Would wish to start a business in London as a foreigner?
You chose right!
With its vibrant culture, world-renowned universities, and strong global connections, London has become a popular destination for those looking to start their own venture.
But before you move forward with your business plans, several steps must be taken to get started.
In this blog post, we will look at this process and discuss topics ranging from registering your business with the relevant authorities and understanding visa requirements to finding funding options and setting up a premise.
Understand the legal requirements for starting a business in London as a foreigner.
Before starting your business in London, you must understand the law.
As a foreigner, there are some things you can and cannot do.
While I won’t be able to touch on every aspect, I will highlight what you need to look into before proceeding.
a. Research the visa requirements.
This is a critical step when starting a business in London as a foreigner.
Companies that do not comply with UK immigration regulations can face serious legal repercussions.
Determining whether you need a visa before beginning any business activities in London is really crucial.
At the same time, the type of visa you will require depends on your nationality and length of stay in the UK.
These visas usually require applicants to have access to significant funds and demonstrate that their proposed venture has potential for success in the UK market.
Those traveling from outside the European Economic Area (EEA) will likely need to apply for a Standard Visitor Visa if staying for less than six months or an appropriate work-related visa if staying longer than six months.
b. Understand the taxation laws and regulations.
Starting a business in London can be complicated for foreign entrepreneurs, especially those unfamiliar with the local taxation laws and regulations.
Understanding the taxation rules and regulations is essential to avoiding penalties and fines.
As such, you must research the taxes that apply to your particular business as well as follow any filing or reporting requirements.
To give you a hint, you will need to register your business with HM Revenue & Customs (HMRC), which administers most of the taxes in the UK including Corporation Tax, National Insurance Contributions, Value Added Tax (VAT), PAYE (pay as you earn) and Stamp Duty Land Tax.
On top of that, other types of taxes could apply depending on the type of business you operate.
For example, environmental taxes or import/export duties.
Either way, to be safe, meet all tax registration deadlines to avoid potential penalties or fines.
Or worse, being thrown behind bars?!
c. Learn about the company structure and registration process.
Understand the differences between limited companies and sole traders.
Limited companies are separate legal entities from their founders which come with distinct liabilities.
Here, any profits can be taxed at higher rates than sole traders but losses may also be offset against other proprietors’ income.
This means you may end up paying less tax overall.
On the flip side, sole traders have fewer restrictions on ownership.
But they personally bear full responsibility for their debts and obligations – whereas limited companies limit their owners’ personal liabilities.
Then there’s a partnership.
Partnerships are a type of business structure where two or more people come together to share the risks and rewards associated with running a business.
They can be registered to protect partners from legal liability, but all involved parties agree on how ownership will work before registering.
And finally, Limited liability partnership (LLP) registration.
This one combines the advantages of limited companies and partnerships, allowing two or more people to join forces without anyone partner is liable for their colleagues’ debts.
Though all partners remain jointly responsible for running the business.
Instead, their liability is limited to the amount of money they invest in the business.
Each company must be registered with Companies House to operate legally in London.
So, research your chosen legal entity carefully before registering, as this will affect how much tax you may pay over time!
Create a business plan.
Once you grasp the legal landscape of starting a business in London as a foreigner, the next step is to work on your plan.
As they say, failing to plan is planning to fail.
And considering this is London we are talking about, you need a water-tight business plan!
a. Identify the target market.
One of the essential steps to starting a business in London as a foreigner is to identify your target market.
A target market is a specific group of consumers that a business or organization aims to reach with its products, services, or brand message.
This group is typically identified by age, gender, location, interests, and income level.
For example, suppose your company sells outdoor apparel and equipment. In that case, you may focus your marketing efforts on individuals between the ages of 25-45 who live in urban areas and are interested in outdoor activities.
By doing so, you can be sure that the message is resonating with the right people and not being wasted on those who are not likely to purchase their product.
So, before launching your business in this city, you should understand who will purchase from you and their needs.
Here’s another example.
If you are opening a restaurant in Southwark, consider the type of cuisine and demographic that would be drawn to your establishment.
Research average incomes and other key demographics such as age groups or location to determine who will likely become a customer.
If that sounds daunting, ask yourself questions such as:
- What do they need?
- How can I reach them?
- What does my product offer that others don’t?
Knowing these answers will later help you refine your marketing strategy for maximum sales potential.
Besides this, look at trends within the city and how those might affect your sales potential.
If a certain area is becoming more popular or new regulations are being implemented that could affect your business, stay on top of those developments.
b. Analyze competitors.
Now that you know who is more likely to buy from you, switch focus to who you are up against.
As we mention, London is a bustling city with many businesses and companies.
In fact, according to Statista, there were almost 1.04 million private business enterprises located in London in 2022.
To stand a chance, analyze competitors in the area – their target customers, pricing models, marketing strategies, and more.
Use these insights to develop an effective strategy for succeeding in the market.
For example, if you are starting a retail business in Greenwich, identify the other stores around you that offer similar products or services.
This will help you determine what prices to charge and promotions or discounts to offer.
At the same time, understanding how your competitors are advertising their businesses can provide valuable insight into how you should also market yours.
In short, knowing who else is operating within your industry can also help you find potential partners or investors, as well as any gaps in the industry that could be filled by starting up your business.
c. Outline a marketing plan.
Besides market research, a well-thought-out marketing plan is a must-have.
With it, you can start piecing together the target audience, creating an effective strategy, and determining the budget needed for success.
Start by outlining who your target audience is and what their needs are.
This can include demographic information such as age, gender, income level, and location.
From there, you can develop strategies such as using social media or advertising campaigns that are tailored to your specific customer base.
Then there’s the budget.
Determine how much money should be allocated for marketing efforts each month or quarter to spend the budget efficiently and effectively.
Lastly, consider which channels will be used most often to reach this target audience.
This could include email campaigns, online platforms like Google Ads, or even traditional methods like radio ads or sponsorship events.
For this one, go where your audience is.
If they are on Pinterest, start Pinning!
If they are on LinkedIn, join them.
82% of businesses fail because of poor cash flow.
And according to research conducted by HP, the average cost of starting a business in the UK is £22,756 for the first year!
Here’s their breakdown of the costs:
- £6,259 on legal costs
- £3,937 on accountancy
- £4,518 for HR
- £5,518 on the formation of the company
Do you have enough money to start a business in London as a foreigner?
a. Research available grants and loans.
Many of the UK government’s initiatives are aimed at encouraging new businesses.
You should take advantage of these opportunities.
One way to find out what grants and loans may be available is to visit the Innovate UK website.
Here entrepreneurs can search for specific funding opportunities or browse through various programs that offer financial support.
That’s not all.
There are also websites, such as Funding Central, which helps people identify funds they may be eligible for based on their location, industry, or other criteria.
Note: There may be restrictions on who can apply for certain funds, such as requiring applicants to have been living in the country for a certain length of time or having an established company registered in the UK before applying.
b. Build a network of potential investors.
Besides the grants, you can seek investors.
They will provide capital and contacts that can help make the venture successful.
And the best way to score them is through networking.
Meeting other entrepreneurs, advisors, and mentors can help find investors who may be interested in helping fund the business startup.
Consultants and financial advisers can also provide insight into which investors may be most favorable to approach.
They have experience working with various individuals in the industry, and their advice could prove invaluable when trying to identify potential partners or financing sources.
Moreover, attending entrepreneurial events or conferences is an excellent way to meet new people and learn more about potential investor leads.
Go out there and start hunting for investors.
Find a suitable business location.
Location! Location! Location!
It is a single aspect that can make or break your business.
So, when looking for a suitable business location in London, research the local market and compare different business locations.
Start by understanding the local laws and regulations that apply to your chosen industry.
This will help you identify areas of opportunity as well as any potential risks or issues associated with setting up a business in London.
Next, consider the demographic of the area- what type of people live there, their income level, and their ages?
This information can help you target your services more effectively.
As you compare, take into account rent prices, cost of living expenses, access to public transportation, and proximity to customers or suppliers who may be essential for your operations.
At one point, you will need someone to help you run the business.
Considering you are starting a business in London as a foreigner, it might not be as straightforward as advertising and filling positions.
a. Understand the laws regarding hiring foreign employees.
Employers must also adhere to the relevant legislation when recruiting foreign workers and verify that any employee from outside the EEA has permission to work.
You MUST complete checks on each employee’s right-to-work status before providing them with an employment contract.
Failing to do so can result in criminal sanctions or hefty fines.
At the same time, employers are responsible for ensuring that they have received and retained a copy of each employee’s valid visa documents.
Again, failing to do so may lead to civil penalties or other legal action being taken against them.
And then there are laws surrounding wages, hiring locals, and such stuff.
Know them all like the back of your hand.
b. Develop a recruitment plan.
The recruitment process is critical in setting up and running a successful business in London.
Developing an effective recruitment plan can help ensure that only the best candidates are hired for the open positions.
The first step is to identify any key roles within the company which needs to be filled as soon as possible.
This could include sales representatives, accounting staff, customer service personnel, or other important roles.
Once these key roles have been identified, create job descriptions for each position, detailing the skills needed and expected duties for each.
From there, develop a strategy for reaching out to potential candidates, such as placing ads online or using recruitment agencies.
Market the business.
For your business to thrive, you need customers.
And the only sure way to get them is through extensive marketing.
Lucky for you, there are a ton of channels you can use to spread the word about your new venture.
a. Use social media channels.
According to Statista, there are 53 million active social media users in the UK, which is 77.9% of the UK population.
That’s a big number!
Platforms such as Twitter, Instagram, and LinkedIn are great for getting the word out about your business and your services.
You can create posts with content related to your business, such as images or informative texts, or through paid advertising campaigns.
Use these channels to create relationships with customers that may lead to return customers or referrals, which is key for any successful business.
b. Develop relationships with local influencers.
Local influencers can help build your brand’s reputation and provide valuable insight into the city’s market.
Working closely with them can provide access to potential customers, investors, mentors, and other resources that would benefit your business.
These relationships will also help you gain credibility in the eyes of the public and promote customer loyalty as they trust their influencer friends’ opinions.
And networking events are a great way to meet people who have influence in London’s business circles.
Events like “Business After Hours” or “The Big Pitch” are excellent opportunities to connect with key individuals who could help promote your venture.
c. Create a business website
Online presence is essential for any business in today’s digital world, and London businesses are no exception.
A website offers potential customers the chance to learn more about a business and its product or service offerings and provides easy access to contact information.
For foreign entrepreneurs looking to start a business in London, there are many options for building out a professional website.
You can do it yourself using a website builder like OLITT.
This tool makes creating a beautiful business website easy without coding knowledge.
You can also create an online shop in under five minutes.
Alternatively, hire someone to design the site for you.
Even though this approach might be more expensive than the previous one.
Either way, when creating a business website for your new venture in London, ensure the design is clean and user-friendly with relevant content that accurately reflects your brand.
Think about what features might be beneficial for customers, such as a live chat or booking system.
Once you have designed your site, you can start driving traffic using SEO or social media.
Monitor the performance of the business.
You need to keep tabs on what’s happening for your business to continue growing.
Failure to do so can lead to fatal surprises?.
a. Track financial performance.
One of the most crucial metrics for any business, regardless of its size or industry, is to track their financial performance.
As a foreign entrepreneur, be especially mindful of your finances, as there may be additional requirements related to taxes and other payments.
For starters, keep a detailed record of all income and expenses.
This could include items such as revenue from sales and costs associated with payroll and inventory purchases.
Also, set up an accounting system that enables monthly financial performance reviews.
Doing this allows you to quickly identify potential problems or areas where improvements can be made to increase profitability.
Above all, be familiar with the tax laws applicable in London so you can correctly file returns each year and avoid penalties or other repercussions from HM Revenue & Customs (HMRC).
b. Measure customer satisfaction.
Another key metric is customer satisfaction.
It determines success for any business, and it’s especially essential when running a business far away from home.
Measuring customer satisfaction gives you feedback on how your products or services perform.
And can also provide helpful insights into how and what you can improve.
There are several ways to keep tabs on this, including surveys, focus groups, and interviews.
Surveys are a great way to collect quantitative data that can be used to evaluate the customer experience.
They should be designed carefully with questions relevant to the product or service offered to gain useful insight into customer sentiment.
On the other hand, focus groups and interviews allow for more qualitative data collection. This can be invaluable for understanding customers’ thoughts about your offerings.
While there may be some challenges to getting started, like navigating the complexities of UK immigration law, anyone can make their entrepreneurial dreams come true in London with the right strategy and dedication.
Remember that starting any business requires hard work, creativity, and perseverance.
It also takes time and money to get your business up and running.
When deciding whether or not to start a business in London as a foreigner, make sure you have done your research thoroughly and have an action plan for success.
With the right preparation and mindset, you will be able to take advantage of all the incredible opportunities in this vibrant city.