How to Start a Business in London

Starting a business in London gives you access to one of the UK’s largest and most competitive commercial markets. A city that if stood alone, as a nation, would have the 18th highest GDP in the world.

London has strong infrastructure, a large customer base and a wide range of business support, which makes it an attractive place to start and grow a company. According to a recent forecast by GLA Economics, London is expected to see around 2% year-on-year growth. That might not sound like much, but with a GDP of £508.4 billion in 2022, even small growth can translate into major opportunities. However, the opportunity comes with higher costs, stronger competition and a greater need for careful financial planning.

Accounts and Legal started in London, so we understand both the opportunities and the pressures that come with building a business in the capital. This guide sets out the main points to consider before you launch.

Find out more here if you’re looking for an accountant in London.

Advantages of Starting a Business in London

London is considered one of the most diverse cities in the world, with a 36.4% foreign-born population. For many businesses, that creates opportunities to serve specific customer groups, test niche products and build a clearly defined market position.

However, a large market does not guarantee demand. You still need to research your customers, test your offer and understand how they make buying decisions.

Learn more: Finding your target market.

London is home to a very strong pool of workers, as people from all over the UK and the world move to the city every year to find better opportunities.

Having access to a strong pool of workers means you shouldn’t have much problem finding the right one for your business. However, you may have to expect to pay more for an employee compared to the rest of the UK.

Finally, London is built for business, with a wide range of support available for those starting. Support ranges from small loans to free co-working spaces.

Disadvantages of Starting a Business in London

Although the capital can be a fantastic place to start a new company, there are some disadvantages to starting a business in London.

The first major challenge is cost. London is significantly more expensive than many other parts of the UK, which affects rent, wages, supplier costs and personal living expenses.

If you’re paying more, you’ll need to earn more. This means your business will need to generate significantly higher revenue to cover the increased expenses and remain sustainable.

Compared to the rest of the UK, you’ll be paying more to rent shop fronts and/or office spaces as well as paying staff higher wages to stay competitive.
When starting in London, you must keep a close eye on your incomings and outgoings to just survive in some cases.

Another disadvantage to setting up in London is the competition. If you’re thinking of starting your business in the capital, you won’t have to look far to find tens, maybe hundreds, or even thousands of other businesses already competing with you.

Without clear differentiation, it can be difficult to win customers in a market where many businesses are already well established. London has both the highest new business birth rate and death rate in the UK, so you’ll need a very solid business plan to find success in the big city.

A clear business plan, realistic forecasts and well-managed finances can make the early stages more manageable. Our London accountants can help with setup, tax planning and financial forecasting.

How to start a business in London

Now we’ve dived into the pros and cons of starting a business in London, let’s help you put together a plan.

Here are our top tips for starting a business in London:

Find your target market

Once you have an idea of what you want to sell, you’ll need to find a group of people who’ll want to buy it. Finding a target audience helps you adapt your product or service to fit their needs, it’ll also help you find your USP.

You can find your target market through a few means:

• Research competitors, who do they advertise to?
• Read existing research on the topic
• If you’ve already started your business, look into who’s buying your product.
• Get out on the street and ask people their opinions.
• Hire a company or individual to carry out a survey for you.

Find a Unique Selling Point (USP)

Your USP will be what makes you stand out from the heavy amount of competition you’ll be up against. Unless you’ve invented a completely new product or service, you’ll need to find some adaptation to an existing one to be successful.

Your USP does not need to be revolutionary. It could be based on price, service quality, convenience, location, speed, specialist knowledge or a better customer experience. Your unique selling point could be something as simple as being cheaper than your competitors or having a more convenient website.

Get Yourself Financed

Starting in London usually requires a realistic funding plan, especially if you need premises, staff, stock or professional support before revenue becomes consistent. So, before you do get started, you’ll need someone to finance your business, this can be done through a few different means:

• DIY finances (using your savings)
• Funding from friends and family
• Seeking out a personal loan
• Equity financing
• Seller financing
• A mixed approach

Be Competitive in More Ways Than One

Once you’ve found success, you may wish to expand your business and take advantage of London’s massive opportunities. While you expand, you’ll probably want to hire a few staff members to help you on your journey.

To attract the right staff, follow these steps:

• Offer a competitive salary and/or perks
• Be Flexible
• Show off what you stand for
• Offer career progression
• Create equal opportunities

Hiring strong staff in London is competitive. To attract good candidates, you need to offer a credible package, clear progression and a workplace people can see themselves staying in.

Get an Accountant

Starting as you mean to go and getting your finances in order will help you stand out in London’s fiercely competitive market.

If you are starting a business in London, we can help with company formation, tax planning, bookkeeping, payroll and financial forecasting.

Should you Start a Business in London?

London offers a dynamic and competitive business environment, packed with opportunities for growth and expansion. However, to give your business the best chance of success, you’ll need a solid business plan to secure the funding necessary to navigate the challenges ahead.

Standing out in this crowded market means bringing something unique to the table new ideas that excite customers and differentiate you from competitors.

Attracting top talent may require extra effort, as you’ll be vying for the best with many other businesses.

Every penny will count. Careful financial management and tax planning will be essential to keep your business profitable and efficient.

London offers access to a large, diverse and commercially active market, but success is not automatic. Starting a business in the capital can be a good decision if your pricing, funding, tax setup and market positioning are strong enough to support the higher cost base.

Need help setting up your business? Speak to our London accountants today for expert support.