britain’s young entrepreneurial talent.  They can make a good return on their investment and reinvest in more businesses in the future.”

YES already has the attention of the government, having yesterday announced that the coalition will introduce the organisation’s ’12 steps to success’ programme as a recognised enterprise qualification. It will be used to teach young people aged 16-18 how to start their own businesses.

You can share your thoughts on the Entrepreneurial Government campaign in the comment box below, or by voting YES or NO to the initiative on the YES website

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New ‘off-the-shelf’ app available for just £250

Tailored retail and download options available
Written by The Startups Team
Published on 15 April 2012

Small businesses can now create their own ‘off-the-shelf’ app for just £250, thanks to a new service from South Manchester developer Apps4.

The service offers clients a choice of two distinct app models: 4Vouchers, which enables retailers to offer discounts and promotions to smartphone users, and 4Downloads, which is designed for the playing of tracks, soundbites and videos, and is intended for clients in the music business.

Each model is available as a starter package, with upgrades such as GPS and digital ticketing functionality available for an additional cost.

Henry Hochland, co-founder of Apps4, said:  “We truly believe that apps are the way forward for start-ups and smaller firms and, as our new service shows, they don’t have to cost the earth.

“Apps allow companies to learn about their customers’ preferences and shopping habits while enabling them to use that information to refine their business strategies. They also provide companies with the opportunity to build brand loyalty by offering exclusive, app-only promotions and offers.”

For more information, visit www.apps4.co.uk

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How to start a dance school

Here we cover the basic steps, from marketing to initial costs, to help you sashay your way to success with a dance class company
Written by The Startups Team
Published on 15 April 2012

When starting a business as a dance school, these areas are essential to consider:

What is a dance studio business and who is it suited to?

With the popularity of TV programmes such as Strictly Come Dancing and So You Think You Can Dance, demand for dancing lessons is on the rise. Whether betrothed couples hoping to hone their first dance or young professionals seeking a fresh way to keep fit and make friends, dance classes have enjoyed a contemporary renaissance and now remain a popular pastime for many – and that creates an opportunity for quick-footed entrepreneurs.

It goes without saying that if you’re thinking of starting a dance school, some prior dance experience is advisable. However, this doesn’t necessarily mean boxes of rosettes or a roll call of professional accolades. Mental fitness and stamina is more important that outstanding physical fitness.

A passion for dance is a must, but so is a passion for people – and a good level of patience. Could you welcome 20 strangers into your studio and teach a class where they all feel engaged and included? Could you tailor your dance classes to individuals and never show your frustration to slow learners? Do you have the creativity to devise custom dance routines?

Of course, as the owner of a dance studio, you don’t have to teach lessons yourself. However, in the early stages, not only is this cost-effective but it is a good way to get to know your customer and hone your customer-service skills. It also means you can step in if one of your teachers drops out at the last minute.

Although running a dance school can be a very sociable business, it also requires great personal discipline. You may want your dance school to have an inclusive, family feel – but remember, it can be hard to take money from friends. You need to be very organised, business orientated and able to draw the line between friends and clients.

After all, the social aspect is just one part of your business. You may teach 15 hours of dance classes a week, but spend another 50-70 doing admin – whether answering e-mail enquiries, writing training manuals for new teachers, paying invoices, arranging venue bookings or updating your website and social media. No matter how active your start-up, the back room business remains.

The planning and preparation involved in launching a dance school

The first question you need to answer is – what kind of dance do you want to teach?

If you have the skill-base to support it, there are definite advantages to offering a wide variety of classes. However, don’t feel you need to know every dance style yourself. You’ll never be able to answer all your customers’ requests, but can always hire freelance dance teachers to fill the gaps.

You may also want to look for specific growth opportunities. Is a new dance style in vogue? Or is a particular era enjoying a contemporary revival – such as rockabilly, folk or the forties? Recent trends include the rise of fitness-focused fusion dance styles, such as Zumba and Ceroc, and early years’ activities, such as Ballet Babes. This decision – and in particular whether you choose to focus on children or adults – will help you to define your target market.

Next you need to decide upon a location. This is where market research is crucial, as Lianne Weston-Mommsen, co-founder of Starz Academy UK in Hampshire, explains: “Areas that you’d think on paper should be brilliant, such as those with higher household incomes, sometimes don’t really work. But in other areas, there might be more demand than you’d expect.”

One way to decide if a location is appropriate is to look at whether there are any similar, successful dance schools operating in the area. If there are, you’ll know there is demand for your business type and you then need to make an assessment as to whether there is room for some healthy competition.

Research your competitors thoroughly and ask yourself: How could I do it better? Brainstorm a unique selling point and plan your branding carefully, to avoid stepping on your competitors’ toes. You could also test the water before you launch by offering short courses of lessons – for example at a local gym.

Indeed, you may want to continue to rent studio space, such as this, at least for the first year or so of your business. It’s a great way to keep costs down until you can afford your own studio.

Business models and structure

One option to consider is to buy into an existing franchise, such as Baby Ballet, diddi dance or – if you are interested in offering drama and singing classes too – performing arts franchise Razzamataz, which raised £85,000 investment from Duncan Bannatyne in the 2007 series of Dragons’ Den.

This removes much of the risk from starting your own business, as you are buying into a tried and tested formula and your franchisor has already made their start-up mistakes and learnt the lessons. This means you can benefit from their years of skills and experience from day one, and will receive training to learn the tricks of the trade.

Joining an already-established business also means much of the back room work is done for you. Some franchisors employ efficient database systems to minimise franchisee paperwork, as well as providing support with licensing and legislation. That is not to mention the marketing benefits of being part of a high profile, trusted brand.

“It can be very lonely running your own business,” points out Denise Hutton-Gozney, founder of Razzamataz.

“Our franchisees receive a minimum of two Skype calls from our management team per term and we have an annual sit-down business development review. We also provide a weekly business newsletter, which keeps them up-to-date.”

She adds that Razzamataz further provides a website specifically for its franchisees, where they can find everything from teacher contracts and health and safety templates to PR and marketing tools – doing much of the legwork for you.

However, becoming a franchisee won’t be for everyone. If you don’t like following a structured system, this may not be for you. Of course, to buy into a franchise, you also need a sufficient body of capital saved up.

A dance or performing arts franchise in the UK will generally cost you between £5,000 and £25,000. This is likely to include your franchise licence, some initial training, merchandise and marketing support. Remember though, your start-up costs won’t end there.

You’ll also need to shell out for Criminal Records Bureau (CRB) checks, first aid courses and similar expenses. Your franchisor may also request you have a launch budget put aside of a few thousand pounds. Look carefully at your franchisee agreement and assess the total costs. Then decide whether you think the contract offers good value for money, or if you’d rather go it alone.

If you would prefer to cater towards adult dancers, one popular opportunity within the dance franchise space is Zumba Fitness®. This fusion of Latin dance with international music has boomed in the last few years, due to its focus on fitness and the party atmosphere it brings to classes.

Zumba is not a franchise in the traditional sense of the word – you’re not buying into a business as such, but Zumba is a registered trademark, created and owned by US company Zumba Fitness LLC. To start teaching it, you initially need to attend a one-day Zumba instructor training course (which usually start at around £200), then maintain an up-to-date instructor licence throughout the time you teach the class.

This is a relatively affordable franchise option, but a crucial one. Any dance teacher who includes ‘Zumba’ in their class titles (or teaches it) without having a current certificate of completion is in violation of trademark and copyright laws.

Marketing your dance classes and studio

Once you’re happy with your idea, you need to raise awareness of your business. Core to your marketing campaign will be the name you choose for your dance school. Get it wrong and you will find your start-up much harder to promote. Likewise, if your name is too similar to that of a competitor, you may have the same problem.

Consider where your business might be in five or 10 years’ time and try to choose a name that allows for expansion. For example, although Lianne Weston-Mommsen and her business partner Cheryl Dodd exclusively offered early years ballet classes when they launched their dance school in September 2010, 18 months on and they were able to expand into more unisex dance styles, because they chose a versatile name in ‘Starz Academy UK’.

Weston-Mommsen advises: “Go in expecting to succeed and with a very definite angle of what you want it to become. We wanted to go in with professional looking marketing and a full syllabus. That made us recognisable sooner than it would have done if we’d started small.”

Starz Academy UK has also benefited, Weston-Mommsen insists, from having joint founders. A partnership can allow you to split your workload between the creative and the business – with one founder focusing on teaching classes and writing syllabuses, while the other manages the books, admin and marketing.

The advent of social media provides scope for you to undertake a fair amount of online promotion for free. Similarly, there are various listing companies that you can provide your school’s location to, so that it ranks well in online searches. Most will not charge for this.

One marketing strategy, which may help to drive initial customers to your dance school, is to offer discounted classes through a daily deals site, such as Groupon. These can be controversial but Inspiration2Dance founder Viktoriya Wilton believes that, “if you’ve tried Groupon and failed, it’s because you didn’t manage it very well.”

She used the site to offer six-week beginners’ courses in a variety of dance styles and found it a successful way to get new customers and create momentum for her business. She advises that entrepreneurs can control demand for their deal through, “managing numbers yourself, by asking customers to book their dance type on your own website.”

Another way to raise awareness of your business – besides traditional PR and marketing – is to plan showcases, presentations and specialist workshops, where prospective customers can see what your existing students have learnt (and maybe even have a go themselves). After all, you can shout about your dance school all you like, but, as the saying goes, actions speak louder than words.

Rules and regulations when launching a dance school

There are very few restrictions to starting a dance school. You don’t need prior certification – on the contrary, the International Dance Teachers Association won’t actually accredit you as a dance teacher until you have at least two years’ teaching experience. The only exceptions are specialist franchises, such as Zumba, which do require you to complete training in advance.

As with most businesses, you will need public liability insurance to cover you against any accidents or injuries which may occur in your classes. If you are a member of the Imperial Society of Teachers of Dancing, they can help to arrange this for you. You will also need a Public Performance Licence (PPL) for permission to legally play music. Most of the venues you hire will already have one of these, but it is better to be safe than sorry.

It is also sensible to do a health and safety assessment of your business and put a policy in place before you launch. You may want to consider completing a basic first aid course. Similarly, if you are planning to teach students who are under the age of 18, you will need to have intermittent Criminal Records Bureau (CRB) checks and request this of all teachers working with this age group.

You will also need to decide on the best legal structure for your start-up (whether you want to be a sole trader, form a partnership, or register a limited company), and make sure you comply with all the relevant legal requirements. For more information on the different business structures and your responsibilities regarding tax, administration, etc, read our article on how to choose the right legal structure for your start-up.

Dance school start-up costs

The main outgoings for a start-up dance school are renting venues and paying teachers. The cost of these will vary greatly according to the region you operate in, but the good news is that both should be payable by the hour, and if you later acquire a dance studio of your own, you can hire the space out for the same price to other dance teachers in your area – this will also help you increase the types of dance lessons you can offer without you having to undergo the training.

If you plan to provide your teachers with any kind of props to use in classes, that is another start-up cost you need to factor in and if you are going to provide refreshments, there will be a one-off cost to buy relevant equipment and minimal ongoing expenses, to replenish teabags, milk and sugar.

Then there are the practicalities. Quotes for Public Liability Insurance will vary but should be around the £120 mark (per annum) and a Public Performance Licence (PPL) is about £100 a year. Creating a website can be relevantly cheap enough but expect to pay for your website domain name and hosting – however again this shouldn’t be massively expensive. If you need someone to design and maintain your website for you, this will cost more, but there are plenty of basic web-builder tools online, which are free to use for a basic site, or cost up to around £25 per month for more advanced features.

If you are going to send out newsletters, promotional offers or product orders by snail mail, expect to spend on postage as well as the cost of printing and creating the leaflets. But, don’t forget that to build a brand you need a professional and compelling logo for your letterhead and other branding. Unless you spent your past life as a graphic designer, you need to budget for this and you may also want to invest in a copyright application, to protect your brand.

However, as your business grows, you may want to expand your marketing budget, perhaps hiring a freelance consultant to provide occasional advice and help you gain press exposure. If you can afford to put aside £1,000 a year to promote your dance school, you’ll be giving yourself a great chance of growth.

How much can a dance teacher potentially earn?

If successful, starting your own dance school could earn you a fair little income: upwards of around £30,000. Of course, how much you earn is completely dependent on how many dance classes you run. But – if you can keep your outgoings low – much of this income is your own to keep.

This was a major motivation for Wilton to start her dance school. Having started teaching evening classes as a hobby, she soon found that, “I could earn twice as much from running a dance school than I could from my London admin role.”

It is important to research venue and teacher fees in your local area before you start out, as these will play a significant role in dictating how much you charge your students. After all, it’s not worth running a class unless you turn a profit. You need to be sure you can achieve this, even if some weeks’ classes have poor attendance.

Starz Academy UK charges £4.60 per child for a 30-minute Ballet Babes class, followed by 30 minutes social, play and refreshment time – which is included in the price.

Each class has a maximum capacity of 16 children, however Starz Academy UK requires at least six children to attend in order to break even. One way to ensure this, is to ask parents to pay termly (Starz offer 12 week terms for £55), providing them with an incentive to attend each week, and safeguarding the business’s balance sheet if some students are absent for any reason.

Similarly, Wilton charges an upfront fee of £60 for a six-week dance course in central London, with a deal of £100 offered to couples. However, she also offers a drop-in price of £12 per class, to entice first-timers who might not be ready to commit to a full course or have unpredictable working hours. For private, one-to-one tuition your fee can be much higher: between £45 and £100 in the capital. London Zumba teachers typically charge between £7 and £12 per hour.

You could also boost the revenue generated at each class by selling a small selection of relevant stock, such as children’s tutus at a toddler ballet class or weighted toning sticks at Zumba (which can be used to boost the workout). As Weston-Mommsen points out, this can be a good money-spinner, because – in the case of early years ballet classes at least – “once someone sees one child in a tutu, they tend to want their own.” If you choose this route, that is another cost to factor into your business plan: buying up a supply of stock (and possibly paying for somewhere to store it). You also need to equip each teacher with a box of samples, so customers can view the products and then make an order – either online or to collect the next week.

To help formulate your dance school business plan you may find it useful to download our free business plan template.

As your brand develops, you may want to consider making your dance school into a franchise. This could be a great way to grow your business, while passing regional management to your franchisees.

Tips for dance school success and useful contacts

Hopefully by now you have all the tools to make your dance school a success. However, if you get stuck along the way, there are plenty of organisations out there to help you.

These include the Imperial Society for Teachers of Dancing, the International Dance Teachers Association and the Royal Academy of Dance – as well as Startups’ own site.

Imperial Society of Teachers of Dancing http://www.istd.org

International Dance Teachers Association http://www.idta.co.uk

Royal Academy of Dance http://www.rad.org.uk

If you are still unsure about whether you could start a dance school, use these top tips from entrepreneurs who have opened their own.
Lianne Weston-Mommsen, Starz Academy UK:

  • “You get most people word-of-mouth so reputation is key. Your customer service must be excellent – address queries and issues immediately and don’t put customers under pressure to buy stock.
  • There is always room to improve, so listen to your teachers’ feedback and never think you know it all. Listen to other people, because what works on paper might not work in reality.
  • Launch in new locations – but then stop and grow what you’ve got. Fill your existing classes rather than opening more. Recruiting area managers can help deal with the most time-heavy bits of your business.
  • Consider your business like a spider diagram. What can come out of your central bubble? Get the first bit right before you roll out other ideas. Learn from your mistakes so that you can be more efficient second time around.”

Denise Hutton-Gozney, Razzamataz Theatre Schools:

  •  “Research your market and remember, location, location, location!
  • Follow best practice – make sure your health and safety policy is up to date.
  • Recruit a fabulous team. Never go for second best.
  • Be organised and try to have fun along the way.
  • Get a mentor (I went to The Prince’s Trust). They can seem nosy but they’re there to help you. They provide great advice and are much cheaper than turning to consultants! Mine also put me forward for some awards.
  • Everyone loves a star. If you can get someone high profile in to launch your business or judge your competitions, it does help.”

Viktoriya Wilton, Inspiration2Dance:

  • “Stay on top of your cashflow and make every penny count.
  • Get out of your comfort zone.
  • Don’t be scared. Fear is the only thing that prevents us from doing something. You might be surprised how easy it really is!”
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Funding Circle closes £10m Series B round

Index and Union Square lead the financing
Written by The Startups Team
Published on 15 April 2012

Funding Circle, an online lending marketplace for small businesses, has closed a £10m Series B funding round led by Index Ventures and US-based Union Square.

A number of angel investors, including Better Capital founder Jon Moulton and Betfair co-founder Edward Wray, also made significant investments in the funding round, which takes the total amount invested in Funding Circle thus far to £13.2m.

Since launching in August 2010, Funding Circle has helped more than 670 small firms secure finance via its peer-to-peer exchange, which enables investors to lend to early-stage companies without the need for banks or intermediaries.

The site has grown at a yearly rate of more than 400% over the last two years, and the total value of loans it facilitates now exceeds £1m per week.

Plans are in place to double the company’s staff base over the next 12 months, and co-founder Samir Desai hopes the Series B money will fuel continued innovation.

Desai said: “At present 90% of the small business lending market is made up by five major high street banks. This lack of competition has continually stifled the attempts of small businesses to gain access to much-needed finance. At the same time investors continue to receive pitiful returns on their savings.

“At Funding Circle, we are delivering an innovative service that removes the outdated and laborious processes of the banks. We deliver a better deal for businesses and a better deal for investors.”

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Scottish franchisee to launch Domino’s in Germany

Plans to open three outlets before end of the year
Written by The Startups Team
Published on 15 April 2012
A serial Scottish franchisee has announced plans to launch Germany’s first-ever Domino’s Pizza outlet.

Sean Geddes, who runs a chain of 11 Domino’s restaurants north of the border, will open a total of three outlets across the central European country before the end of the year, creating around 70 jobs in the process.

The inaugural franchise will open at Aachen, a university town on Germany’s western border, in May. Plans are in place to open the second branch in Cologne over the summer, although the timing and location of the third outlet have yet to be decided.

Explaining his choice of location, Geddes told The Scotsman:

“Germany is a virgin market so we’ve selected Aachen because it’s near Belgium and the Netherlands, where the Domino’s brand is already familiar.

“Aachen is a university town with about 45,000 students, and young people tend to be the first to adopt new brands.”

Geddes has recruited Gordon Penman, manager of Domino’s’ Edinburgh branch, to head up the German operation, and says he has injected around £1m into researching the fledgling market.

The seasoned entrepreneur has been operating Domino’s franchises since 2001, and also runs Britain’s only mobile Domino’s division, selling pizza at music festivals. He was awarded the European master franchise in 2010, in recognition of his success and loyalty to the brand.

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Budget 2012: Pilot for enterprise loans to boost youth entrepreneurship

Branson proposal given tentative seal of approval, subject to trial run
Written by The Startups Team
Published on 15 April 2012

The chancellor today used his Budget speech to confirm the government is “exploring the idea” of offering enterprise loans for young people looking to start a business, on similar terms to student loans.

Osborne said: “Young people get a loan to go to university or college. Now we want to help them get a loan to start their own business.”

The idea is based on a recommendation made by Sir Richard Branson in January this year and trumpeted by the Virgin tycoon again earlier this week. It has since been championed by a number of entrepreneurs and business organisations, including the Institute of Directors, Enternships and NACUE.

The official Budget document said: “Later this year, [the government will] pilot the best way to introduce a programme of enterprise loans to help young people set up and grow their own businesses, building on the support already available including the National Enterprise Allowance.”

Commenting on the news, Sir Richard Branson said: “This has the potential to transform the prospects of thousands of young people. The entrepreneurs of today will be the job creators of tomorrow so I’m delighted that the government has listened to those at the very start of their careers.

“The country is full of gifted and enterprising people so this pilot, which crucially has business mentoring and support at its heart, will help prevent a lost generation of talent.”

Melody Hossaini, star of The Apprentice and founder of InspirEngage International, added: “I am very supportive of the government’s announcement on Enterprise Loans.

“I’ve said in the past that, if young people can borrow to go to university, then they should be able to borrow to start a business. The important thing now will be to design an effective implementation framework, to benefit those who need support, in a sustainable way.”

 

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How to register for VAT: complete guide

A guide to the VAT registration process, from creating an account with HMRC online to reclaiming on your previously purchased goods and services.
how to register for VAT
Written by The Startups Team
Published on 15 April 2012
What did the 2025 Autumn Budget say about VAT?

There was speculation that this year’s Budget announcement would see an increase in the VAT threshold but thankfully this didn’t occur.

Instead, following a consultation, the government said it will introduce a new VAT relief on 1 April 2026 for business donations of goods to charity.

Even when using the best accounting software, the process of registering for value-added tax (VAT) for the first time can be confusing. Certain timescales might also worry you if you feel your registration is overdue.

That’s why it’s worth understanding the steps involved in VAT registration so you can proceed with confidence.

Registering for VAT is essential if your business’s taxable turnover exceeds the 2025 taxable turnover, which is currently £90,000.

If you think you will need to get registered for VAT soon – or if you are just curious about the process for the future – then this article will help you gain the confidence you need to get started, avoid the common mistakes that may disrupt your business, and cover everything you need to know to register successfully.

💡Key takeaways

  • You must register for VAT if your taxable turnover exceeds £90,000.
  • VAT registration is free, but you may need to pay to hire an accountant or accounting software to help with the process.
  • You can register for VAT either as a limited company or as an individual/partnership.
  • You can reclaim VAT on paid goods up to four years before you registered and six months for services.

How much does it cost to register for VAT?

There is no cost to register for VAT. The whole process is free on the HMRC website.

However, when it comes to filing your VAT return, there are optional methods that can increase your costs. For example, if you wish to contract an accountant to complete your return, you’ll be paying for their professional services.

Alternatively, if you want to file your VAT return yourself, it’s helpful to use some good quality accounting software.

Either way, these methods will ensure you are compliant with the Making Tax Digital (MTD) legislation, which requires UK businesses to keep digital records of their VAT accounting.

What documents do you need to become VAT registered?

When registering for VAT, you’ll either need to register as a limited company or as an individual/partnership. Here’s a quick rundown of both.

Documents you’ll need as a limited company

To register as a limited company, you will need:

  • Your company registration number
  • Your business’s bank account details
  • Your Unique Taxpayer Reference (UTR)
  • Details of your annual turnover
  • An estimate of your taxable turnover for the next 12 months
  • Information on your Self-Assessment tax return
  • Details about your corporation tax
  • Information on Pay As You Earn (PAYE)

Documents you’ll need as an individual/partnership

To register as an individual (e.g. sole trader) or partnership, you will need:

  • Your National Insurance (NI) number
  • An identification document (e.g. passport or driver’s licence)
  • Your bank account details
  • Your UTR (if you have one)
  • Details of your annual turnover
  • An estimate of your taxable turnover for the next 12 months
  • Information on your Self-Assessment tax return
  • Details of your payslip and P60

Can you register for VAT with a paper form?

You can register for VAT with a paper VAT1 form, which you’ll need to request from HMRC.

Paper registrations are allowed when:

  • You need to apply for a registration exception
  • You’re registering several divisions or business units under different VAT numbers
  • You’re joining the Agricultural Flat Rate Scheme

However, even if you begin this process with a paper form, you’ll have to head online to complete it.

All newly VAT-registered businesses are required to submit their VAT returns and any VAT payments electronically. HMRC is paperless in this regard. This has been the case since April 1 2012, when it was extended to virtually all VAT-registered businesses, not just newly registered ones.

How to register for VAT in three steps

All UK business owners can register for VAT online at HMRC’s website.

If you are in a partnership, your nominated partner can use HMRC’s online system to register, as long as you are using one VAT number.

Here’s what you need to do, step-by-step.

1. Register with HMRC Online Services or Government Gateway

These are where you can register for VAT, as well as other services.

To create a new Government Gateway account, go to HMRC’s login page and select Create sign-in details. From there, you’ll need to provide your contact details, such as your email address.

After you’ve created your account, you’ll receive a 12-digit activation code within 10 days of enrolling (or up to 21 days if you live abroad).

2. Log in to your account

Once you’ve received your activation code, you’ll be able to log in with it to your private VAT dashboard.

Here, you can view your VAT status, manage your account, track your records, see your upcoming important deadlines and dates, as well as apply for and view your VAT certificate online once you receive it.

3. Apply for your VAT Certificate Of Registration

A VAT certificate (also known as VAT4) is an incredibly important document that HMRC provides to confirm that your business is officially registered for VAT. The certificate includes several important information, including your unique VAT number and your date of registration.

To access this certificate, log in to your Government Gateway account. From there, select View your VAT account and then View VAT certificate. You’ll then be able to see your VAT details displayed, as well as options to either print a copy or download it as a PDF.

What should you do after you receive your VAT certificate?

Once your VAT certificate has come through, you can take the next steps in registering with HMRC online. To do this, you’ll need the following three pieces of information about your business:

  • Your VAT registration number
  • The postcode of your principal place of business (if you’re an overseas business, you can use postcode AB10 1ZP – which is valid for persons with no place of business in the UK.)
  • Your effective date of registration for VAT

You will be able to find these three pieces of information on your VAT certificate.

You’ll also be prompted to add the final month of the last VAT return you submitted, and your “Box 5” figure (which would be your VAT due minus any instalments you’ve already made for the period). However, the answers to both of these would be “N/A” or 0.00 if the business has just been newly VAT-registered.

Will I receive confirmation of VAT registration?

There’s no official email confirmation sent from HMRC. However, if you’re using accounting software, you should be notified of completion. 

Once you have your certificate and can access your account to send your VAT returns annually, you’ll know that you’ve completed the process.

The only thing you will have to remember after this point is to send in your VAT returns annually. Therefore, you should make sure to check your VAT return submission and payment deadlines within your HMRC online account, so that you don’t miss any important dates.

Can you reclaim VAT on purchases made before registering?

Once the business is VAT-registered, you may be able to recover some previous VAT you’ve incurred. However, the time limits and conditions differ depending on whether you’re dealing with goods or services.

Reclaiming goods

You can reclaim VAT on goods you bought or imported up to four years before you were registered if all of the following apply to the goods:

  • They were bought by you as the entity that is now registered for VAT
  • They are for your VAT taxable business purposes
  • They are still held by you, or they have been used to make other goods you still hold

HMRC recommends that you record the transactions like any other present-day transaction. It is also suggested that you keep details of stock-take, usage and expiration.

Reclaiming services

You can reclaim VAT on services you bought during the six months before you registered for VAT if both of the following are true:

  • The services were bought by you as the entity that is now registered for VAT
  • The services were for your VAT taxable business purposes

Both goods and services are expected to have VAT invoices, and the VAT element recovered will be based on the amount shown on the invoices, not on the current rates of VAT.

When do I need to register for VAT?

You must register for VAT if your total taxable turnover for the next 12 months goes over the £90,000 threshold, or you expect your turnover to reach the threshold in the next 30 days.

Read our guide on when to register for VAT for all the relevant information you need.

Conclusion

Registering for VAT is crucial if your taxable turnover reaches £90,000, or you risk facing penalties.

Fortunately, registration doesn’t have to be a complicated task. It’s just a matter of providing the right information, staying up to date with key deadlines, and keeping a record of your relevant expenses.

And thanks to the many choices of good-quality accounting software out there, staying on top of VAT is easier than ever. It automatically calculates VAT on sales and purchases, applies the correct VAT rate based on product/service, and makes your business compliant with MTD regulations.

Don’t forget to check out our top choices for the best free accounting software, so you can choose the right fit for your business.

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What is the VAT threshold and when do you need to register for VAT?

A small business guide to value added tax (VAT), including the new threshold, current rates, and when you may need to register.
When to register for VAT
Written by The Startups Team
Published on 15 April 2012

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Autumn Budget 2025: VAT threshold remains unchanged

Despite rumours of the Government planning to lower the VAT registration threshold, the latest information following the 2025 Autumn Budget has confirmed that the threshold will remain at £90,000 from April 2026.

It was also confirmed that a new VAT relief for business donations of goods to charity will take place at the same time. The relief will cover items worth up to £100 earch, increasing to £200 for essential electrical goods like laptops and household appliances to help address digital poverty.

Registering for VAT is a crucial part of getting your small business accounting software in order.

If your taxable turnover exceeds £90,000, you’ll need to become VAT-registered.

But the question now is, when should you do all of this?

You must register for VAT if your taxable turnover exceeds the threshold in the next 12 months, or you expect it to go over this amount in the next 30 days. You can also register voluntarily, so that you can reclaim VAT incurred on goods and services.

In this article, we’ll guide you through everything you need to know about when to register for VAT, including the current VAT threshold, the different VAT rates, and how to choose the right VAT scheme for your business.

💡Key takeaways

  • VAT (value-added tax) is a tax that’s charged on most goods and services sold by businesses.
  • You must register for VAT if your taxable turnover exceeds £90,000 in the next 12 months.
  • You must also register if you expect your taxable turnover to exceed the threshold in the next 30 days.
  • You can register for VAT voluntarily, which allows you to reclaim VAT on most goods and services charged.
  • The three main VAT schemes you can apply for are the flat rate scheme, cash accounting scheme, and annual accounting scheme.

In this guide

What is VAT?

VAT — short for value-added tax — is a tax that’s added to most products and services offered by VAT-registered businesses. For consumers, it’s a tax added to the price of the things they buy.

How it works is simple. First, a business buys raw materials, and will pay VAT on that purchase. Next, when they sell the goods or services, they’ll add the VAT as an extra charge on top of the original price. From there, they’ll pay the Government the difference between the VAT collected from customers and the VAT they paid on business expenses.

In the UK, businesses must be VAT-registered when they’re taxable turnover exceeds the threshold. If you need help, read our guide on how to register for VAT to get the essential information you need.

What is the threshold for compulsory VAT registration?

The current VAT registration threshold is £90,000. This changed on 1st April 2024, meaning the threshold is now £5,000 more than the previous £85,000. This has remained unchanged following the 2025 Autumn Budget update.

A business must register for VAT if its taxable turnover is more than the VAT threshold for any consecutive 12-month period. You must also register if you expect your turnover to exceed this amount in the next 30 days.

Another common reason why businesses may have to register is if they take over an existing VAT-registered business. If the taxable turnover of the purchaser for the last 12 months, plus the turnover of the business being purchased, is over the threshold, then the purchasing business must register.

Outside of this, there are a few other scenarios when VAT registration becomes necessary. For instance, if you’re trading outside of the UK.

What happens if I don’t register on time?

If you don’t register for VAT on time, you might have to pay a late registration penalty and/or a “failure to notify” penalty.

What’s more, surcharges and interest are likely to be charged for late payment if the business has a VAT liability. If your business’s turnover exceeds the VAT threshold temporarily, you can ask HMRC for an exception from registration.

Who cannot register for VAT?

A company cannot register for VAT if it does not meet the definition of a business as stated by HMRC for VAT purposes.

Additionally, a business would also be prohibited from registering if it tends to sell only goods or services that are exempt from VAT.

Can you voluntarily register for VAT?

If the taxable turnover of your business does not exceed the current VAT registration threshold, you can still register for VAT voluntarily.

The common reasons why a business might opt to register for VAT include:

  • VAT can be reclaimed on most goods and services that the business purchases.
  • If a company’s customers are mainly VAT-registered businesses, they can also reclaim any VAT that is charged.
  • It gives small businesses the appearance of being more established, which can be appealing to customers, lenders, investors, and suppliers.
  • It pushes small businesses to keep more accurate records, which can help keep things running smoothly.

B2B vs B2C: why does it matter for VAT?

Unless it is mandatory, businesses should think about their customers before choosing to register for VAT.

For B2B businesses, it won’t have a major effect on clients. As mentioned earlier, if a company’s customers are generally other VAT-registered businesses, they won’t mind if they’re charged VAT, because they can reclaim it from HMRC later on.

On the other hand, B2C businesses will have to charge VAT on products/services to the general public, who aren’t VAT-registered. This means that the VAT would be an additional cost and would inflate the retail price. Also, if the business’s competitors aren’t VAT-registered, customers may be more drawn to their prices instead.

What are the different VAT rates?

The most common VAT rate in the UK is 20%. However, certain goods and services are marked lower, or even exempt from VAT completely. Here’s a quick overview of the different categories:

NameCurrent rateExamples
Standard20%The majority of goods and services sold in the UK, such as clothing, electronics, and fuel.
Reduced5%Covers a large number of products/services, including children's car seats, specific medication for disabled people, certain social housing projects, and LPG and heating oil used in households.
Zero0%Zero VAT rates for domestic and international passenger transport, newspapers and magazines, basic unprocessed food, water supplies, animal feed, and more.
ExemptN/aSome products and services are exempt from VAT completely, including entrance fees to cultural events (e.g. museums, art exhibitions and zoos), care provided by a qualified institution (e.g. hospital or care home), health services provided by registered professional, and education provided by an authorised body. Business donations to charity will also be exempt from April 2026.
Outside the scopeN/aItems that are completely outside of the UK VAT system. Examples include drawings, wages, MOT tests, rates, etc.

Choosing a VAT scheme

Once you’ve established when to register for VAT, you’ll want to consider the most appropriate VAT scheme for your business. There are three main options:

VAT flat rate scheme

This scheme is only eligible for businesses with less than £150,000 of taxable turnover. It is designed to make record keeping simpler for small businesses by allowing you to apply a fixed-rate percentage to turnover, dependent on industry.

For more detailed information from HMRC, click here.

VAT cash accounting scheme

Another popular choice for startups and small businesses, but it is only accessible for those with a turnover of less than £1.35m. In this scheme, you only have to pay VAT on your sales once you have received payment from your customers. Likewise, you only reclaim VAT on any purchases you make once you have paid your supplier.

However, you still have to pay HMRC, even if the invoices haven’t been paid yet, which can risk cashflow issues. You also cannot use the cash accounting scheme in conjunction with the VAT flat rate scheme.

Annual accounting scheme

Rather than filing your return each quarter, this scheme allows businesses to submit one annual return, as well as making advance payments (using estimated amounts based on the previous year’s return) throughout the year.

Once you’ve completed your return, you can either make a final payment (to cover any shortfall between your advance payments and the final bill) or apply for a VAT refund if you’ve overpaid.

VAT schemes for retail businesses

For retail businesses, there are several VAT schemes you can apply for. These include:

  • Point of Sale Scheme: you identify and record the VAT at the time of sale.
  • Apportionment Scheme: you can only use this scheme if you buy goods for resale and have a turnover (excluding VAT) of £1m or less. You cannot use this scheme if you’re selling services or goods you’ve made yourself.
  • Direct Calculation Scheme: you make a small proportion of sales at one VAT rate (e.g. 20%) and the majority at another rate. Only available if you have a turnover (excluding VAT) of £1m or less.
  • VAT Margin Scheme: you pay VAT on the value you add to the goods you sell rather than on the full selling price of each item. Only available if you sell secondhand goods, works of art, antiques, or collectors’ items.

Conclusion

You must register for VAT if your taxable turnover exceeds £90,000 in the next 12 months, or you expect that it’ll hit this amount in the next 30 days.

But even when it’s not mandatory, registering for VAT can have its perks. You can reclaim it on most goods and services, and even come across as more established, attracting customers, investors, or lenders.

Either way, a good accounting software can be a lifesaver when managing VAT. Not only can it save serious admin time by automating VAT calculations and correcting VAT rates, but it can also ensure you remain compliant with the UK’s Make Tax Digital (MTD) regulations.

Need help finding the right software? Check out our guide on the best accounting software for small businesses for our top choices, including features, pricing, and who it’s best suited for.

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Google study highlights importance of mobile-friendly websites

dotMobi joins GetMo programme to encourage business’ adoption
Written by The Startups Team
Published on 15 April 2012

Mobile searches for leading retail brands increased by 166% in the UK last Christmas.

That is according to Google, who have released results highlighting the importance for businesses – and particularly retailers – to have a mobile-friendly site to serve traffic.

Nearly four out of five large UK online advertisers do not currently have this facility – risking alienating customers and incentivising them to go elsewhere.

Google’s head of global mobile sales Jason Spero further reported that approximately 15% of all web traffic is now mobile – likening a failure to answer this demand with a mobile site to closing down your website for one day every week.

Now Google’s GetMo scheme – which aims to help UK firms establish a presence on the mobile web – has partnered with dotMobi, to introduce the goMobi mobile website builder to Google’s business users.

Established in 2010, goMobi allows firms to create sophisticated mobile websites via a simple cloud service, including click-to-call, m-commerce support, maps and social networking functionality. The service is currently available to businesses at a 40% discount through group hosting site Easyspace, including a free trial.

Eileen O’Sullivan, COO of dotMobi, said: “We’ve been in mobile web since its beginning, so we understand websites need to deliver a local, personal and mobile-specific experience to customers.

“Mobile is not desktop made smaller. It’s a different medium and needs a different approach.”

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Crowdcube celebrates first birthday with £2.3m invested

First year investments to create over 200 new jobs
Written by The Startups Team
Published on 15 April 2012

Happy birthday to Crowdcube, which is today celebrating its first year of trading.

The crowdfunding platform was the first equity-based model in the world when it launched last February and has facilitated investments totalling £2,352,000 in small businesses within 12 months.

Eleven businesses have secured seed or growth capital through the platform to date – including Crowdcube itself – which is expected to create an estimated 246 new jobs within the next three years.

In November 2011, Crowdcube hosted the world’s first £1m investment through crowdfunding, positioning the business as a leader in its field.

Last month the start-up’s founders were invited to Number 10 to advise on the implementation of the Seed Enterprise Investment Scheme and they also launched their first white-label partner site, with Startups.

Crowdcube has created an infographic to celebrate its first birthday.

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Top 20 round-up: Blue Dot secures £50,000 investment through NESTA

The latest news and deals from our Top 20 start-ups of 2011
Written by The Startups Team
Published on 15 April 2012

Blue Dot has been selected as one of the first 15 businesses to secure investment from NESTA’s Innovation in Giving fund.

The social currency concept – which rewards people for doing good things such as volunteering, donating or liking not-for-profit businesses on Facebook – was chosen from over 400 applicants to receive £50,000 from the Fund.

Launched in September, the £10m Innovation in Giving Fund is part of a £34m package from the Cabinet to increase levels of social action.

Cubesocial wins Local Business Accelerators award

Social media manager Cubesocial has been selected as one of the outstanding businesses of its local community.

The start-up, which is based in Basingstoke, was chosen as one of three businesses in the area to win the regional Local Business Accelerators award, which includes a three-month advertising campaign in a local paper and mentoring.

The business – which was recently named as a ‘One to watch’ by Index B, alongside Top 20 peer Crowdcube – will now go through to the final, where it will be assessed for its ability to create jobs, revitalise its local community and create economic growth.

The overall national winner will receive mentoring from Dragons’ Den star Deborah Meaden.

Marketinvoice celebrates £1m-December with international expansion

Financial e-commerce site Marketinvoice has announced plans to expand into Asia, less than a year after its launch.

The start-up – which allows suppliers to ease cashflow woes by auctioning outstanding invoices – is setting up a liaison office in Hong Kong, after spotting demand for international invoice auctioning.

The move follows a record month of trading for Marketinvoice in December, when the site helped small businesses access over £1m in finance. The founders expect their clients to auction up to $5m (£3.1m) through the site in 2012.

The fore-mentioned businesses are all among those chosen as our Top 20 start-ups of 2011

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Tech innovators offered start-up support with launch of £150m fund

MTI partners with university research centres to provide seed capital
Written by The Startups Team
Published on 15 April 2012

A new investment fund designed to help tech innovators transfer their ideas to market was unveiled yesterday.

The Orion Fund – which was launched by venture capital firm MTI, in partnership with the Universities of Manchester, Edinburgh and University College London – aims to raise £150m for tech start-ups, making it the largest investment fund of its kind in the world.

Working with three of the UK’s top six universities for commercial tech research, the fund will assess hundreds of innovations for their potential – and many will receive pre-seed funding to test their viability as businesses.

Ultimately, 35 of the country’s best tech innovations will be selected to receive seed funding of between £250,000 and £750,000.

These businesses can then potentially bid for further investment, typically ranging from £3m to £5m, at a later stage. The fund, which is currently raising its investment finance, hopes to accumulate the capital from pension funds, insurance societies and family offices.

Four leading investors will use their networks to join the fundraising effort, before joining the board as fund partners when the target is met.

Speaking for the new partners, Sir Richard Heygate said: “The United Kingdom has always been one of the most innovative countries in the world, although sometimes it has lagged behind others in turning this creativity into world-ranking businesses.

“The new fund is well positioned to…create significant new wealth for our investors and our country.”

 

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Healthy restaurant chain Leon to launch franchise model

Fast food veteran hired to head up operation
Written by The Startups Team
Published on 15 April 2012

The former chief executive of Burger King has been hired to guide the UK roll-out of a brand-new franchise – based on healthy eating restaurants.

Brad Blum, who was Burger King boss from December 2002 to July 2004, has taken a senior advisory role at Leon, six weeks before the brand’s first franchised outlet opens for business.

The restaurant will be based in the entrance hall of London’s Kings Cross station, and a further eatery will open at Heathrow Airport shortly after.

Leon’s founders Henry Dimbleby and John Vincent, who have hitherto focused their expansion on London and the South East, plan to open a further three Leons – with the ultimate goal of 30 franchised outlets across the UK and US.

Dimbleby and Vincent have also inked an agreement with US firm HMSHost to manage the initial wave of franchised premises.

Leon already serves 50,000 people every week, and recorded revenue of £12m in 2011. The founders hope that, by adding a dash of Blum’s fast food acumen, they can create a truly unique proposition.

Dimbleby – son of the famous BBC political anchor David – told The Financial Times: “We believe that there will be a few global players who will succeed in serving good fast food. Our ambition is to be one of those.”

To find out more about franchise opportunities with Leon, keep an eye on the Leon website.

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Subway franchise plans to open 600 new UK branches

Sandwich giant set to explore hospitals, airports and petrol stations
Written by The Startups Team
Published on 15 April 2012

Subway, the international sandwich franchise, has announced plans to open 600 new branches in Britain and Ireland over the next three years, creating 6,000 new jobs in the process. It is thought that the company, which has earned global fame for its quick-service rolls and baguettes, hopes to explore new locations such as hospitals, airports and petrol stations during the expansion. Subway believes that the recession has increased public demand for quick, affordable meals. Its signature lunch deal, currently available for just £3, is specifically designed to capture this market. The franchise currently comprises more than 1,400 stores across the UK – a five-fold increase on 2004. Furthermore, footfall has soared across the country in recent months. According to Subway’s latest UK financials, sales at stores which opened before January 2011 have risen 10% in the last 13 weeks. Discussing the UK expansion, Fred DeLuca, president and founder of Subway, said: “Everybody eats three times a day; it’s only a question of where they choose to eat. The longer-term trends are people eat out more often. “When we get to 2,000 stores, we’ll have about one store for every 30,000 people (in the UK). That’s actually quite low density for us. In the US and Canada, we have one store for every 12,000 people.” For more information on franchise opportunities with Subway, visit the Subway website.

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LinkedIn game helps entrepreneurs risk-assess their business

Snakes and ladders’ style game calculates insurance needs
Written by The Startups Team
Published on 15 April 2012

An innovative new game to help entrepreneurs risk-assess their business ventures has been launched via LinkedIn.

The ‘snakes and ladders’-style game was devised by AXA Business Insurance after its research suggested that many new business owners start up without properly assessing the risks they may face – or taking steps to safeguard their start-up.

The new online game can be played using LinkedIn login details, and helps players assess their insurance needs with a series of true or false questions. Players can compare their scores with their LinkedIn contacts, to aid discussions and advice sharing on the topic.

Amanda Blanc, CEO of AXA Commercial Lines, said: “New businesses are the backbone of our economy and will help drive us forward.

“They need to be as prepared for the risks they may face as they grow, by taking out protection.”

Regarding the specific target audience, Blanc added: “This online game is designed to encourage small businesses – particularly those just getting off the ground – to think about the risks and [how] to ensure their business climbs the ladder of opportunity, rather than falls down following unexpected disaster.

“It’s intended to be a fun way of getting a serious message across: without the right protection, a small business may not survive a pitfall.”

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PM challenges potential entrepreneurs to unleash the ‘Business in You’

Cameron also pledges under-used government offices to start-ups
Written by The Startups Team
Published on 15 April 2012

The prime minister David Cameron has today unveiled a major campaign to boost entrepreneurship in the UK, following last week’s reports that he would launch a new start-up initiative.

The nationwide ‘Business in You’ campaign – which was launched in partnership with StartUp Britain – aims to inspire potential entrepreneurs to start their own businesses and to encourage existing small businesses to grow.

Based on the concept that there is “a business in everyone”, the campaign will champion the stories of nine inspirational UK entrepreneurs, from a variety of backgrounds, who have used their passion or talent to develop successful businesses.

The ambassadors include Jamal Edwards, the 21-year-old founder of SBTV – an innovative broadcast company which has amassed more than 50 milllion YouTube views.

Moonfruit’s Wendy Tan-White, Alastair Mitchell of Huddle, Richard Moross from moo.com and Paul Lindley, founder of Ella’s Kitchen – one of the 10 fastest growing private companies in the UK – are also among the campaign heroes.

Cameron further pledged to make up to 300 empty and under-used government offices available to entrepreneurs struggling to find suitably flexible and affordable work spaces, from which to start or grow their businesses.

Launching the campaign in front of an audience in Leeds this morning, Cameron said:

“Small businesses and entrepreneurs are the lifeblood of the British economy and I am determined that we, working with the private sector, do everything we can to help them to start up and to grow in 2012.

“I want to encourage people to go for it and make this the year of enterprise – whether that is fulfilling their dream of starting a new business or taking the leap to grow their business, to employ more staff, or to start exporting.”

The initiative will draw on the resources of a number of private sector partners to offer potential entrepreneurs advice on starting up, including workshops, web-based seminars and video tutorials, covering topics such as finding finance and mentors.

Michael Hayman, co-founder of StartUp Britain added: “Is there a business inside you? We believe the answer is yes and we want to inspire those with a dream to make it a reality by starting their own business.

“All around the country are people proving that you can make it in Britain, be your own boss and create the jobs that can help transform communities. This campaign champions the courage and determination of Britain’s entrepreneurs – the people that change things. The people that have a go.”

For more information on the campaign, visit the Business in You website

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Business ideas for 2012: Hobby and crafts

Why this year could be the perfect time to turn your crafting skills or hobby into a business
Written by The Startups Team
Published on 15 April 2012

Why is it so promising?

Britain has always held artisan craftsmanship in high esteem; the UK has long had the biggest cultural industry in the world as a percentage of GDP. But, right now, things are getting even better. With the explosion of pop-up shops, the revival of fairs and markets, and a cultural shift away from bling and labels towards quaint and quirky boutique designs, the arts scene is in the middle of an extremely lucrative renaissance.

According to figures from the Crafts Council, the total UK market, encompassing both active and potential buyers, comprises 26.5 million people. And it’s never been easier to get a craft business off the ground. According to Doug Richard, former Dragons’ Den panellist and founder of the School for Creative Startups:

“The problem for a craft producer over recent years has been that you can’t build to a large scale, and you can’t serve a huge marketplace. But the web is changing the latter fundamentally. For example Notjustalabel, a platform for young designers, wouldn’t have existed 10 years ago. Now people can represent themselves globally, and still be small and independent.”

Furthermore, a series of advice and mentoring schemes have been developed, such as Crafted, so there is plenty of support available if you choose to go down this route.

What are the specific opportunities?

Jewellery making, ceramics, glass-blowing, textiles – whatever your craft, hand-made chic is in. It is also the perfect business to start off part-time, from home, allowing you to test the water and learn what sells before taking the plunge into full-time entrepreneurship.

The sector or specialism you choose to pursue will obviously depend on your own skills and knowledge. There’s no point starting a pottery business if your main specialism is jewellery design. In terms of competitors, there’s little difference between any of the major industries. According to recent figures, 34% of contemporary craft businesses operate in the textiles sector, with 30% specialising in ceramics and 21% in jewellery.

Furthermore, it’s hard to pinpoint one specific sector within this space, because all the major trades appear to be flourishing. A 2009 report from Mintel forecast 11% growth in the UK’s jewellery and watches market between 2010 and 2015, and at the moment this bullish prediction appears justified. However there has been equally significant growth in other sectors; for example, thanks to the efforts of start-ups such as the Cambridge Satchel Company, Britain’s boutique bags have captured the attention of celebrities around the world.

Whatever you choose to do, it’s important to keep in mind that this is not a hobby, it’s a commercial operation which has to be scalable. You might enjoy making, say, tables or wooden toys – but will you be able to ramp up your production levels to keep up with demand? If not, you’ll need to think about employing other people to share the workload.

And you also need to consider your sales and marketing strategy. As we said earlier, there are loads of exciting routes to market. In addition to Notjustalabel, NotontheHighStreet promotes dozens of start-up and home-based designers in a range of sectors, from weddings and childcare to toys and home furniture, while Etsy and Folksy specialise in hand-made wares. Similarly, ASOS provides a fashion marketplace for boutique as well as big designers. If you speak to the right people, you’ll give yourself a great chance of flying start.

Who’s doing it?

Dickie Wilkinson, DWRM

“I’m a designer and I work with silverware, specialising in cufflinks. Although I don’t make a lot of my own products, I do insist on having every product made in the UK.

“We started the business when I met Doug (Richard) at the School for Creative Startups in September 2011, although I already had some samples. I wouldn’t say it’s fully taken off yet, not in terms of sales anyway, but I’m now stocked in four stores, including one on Jermyn Street in the heart of London.

“Jewellery and ceramics are traditionally the two main professional avenues for arts and crafts, because there will always be demand for them. But the explosion has been towards the knick-knack things, inspired by Kirstie Allsop and the have-a-go-yourself attitude. People will increasingly go towards bespoke and commissioned work, and I noticed a lot of other arts and crafts businesses moving towards this at the School for Creative Startups.

“Thankfully, my business has scalability. I can ramp up to a bulk order for a department store, but also offer limited edition and bespoke. I come from a tailoring background, so that range of service was always there. We’ll increasingly see that bespoke element entering all aspects of arts and crafts in the next few months.”

If you’re a skilled craftsperson with an eye for what sells, read our step-by-step guide on how to start a craft business.

Published Jan 2012

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FPB applauds government decision to boost tech talent in schools

Statement comes as research reveals growing demand for IT in workplace
Written by The Startups Team
Published on 15 April 2012

The Forum of Private Business (FPB) has applauded the government’s decision to invigorate the way IT is taught in British schools, as announced by the education secretary this week.

The move – which it is hoped will increase pupil engagement and foster young tech talent – was celebrated by the FPB, which claims this has been long demanded by its small business members.

The Forum’s chief executive Phil Orford said: “A targeted approach to what secondary school pupils learn in the classroom with an eye on the types of skills employers require is exactly what we need to see more of. Our own research has shown that there is a gap between what businesses need and what businesses get when it comes to education standards.”

The new plans came as the latest figures from Freelancer.co.uk revealed significant growth in the demand for tech talent. According to quarterly statistics, detailing the jobs posted on the website, one of the greatest increases in demand was for freelance C++ programmers (up 38%).

Other significant rises included demand for freelance programmers with skills in Java (up 36%), Android (up 33%) and Facebook (up 29%).

Orford added: “The future is digital, therefore there’s a clear requirement for more workers who are already skilled in this area, and who will want to take their studies in this subject further.

“Small businesses are desperate for employees with the right skills, and this seems a significant step in the right direction from government to achieving that aim by helping improve the calibre of school leavers in a key area.

“If the private sector is to drive and grow the economy in the future, we need well-educated innovators and entrepreneurs who can deliver in key growth areas such as IT.”

 

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What is crowdfunding?

Discover how crowdfunding works, the different types available and the best crowdfunding platforms to help you raise money for your business.
Written by The Startups Team
Published on 15 April 2012

Often one of the biggest hurdles people face when they want to start a business is a lack of funding.

Launching a new business doesn’t come cheap and if you don’t have a goldmine of personal savings to use, getting your head around business loans, grants and investors can be tricky.

But what about crowdfunding? This innovative new way of funding a business continues to grow in popularity and could be the answer you’re looking for.

Crowdfunding can be a gamechanger for smaller startups, but how exactly does it work? Keep reading to discover what crowdfunding is and how you can make it successful.

This article will cover:

What is crowdfunding?

Crowdfunding is a unique way of raising finance, usually for a new business. 

With crowdfunding you raise funds by receiving small amounts of money from a large number of people.

Whereas traditional funding methods usually involve a small number of investors or an angel investor contributing large sums of money, crowdfunding switches this round.

Businesses can make use of social media and crowdfunding platforms in order to connect with potential investors to raise the money they need.

There are various different types of crowdfunding:

Reward crowdfunding: investors receive an agreed reward for their investment such as free products, acknowledgements or tickets to live events.

Equity crowdfunding: investors receive shares in the company in return for their investment. 

Donation crowdfunding: investors contribute with no expectation of anything in return (e.g. donating to a GoFundMe).

Debt crowdfunding: investors receive their money back over time with interest.

How does crowdfunding work?

Raising money and capital is a key part of running and growing a business and while larger businesses often have no problems securing funding via loans and traditional investors, it can be harder for smaller businesses and startups.

Enter crowdfunding.

Crowdfunding works by harnessing the power of the internet and instead of having to choose a single investor, business owners collect small contributions from people who believe in their idea.

The average crowdfunding campaign can be broken down into these stages:

  1. Choose a crowdfunding type (reward, equity, donation or debt).
  2. Select a crowdfunding platform. 
  3. Set your financial goal and timeframe.
  4. Create your campaign, taking the time to develop a strong pitch.
  5. Promote your campaign across social media, email marketing etc.
  6. Keep your investors up to date.
  7. Deliver on your promises.

Should I use crowdfunding for my business?

Deciding whether or not to use crowdfunding for your business is a big decision. To help you out we’ve listed some of the pros and cons of the funding option.

Crowdfunding pros

  • A fast way to raise the money you need.
  • Provides access to a larger, more diverse group of investors.
  • A great way to test public reaction to your business idea and receive valuable feedback.
  • Helps to grow the audience for your business. Many of your investors will also become loyal customers. 

Crowdfunding cons

  • Most crowdfunding platforms charge you a fee.
  • If you don’t reach your goal, pledged money is often returned to investors leaving you with nothing.
  • Failed projects can damage your reputation.
  • If you haven’t got a patent or copyright for your business idea, there’s nothing stopping someone from seeing your crowdfunding campaign and copying your idea.

There are various ways to finance your business including venture capital, seed funding, series funding and small business grants. For a complete overview of the finance options available, head to our business finance page. 

How much does crowdfunding cost?

The good news is that most crowdfunding platforms won’t charge you for publishing your pitch, but they will take anywhere between 5%-12% commission when you reach your target – so be sure to take this into consideration when planning your budget in your business plan. 

Another cost you’ll have to factor in if you opt for crowdfunding is the rewards you offer investors. If you decide on a rewards-based model you’ll need to work out exactly how much the rewards will cost you and factor that into your projections. 

Best crowdfunding platforms

As we’ve mentioned, there are various crowdfunding platforms out there, but which ones are the best?

Kickstarter

Kickstarter is one of the original crowdfunding platforms and has funded over 250,000 projects since its launch in 2009.

Kickstarter projects are rewards-based, meaning you can’t offer equity in your business, and successful campaigns also have to pay a 5% commission.

Indiegogo

Another popular choice is Indiegogo.

Unlike Kickstarter, Indiegogo offers a flexible option meaning you’ll receive your pledges even if you don’t reach your goal plus there’s a feature that allows you to keep raising money even once your goal has been reached.

There’s a 5% commission fee when using Indiegogo.

Crowdcube

Crowdcube is a UK-based equity crowdfunding platform. 

While the platform hosts far fewer projects than competitors such as Kickstarter, it does have various features and benefits including the ability to set private and follow-up crowdfunding rounds.

You’ll pay 7% commission on all funds. 

With so many crowdfunding platforms available, it’s crucial to choose the one that best fits your business model and funding goals.

Successful startups that used crowdfunding 

There have been thousands of startups that have successfully used crowdfunding to get their business off the ground.

Some of our favourite examples include Runna, a fitness training app that raised £500,000 via crowdfunding and The Cheeky Panda, an eco toilet paper company now worth £75million five years after launching via crowdfunding.

Other notable crowdfunding success stories include THIS who raised over £8million across two fundraising rounds, deodorant brand Fussy that started out on the Kickstarter platform and IMPOSSIBREW, an alcohol-free beer that’s raised almost £1million in crowdfunding since 2022.

Impressive stuff! If they can do it, why can’t you?

Tips for crowdfunding success

Crowdfunding presents a fantastic opportunity for small businesses but it shouldn’t be entered into lightly.

You’ll need to carefully consider if it’s right for you. If you do decide to undertake a crowdfunding campaign, here are some top tips for making it a success:

  • Set clear and realistic goals that you are confident you can achieve.
  • Consider platform fees and taxes etc to ensure you raise the amount of money you need.
  • Put effort into your campaign page. Hone your pitch, provide images and videos and be clear on your project and why it matters.
  • Keep your investors updated about the progress of your campaign.
  • Keep promoting your campaign, don’t expect investors to find you, take your campaign to them.
  • Ensure you have the time and resources to answer investor questions and discuss your pitch in more detail.

Final thoughts 

Crowdfunding has transformed the way business ideas become reality, giving small businesses the chance to build a loyal community at the same time as raising funds. 

With the right strategy, your crowdfunding campaign can be more than just a way to raise money, it can be an impactful way to build a loyal community for your brand too.

If you’ve got a business idea but are unsure how to fund it then crowdfunding could be the answer.

Lucy Nixon profile
Lucy Nixon - content writer

With 10 years experience in the digital marketing industry, Lucy is a content writer specialising in ecommerce, website building and all things small business. Her passion is breaking down tricky topics into digestible and engaging content for readers. She's also committed to uncovering the best platforms, tools, and strategies, researching meticulously to providing hand-on tips and advice.

Crowdfunding Your Small Business
Discover how crowdfunding works, the different types available and the best crowdfunding platforms to help you raise money for your business.

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