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Why do people start a business? How do they manage to sustain the business goals they set upon starting their own businesses? Business owners start a business mainly because they want to provide services to people and in return get some profit from those people who pay for the services they offered. Business owners should have a clear understanding how to grow their business, what strategies they need to do to grow it, and foresee where their businesses are heading to.

In order to do that, every business should have a good accounting and finance management. These two have a very important role in growing and planning strategies for the business. It is significant for the owners to know where their money is going and coming from so that it will be unlikely for them to lose control of their businesses. Good accounting and finance give them a chance to strategize to make sure the business continues to grow, and it can get through unanticipated financial mishaps.

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Table of Contents

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• Maintain and Keep Business Financial Records

• Compliance to Legal Business Laws

• Create a Financial Plan

• Analyze How the Business is Doing

• External Connections

• Internal Connections

• Creating Strategies

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There are some of the reasons why good accounting and finances are important in business management. Knowing what a good accounting and financial management can do to businesses can guide the owners to have a successful and less stress journey in growing their businesses. Some of these are:

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Maintain and Keep Business Financial Records

Keeping track of business financial activities can be done in accounting. Accountants and small business owners monitor the cashflows of the business' daily operation by using the balance sheet. If done correctly, this will be a great help for them to control the business financial future and will provide better understanding where the company's money is going and coming from. This will help eliminate the risk of spending and losing money in not value adding things.

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Compliance to Legal Business Laws

Having an up to date, fact-based and truthful financial records will help a business comply with important business laws. Not paying attention to minor details can result to major consequence on a business tax management.

The managers in charge in finance need to have a good knowledge about the payments to deduct, the amount of taxes to be paid and the right time to pay those taxes. Some businesses even hire seasonal accountants that work for them to check the business financial records because the last thing a business owner wants is to have poor financial records because once they get audited and proven that they are not legally compliant, the business can face serious legal troubles.

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Create a Financial Plan

Financial plan or creating a budget is what gives the business direction. To establish a good budget, it is important to use the financial records and have a good knowledge about the business cash flow. The budget provides the business owners idea about the present financial situation of the business and assist them in steering up the business towards the sustainable success and development.

There are few things to consider in making a budget for the business. Some of these are the profit, expenses, the future plan and foreseeing the unlooked-for adjustments. Keeping a good number on these things is important in managing business. It is necessary to regularly check the original business plan and make some adjustments along the way depending on how the accounting and finance status is doing.

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Analyze How the Business is Doing

It is a good habit for a business owner to check how his business is doing. He can do this by assessing and comparing the past and present financial records of assets and liabilities and other aspects that involves cashflows. He can use that information to determine how the company is performing over a period of time.

These financial records give the business owners a chance to know what mistakes they did in the past and learn something from the past mistakes. They can also easily foresee the problem before it becomes a real actual problem. Having a good knowledge of the business financial status can also give the owners ideas on how to do improvements for the business.

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External Connections

Financial information of a business is very essential in making deals and communicating with external parties. Correct and transparent accounting and finance management can be of good use when the business needs a loan from a bank or making a good impression to entice prospective investors.

A satisfactory financial management makes it simple for the business owners to show their external stakeholders the financial statements giving them a quick and easy overview of how the business is doing. The stakeholders and investors are given access to these reports for them to decide if they will continue being involved in the business.

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Internal Connections

Internal stakeholders are important too in the business. Financial reports can also be communicated with them. This kind of information maybe essential for the employees who shows interest in stock-based remuneration and profit sharing. It is important for employees to know the positives and negatives of the business, and this can be done by being transparent about the financial records within the team.

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Creating Strategies

It will be easy for the company to create good business strategies if it has a good accounting and financial management. Good strategies can be made if the business has a good accounting and financial records which are meticulously analyzed.

Knowing and understanding the business financial records gives more confidence to the owners to make reasonable and practical financial decisions about the smallest up to the biggest elements of the business that involves finances. Making a business budget is a serious matter. It should be well thought of because it is the business guide in making strategy and this strategy is the answer to a business' success and profitability.

Accounting, which is commonly named as the "Language of Business", plays a powerful role in a small business. This covers up financial data entry, summarizing, analyzing and investigating. These things are a big help to business owners, managers, and stakeholders to assess and understand the business financial health. Understanding the accounting and financial status of the business also helps them deal with the business problems well and give them the confidence they need in making strategic business decisions.

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Objective

For this case study, we will relate the entire experience of one of our foreign start-up clients who asked our firm to help them incorporate their new company dedicating its economic activity to invest in the services market. Particularly in selling software as a service (SAAS) for which they have developed an amazing software that will improve people’s lives.

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Case Overview

The company is just coming out of a business accelerator program and wans to establish their brand in the UK and soon the world. They have developed an ingenious software that helps people with their daily lives, particularly in the area of giving the highlights of every city, town or county that a person visits. The software, which can be subscribed for a a certain amount each month, is designed to give the user an overview of the place that he or she is on, or is planning to visit. This is done so that the user doesn’t have to do a Google search or a Google Maps search and waste precious time looking for places he needs or wants to go (the SAAS is designed to work with Google Maps, by the way).

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Challenges

The primary challenge of this startup company is to sell to as many people as possible in Google Playstore, Apple App Store, Huawei AppGallery and other app stores. But that’s not really something difficult to do as there have been many similar companies who sell SAAS and went through the same hurdles and succeeded. Basically the real challenge that this startup business will face is convincing people to buy a monthly subscription for their SAAS, as there are already free tools on the web to find hotspots that an individual might be interested to go to in various cities around the world.

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Business Solution

We followed a specialized process for creating our client’s limited liability company (as a foreign entity doing business in the UK) and it’s pretty much straightforward. It involves a series of legal strategy that helps the client establish their business in the UK faster, so they can start marketing their product or service to the UK consumers.

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Legal Strategy:

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• Drafting and signing of a power of attorney

• Obtaining a UK Foreigner ID number (Biometric Residence Permits) for the partners of the LLC

• Obtaining a certificate for the denomination of the company

• Opening a bank account in the name and on behalf of the company, with the subsequent deposit of the minimum share capital

• Drafting of the Articles of Incorporation of the company

• Signing and registration of the Public Deed of the company at Companies House

• Obtaining the company’s Tax Identification number (TIN) at the HMRC

• We emphasize that the client did not at any time need to travel to the United Kingdom, as we could establish the company on his behalf without him leaving his country of residence.

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Marketing

Among the company’s notable goals is to provide users with key specific information on certain places of interest (i.e. airports, train stations, bus terminals, hotels, restaurants, and others) that is not available on Google Maps, and/or will take too long to search on any search engine. For example, the company has a feature in its software up-to-date information on, say, flight schedules, available sitting positions, food served on the plane, travel time, the user’s carbon footprint left by boarding a specific flight and many other crucial information. Their SAAS cost $39.95 per month to subscribe and is renewable annually. They aim to cater to Western countries first as people in North America and Europe are the most inquisitive of the people on the planet, but they will soon offer their services worldwide.

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New startups pop up almost on a daily basis nowadays and it’s not hard to see why. More and more people have a disruptive, innovative idea of how to solve issues. But an idea is just an idea until you can prove that your idea works and then get funding for the big leagues! But what is it that you need to impress your potential investors to pour money into your idea? Why, a prototype, of course.

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Today we will discuss how to make a product prototype for venture funding.

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Table of Contents

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• Prototype Concept and Benefits

• Why You Should Start Prototyping

• What are the Fundamental Principles to Build a Prototype for Funding?

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Prototype Concept and Benefits

What is a prototype? A prototype is a physical example of a planned product for mass production and sale that has the approximation of all the functions and features of the matter in question that would be developed in the future. To put it simply, a prototype can include a powerpoint slide presentation that demonstrate the interaction between the user and the product, and a real life example that can be used to demonstrate how it actually works and how people can benefit from it.

The visual presentation of your prototype is meant for the conference rooms, where you explain the mechanics of your soon-to-be developed product in order to make an impression on them. But you will still need to build the bolts & nuts actualized version of it – depending on its size – you may need a warehouse, hangar or an open field to do the actual tests to demonstrate its capabilities to the investors.

As a result, you get a chance to deliver a viable and proper product that fits your target market.

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Why You Should Start Prototyping

Before we dive into the details about the principles of prototyping, let us first learn about the critical benefits that it brings for both startupers and investors.

The first reason is that it enhances your business idea and design validation. You still have time to change and improve your business offering while your prototype is still in the factory being built. Plus you’ll also get an additional benefit of giving your design team enough time to run tests and determine the most workable user flows and design as a whole.

The second reason is that it reduces costs and time to market. Having a working prototype will help you unnecessary costs in changing the specs or features of it while in the design and building process, which also advances the release date of the product. The IBM report about programming development is on point and they determined that it cost them 6 times more when they attempted to fix the bugs during product release than fixing them during the design phase.

Reason number 3 is that your team is on the same page. Prototypes serves as reference points for designers, it gives them a clear knowledge on every detail on the product operability. They can provide you the information you need to make presentations about product concepts and you avoid any miscommunicating them to your investors. Fewer meetings means more money saved and more products sold.

Reason number 4 is you will get earlier feedback. Usually, in the design phase your team will bring in random people to test the product and give their feedback. This feedback can help designers tweak the product and improve it before building the final product for launch.

The final reason is it gives you a solid way of investor engagement. The prototype is actually your ticket to success and a way to the pockets of investors. Leverage on the features and benefits of your product and show investors your vision for your company and you’ll get their attention real quick.

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What are the Fundamental Principles to Build a Prototype for Funding?

You must first learn some of the basic principles and best practices of prototyping before going into the design process. Below are some of the important principles in designing and building a prototype.

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1) Define your Target Users and Intent

The first thing to do is to clearly define what the goal of your prototype is, who is it for, and what problems will it solve. Take note of this because these are the things that investors want to know about your prototype. Once you’ve considered all of this, then make the presentation to the investors and get that much needed funding.

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2) Start with Paper for the Very First Iteration

Bringing your ideas to life should be done as cheap and as fast as possible, and using paper or cardboards just to rough out the basic principles on how your prototype will work is the best way to do about it. Paper prototyping also allows you to quickly modify your design and features without all the hassles of something made of denser materials, which can be expensive and takes a longer time to assemble.

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3) Prioritize Product Features and Ditch the Details

Your design team should focus on the product features more than the aesthetics of it (which can be worked on a later time once all the features are incorporated into teh design). Remember, people will only buy your product if it does a significant deal to ease up or improve their lifestyle, anything less than that will not sell at all. Your prototype itself is your business pitch, so eliminate color, typography, and other design elements. Test your ideas through the process of elimination. Keep what works and do away with the rest.

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4) Use the Right Tools

Your prototype is only as good as its designers and your design team are only as good as the tools that they’re working with. So provide them with the best tools available in the market in order for them to build you a kick-ass prototype. You may want to consider the 2019 Design Tools Survey, as they mention some of the best tools for prototyping.

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Starting your own business is never an easy task and even with all the information and technology available to us now (that would make someone from 20 years ago exclaim with glee had they had access to these things in order to create a business back then), it’s still not enough to keep you competitive without a solid plan. Of course, you’d want your company to be the best place to work in the world but that’s easier said than done. Building a reputation online is not only necessary to have a fan base, but it’s also like a double-edged sword where online users on social media can criticize you for any reason and you have to protect yourself from defamation.

As if that’s not complicated enough, the need to constantly increase the value of your sales will definitely challenge your knowledge and skills, as you seek to ensure that you can accumulate the funds needed to expand your business and go global in the next 5 years or so. This may seem overwhelming to you, but there’s always a silver lining in your grey skies and here are some tips to start a small business successfully.

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Table of Contents

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• Start with a Solid Plan

• Begin Networking as Soon as Possible

• Surround Yourself with the Right People

• Stay Ahead of Everyone Else

• Maintain a Balance Between Work and Life

• How to Avoid Startup Failure

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1. Start with a Solid Plan

Nobody goes into war without a plan and starting a business and war is similar according to the author of The Art of War, Sun Tzu. You have to craft a business strategy and write it down to something called a business plan. It basically details how you’re going to run the business and make a profit in a given amount of time. You need to lay out the short and longterm goals for your business and it involves how you’ll start the business (i.e. who will be in your team, where you’ll borrow capital, what will your product/service be, your target demographics, how you’re going to get sales – the short term goals).

On the other hand, your longterm goals will include how you’re going to grow, expand and scale up your business. For example, if you started out in Liverpool, then make sure that 5 years later you’re ready to do business worldwide! Keep in mind that you can always make adjustments with the business plan in order to keep up with the trend.

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2. Begin Networking as Soon as Possible

Today it’s business suicide to not build a professional network. There’s hardly a modern business that doesn’t do networking. Networking enables your business reach new heights unlike companies that have existed prior to the internet and social media (with a few exceptions like the Dutch East India Company). Word-of-mouth marketing has never been stronger.

With former company insiders and very diligent researchers exposing some scandalous work of companies over the years, 88% of people today trust reviews from online consumers more than official statements from companies or the government. It is the same when family and friends recommend to them which brands to buy or news media to watch. You have all the right reasons to start networking now.

Networking will also increase your chances to connect with highly talented individuals, which can be very beneficial to you in the long run. Large corporations tend to have the best inhouse talent and that’s because they jealously guard it like a big secret or something. Often times these talent never see the light of day in the open market, because the big companies only headhunt them, then keep them shelved until they have some use for them.

So where do you actually begin?

Well, LinkedIn would be the best place to start networking with professionals and join groups there. In case there are some local dedicated networking events happening, then that’s also a good chance to do networking.

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3. Surround Yourself with the Right People

In battle it is the general who commands his army and the same is true for you and your company. Your role is to lead and you need smart and competent people around you to translate your orders into actionable goals. You’ll also need mentors and strategic partners as you grow in the first 5 years in the business (this is why many companies fail, because their leaders didn’t undergo mentorship training). Gather your lieutenants (supervisors) and make sure each soldier (employee) are competent enough to complete basic tasks.

Hire the right people, fire people who do not contribute, reshuffle your organization to achieve better results and learn the art of shifting your business strategy to meet new challenges.

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4. Stay Ahead of Everyone Else

The second best always tries hard to catch up with the winner, so do not be the second best guy in the business. Watch out for and keep up with the latest trends in order to stay in the lead. If necessary, appoint a special team to do this specific task and then have them meet with you and your marketing team to plan your next move to leverage from the new trend. This way you will always outpace your competitors and leave them chasing you and not the other way around.

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5. Maintain a Balance Between Work and Life

Never kill yourself for profits, if you still don’t get why it’s very important to have a work-life balance, then you haven’t been paying attention on how some people lost the love of their loved ones because they preferred to make money than spent time with them. It’s good to see your dreams come true when it comes to personal success and financial security, but do not forego your family, friends and co-workers – they are an essential part of your life and you need them. So build meaningful relationships and be a leader with a heart to them.

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How to Avoid Startup Failure

It’s a known fact that 90% of startups fail within the first 5 years of their business operation, so it may be a good thing to plan ahead and anticipate hurdles that would lead you to failure in order to avoid them promptly. While you can use these tips we’ve presented here in this article as your guide to success, remember that there are no guarantees to success. In fact, you may wish, pray or hope to get lucky because that’s some form of guarantee; however, the best thing that you can do is to hope for the best and prepare for the worst. With time you will also gain experience plus the mentorship you’re receiving will be a big help in your business’ survival.

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Table of Contents

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• How to register a Dormant Company

• What Is a Dormant Company?

• What are Dormant Company Filing requirements?

• Starting a New Dormant Company

• Dormant Company Checklist

• Alternatives to Registering a Dormant Company

• Sole Trader Business

• Limiting Reputational Damage

• Protect your Business by Buying a Company and Keeping it Dormant

• Preserving your Limited Company

• Closing Notes

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How to Register a Dormant Company

Making your company dormant is very similar to registering any limited company to Companies House. The same required formalities that you needed when you setup your company when you started trading will be required of you again. Among what’s required in switching your company’s status from ‘active’ to ‘dormant’ involves selecting an "SIC code" for your company. A unique SIC code is given to every dormant company.

This becomes apparent when you enter an SIC code "99999" in the registration form from Companies House that you intend to keep your company dormant until you are ready to trade again. Once your company has been registered as ‘dormant’ in Companies House, your company’s registered the SIC code will be publicly available.

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What Is a Dormant Company?

A dormant company is a limited company that has been incorporated and is registered with Companies House, but its owners/board of directors have decided to keep it inactive and not trade. Normally, the reason why companies choose this option is to prevent other businesses to use their legally registered name, or perhaps they only want to get a legal business name quickly, but they intend to trade at a later time.

A Dormant Company will have no "significant accounting transactions" and as such will not pay any taxes or engage in any business activity.

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What are Dormant Company Filing requirements?

Companies House requires dormant companies to continue filing annual accounts and a confirmation statement every fiscal year. The dormant companies accounts will show up on the filing history of the company in Companies House, which auditors and other interested parties can access.

Starting a New Dormant Company

If you wish to start a new dormant company (a company which has been incorporated, but has never traded or has no intention to trade), then include your company legal name, as well as your preferred suffix (e.g. “Limited” or “Ltd.”) in the Companies House page dedicated to making companies dormant and hit “enter.” Don’t forget to also include the domain name, which you’ve purchased from a hosting site for your company, because you will need it once you resume trading operations.

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Dormant Company Checklist:

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1. Carry out a company name search.

2. Register your limited company name.

3. Inform HMRC of your intention to keep the company dormant

4. Submit dormant company accounts and confirmation statements where necessary

5. Then when you're ready – start trading

6. (Don't forget to inform HMRC when you do).

7. Start trading and engage in business activities

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Once you’ve registered your company as dormant or inactive in the Companies House database, it will remain that way for only 1 year. If you want to keep your company dormant for a certain period of time until you’re ready to trade again, then you must file company dormant accounts and annual confirmation statements every year. You’ll also need to inform the HMRC that you’re putting your company in dormant mode and you do this by getting a copy of their CT41G form after you’ve informed them of your intent to make your company dormant.

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Alternatives to Registering a Dormant Company

You can also go to a third party company that assist other companies in processing their businesses in order to make them dormant like Companies Made Simple, and of course, us Your Virtual Office London. You’ll get the added benefit of gaining a better credit rating and find it easier to acquire investment. People will also have a higher trust rating towards you because you’ve partnered with a trustworthy company like us.

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The benefits of owning a dormant limited company are:

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1. Your interests are protected – no one can use your legal business name and having the ability to take time to craft a business strategy and financing before resuming trading.

2. Preserving your limited company including all of its related legal rights, while allowing you to prepare years in advance before you resume trading.

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Alternatively, you can also make your company dormant with the intent of having it hold assets such as real estate or a freehold property. However this purpose is of limited relevance to small business owners, so it will not be covered in this guide.

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Sole Trader Business

Perhaps the most common reason why business owners make their companies dormant is to protect their businesses when they’re operating as a sole trader (sole proprietorship in the US, or also commonly referred to as being self-employed). Operating your business as a sole trader gives you more advantages as a small business owner than registering your business as a limited company. Overall it’s also cheaper and simpler to run your business as a sole trader, it’s the reason why there are so many SMEs (small business enterprise) and start-ups opt for this type of business than the more complicated ones.

But there is one drawback to this option also, and it’s when you failed to trademark your business name, it gives other people freedom to register your business name as their own, as you have no legal grounds to prevent them from doing so.

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You may also be interested to read Who Can Be A Company Director?

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Limiting Reputational Damage

Through the power of social media, any kind of news (good or bad) can go viral and reach global proportions in minutes and can damage your company’s reputation with little to no warning. It’s even worse if another company has a nearly identical business name as you have, (i.e. Domnio XL Consultancy Services vs. Domnio XL Consultancy Services LLC), then several customers had a bad experience with your competitor, but when they left reviews online it was your company was tagged, or was tagged along with the culprit. In order to protect your company’s reputation, you register it as dormant which will prevent other people from registering with your company name and avoid the problem in the first place.

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Protect your Business by Buying a Company and Keeping it Dormant

It’s a common practice in the UK for business owners and a company’s board of directors to unilaterally decide to put their company in dormant mode. This business tactic is important because it helps protect their business from being exploited by potential competitors (e.g. the copycat company registering a new business under the same name, which can cause serious problems for the original company). The formations process of making your company dormant and allowing it to trade once more is the same and it is done through Companies House. Pay £12.95 to have your company registered as dormant in the Companies House database and submit company dormant accounts and annual confirmation statements yearly to keep your company in dormant mode.

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Preserving your Limited Company

Another scenario where a dormant company can be beneficial to you is when your limited company has been around for a certain period of time now, but you encounter an unexpected emergency and you need to put it on hold. It could be that you need to go abroad for some important work to do that’s not connected with your business, or from which your business depends a lot on and you’ve considered the costs of keeping it running vs. making it dormant, and the second option seems more reasonable.

The problem with keeping your company running is that you are required by the UK’s Companies House to file full company accounts and pay corporate taxes year after year. You will obviously need to hire an accountant to produce and submit these accounts, which will cost a significant amount. But even more problematic is if you’ll have to hire a temporary manager to help you manage your business too! This person will also charge you an insane amount of money, especially if they know how important your business is to the area where it’s operating and to you personally.

By making your limited company dormant, you can avoid much of the cost of maintaining your company, and you won’t need to go through the administrative process of closing down your limited company.

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Closing Notes

Opting to put your company on hold or making it dormant may not always be your first choice when faced with a certain obstacle in your business operations, but it is worth knowing about it when the time will come that this is the best and only option you have in protecting your limited company and its interests. Be sure to talk to your company accountant about registering your limited company as dormant in Companies House before considering doing it. You can also talk to us and get free consultations.

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It’s very likely that you will setup your first business as a sole trader, which indicates that you are basically self-employed. But after trading for several years, it is only logical to create a private limited company, especially since you should probably now have the financial resources to do so. The formation of a limited company (Ltd) is quite straightforward; however, you must also be aware how your legal position, financial arrangements and other responsibilities will change dramatically from when you were a sole trader.

Small business owners, contractors and freelancers can benefit much from creating their own limited company. In this article, you will learn all about limited company formation plus additional information on how to run this type of business. If you’re confused about the potential benefits and implications of starting a limited company, this guide is for you. This article will enlighten you on how a limited company can save you time and money, and will show you how to setup a limited company online.

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Table of Contents

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• What is a Limited Company?

• Why Set up a Limited Company?

• When Should I Change from Sole Trader to Limited Company?

• Can I Set Up a Limited Company on My Own?

• The 7 Steps to Setting Up a Limited Company

• How to Register a Limited Company

• How Much Does it Cost to Register a Company?

• What Taxes Will My Company Pay?

• How Long Does it Take to Set Up a Limited Company?

• How Will I Get Paid Through My Limited Company?

• Legal Responsibilities of Running a Company

• Year-End Reporting for Your Company

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What is a Limited Company?

The term “limited company” refers to a business organization that’s considered as a separate entity (legally and financially) from the individual(s) managing this business organization (e.g. the company’s board of directors). The reason why this kind of business structure was created is to allow business owners to have limited liability. By contrast, when you register your company as a sole trader, when your company is sued for whatever reason, it is you who will take the bulk of the responsibility of that lawsuit and nothing will be protected from the government seizing even your personal assets when you lost the case.

On the other hand, if your business is a limited company, you are only liable for the face value of your share in the business and the judge cannot order for your personal assets to be siezed as it is not part of the company. A limited company has one or more directors (having more than 2 directors are called board of directors), may have one or more bank accounts, has its own tax designation by the HMRC, can be auctioned or sold as an IPO (initial public offer) company shares, and is required to be registered with Companies House.

Why Set up a Limited Company?

Most of the benefits of setting up a limited company is already mentioned above and the last advantage of having a limited company is that it allows you to pay a lower tax rate compared to a sole trader company. This means you will save more money for other company projects, or pay out dividends to your shareholders.

When Should I Change from Sole Trader to Limited Company?

Creating a sole trader business has its own pros and cons (usually it has lesser pros and more cons) like testing how your business model will work against the real world market and refine it. Among the benefits of being a sole trader includes no registration fees, little to no administration work, and you can make decisions without having to consult with your board of directors or shareholders. Meanwhile, the cons include sole trader tax is categorized as income tax and not corporation tax, which means its a higher tax rate than corporate tax, plus all business debts is your personal responsibility (meaning you have full liability).

Therefore, it makes more sense to form a private limited company instead of keeping your sole trader business, as your revenue grows.

One advantage that forming a limited company is that you can find more ways to finance your business. As a limited company you can get private equity funding (i.e. selling shares in your business), whereas a sole trader business can only get business loans from bank. Also being a limited company you can do either or both.

Can I Set Up a Limited Company on My Own?

Companies House allows individuals to set up their own private limited company even if they’re the only employee and director of their company. This is a safe bet for contractors because it limits the risk of their clients treating them as regular employees and find loopholes in their tax and legal obligations. It also keeps contractors safe from the legal ramifications if and when they are sued by their clients. Contractors can also outsource their company administration to an umbrella company in order to save time, energy and resources.

The 7 Steps to Setting Up a Limited Company

Below are the steps you need to take in forming your private limited company.

1.) Check it’s right for you

Decide which business structure suites you best, limited company or sole trader?

2.) Choose your company name

The company name you’ll chose for your limited company will be your company’s legal business name, therefore it must be unique and must bear no resemblance to other existing company names. Your company name must not make false implications (i.e. imply regulation or approval by a body where none exists) and must not contain any offensive words. You can also operate your business under a different name; however, you cannot include the suffix “Ltd” to this name if your business was not registered under this name.

3.) Appoint at least one director

Your limited company can have at least one company director (which can be you, typically), but it can also have more than one director. The job of the company director or board of directors is to vote on making important decisions for the company, follow their rules set prior to the launching of the business and filling the company accounts, as well as ensure that corporation tax are properly remitted to the HMRC.

Though not required, you may appoint a company secretary. The company secretary would be the enforcer of the board of directors and he or she ensures that their decisions are carried out all over the different departments. He or she also makes certain that the company adheres to regulatory requirements and does all other administrative tasks.

4.) Decide who will be shareholders

Your company shareholders are those individuals who have financially contributed to the formation of your company. As the business owner you can be the founder, CEO and shareholder of your company. Another type of shareholders are the people who have purchased a significant amount of company shares that were offered as IPOs (initial public offer). Those that have huge percentage of the company shares becomes one of the company board of directors. A shareholder with more than 25% of the shares is a “person of significant control” (PSC) and will usually have the strongest voting power in the board. Some companies who have made well for themselves only sells less than 40% of their shares, thereby giving them the controlling interest of the company whenever the board of directors meet to vote on any crucial company decision.

5.) Create your company documents

Your limited company is required by the UK’s Companies House to have legal company formation documents that indicates how it should be operated. These are:

The memorandum of association

This is a legal statement saying that all initial shareholders have agreed in writing their will to form the company together as a group.

The articles of association

These documents lists all the company rules and regulations and how it should be operated, which is signed by shareholders, directors and company secretary. If this is your first time forming a company, you can find examples of articles of association and use that as a guide to create your own.

6.) Confirm what records you need to keep

Records keeping is also one of the requirements in company formation, which may include the company’s PCSs and all of its accounting records. Records must be kept for at least 6 years.

7.) Register with Companies House

The last step involves registering your company at Companies House (be sure to include your physical address when you do). Select the appropriate SIC code, as this specifies the nature of your business. Save time and effort by registering for corporation tax the same day.

How to Register a Limited Company

Go to the website of Companies House and fill up the company formation form, or you can also use the form IN01 and register by post. Should you decide to not use “limited” in your company name, then you must register by post. Typically, your new limited company will be registered within 24 hours after receiving your application (if done online). It can take up to 10 days for postal registrations to complete.

A 10-digit Unique Taxpayer Reference (UTR) will be mailed to the physical address of your company within a couple of days after your company has been registered. Your UTR is important, so keep it safe. The Companies House will also send you a ‘certificate of incorporation’, which confirms that your company is now in their records and that it legally exists. This document also includes the company number and date of formation.

How Much Does it Cost to Register a Company?

It’s very cheap to register your company online, just £12. It cost £40 for postal registration; however, Companies House has a a same-day postal registration option for £100, if you want your company formation to be fast-tracked.

What Taxes Will My Company Pay?

The UK government requires all limited company to pay corporation tax based on their fiscal profits. Companies House requires you to also register your company for corporation tax within 3 months after it has been registered and starts trading (you can register for both company formation and corporation tax at the same time). An actively trading company means that your business is providing services or selling its products and is receiving income or making profits. You can consult with your accountant if you’re not sure whether this applies to your company or not. But be informed that missing the deadline for filing corporation tax could get you fined, or worse, be sued for tax evasion.

You also need to file an annual company tax return to the HMRC based on the deadline they’ve set for your company. You’re also required to register for PAYE (pay as you earn) if your company gives employees and other individuals financial compensation (including your own as CEO or company director). Value Added Tax or VAT is also one of the requirements for your company to register with HMRC. Whether you provide services or sell products VAT will be calculated.

How Long Does it Take to Set Up a Limited Company?

Usually it takes about 8 – 10 business days for your limited company to be registered in Companies House, if you do it by post. Or you can work with us and we will fast track your company formation in a matter of hours!

How Will I Get Paid Through My Limited Company?

Compensating yourself from your limited company involves 2 ways.

1.) By taking a fixed monthly salary

2.) By paying yourself dividends out of the company profits (usually paid quarterly)

The best way to go about it is to choose both options, because you benefit through a reduced tax rate.

The greatest benefit of getting dividends is minimal tax due on them and they usually come in huge sums, because they are taken out of the entire company profits. But it takes 3 months at a time before you get paid dividends and there are no added benefits besides that. There are also drawbacks like if the company made negative profits, which will get you zero dividends.

On the other hand, getting compensated with a fixed monthly income will include other benefits such as state pension and maternity or paternity benefits. And on top of that you will get paid whether or not the company makes a profit because unlike dividends, your salary does not depend on the company profits. However, salary is considered as income and is taxed at a higher rate compared to dividends which is considered as capital gains.

Legal Responsibilities of Running a Company

True, while being the CEO and director of your company has its perks, it does not come without responsibilities and some are delicate because they have legal implications. Among them include managing accounts and giving notice to other shareholders whether or not you will personally benefit from certain transactions of the company. Of course, you may also hire a secretary to do these things on your behalf and cut down on the day-to-day grind – just keep in mind that the buck stops with you.

Year-End Reporting for Your Company

You are required to submit annual accounts and a confirmation statement to HMRC and Companies House every fiscal year. The UK government, as well as the company shareholders, investors, creditors and the general public need to know accurate information about your limited company and that it pays its taxes accurately as well. Consult with us if you intend to setup your private limited company.

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In terms of creating consistent profits or scaling them up to new levels, where do you invest your business resources and time on? Acquiring new customers or retaining the ones who already buys from you? While customer acquisition can increase your revenue and brand awareness, the results are not that significant when compared to customer retention. Repeat customers add more value to your business than new customers because their purchasing behavior is more accurate and predictable, and therefore will bring more profits to your business. New research suggests that almost 80% of your future profits might come from the top 20 percent of your repeat customers than from any other groups.

Small businesses in a post-COVID world are struggling to attract and retain loyal customers in an incredibly transient and competitive marketplace. Gas prices are £6 per gallon on a national average, cost of living has sky rocketed since the 1st quarter of 2022 and another economic recession is on the horizon. All this is reason for concern among Britons that it had heavily affected their purchasing behavior. How then, in all of this uncertainty and competition, can small businesses stand out from the crowd and build a base of loyal customers?

In uncertain times such as this, it is crucial for businesses to start focusing their efforts more towards retaining existing customers, turning them into loyal customers, and increasing their lifetime business value. But before we study the profitability of repeat customers, first we must understand what a repeat customer is.

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Table of Contents

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• What is Repeat Business and Why is it Important?

• Here are Top 10 Ways to Create Repeat Loyal Customers

• Deliver Excellent Customer Service

• Automated Customer Conversations

• Extensive Education about Products

• Create Customer Loyalty Programs

• Offer Discounts and Incentives to Repeat Customers

• Collect Feedback and Update your Products

• Add Value Through Email Marketing

• Grow your Customer Base Through Referral Programs

• Improve Customer Retention with VIP Programs

• Never Ignore Customer Complaints

• Repeat Customers are Vital for Every Business

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What is Repeat Business and Why is it Important?

The term ‘repeat business’ means that a customer (or a group of customers) keeps coming back to shop for products you offer. Alternatively, repeat customer is also the other side of this coin. In some cases, these customers will grow to love your products so much that they become loyal supporters of the brand and regularly shop with you over time.

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Below are some of the things that Constant Contact pointed out regarding repeat business and they actually make sense:

• Businesses thrive with customer retention - Indeed the saying that says ‘the customers are the life blood of a business’ is at the core reason why repeat business also exist.

• Word-of-mouth promotion - It is the most common human trait to talk about things that they like and you can tell that you’re lucky when customers like your products, because they will talk about it to their family and friends eventually. And what do you get out of it? Why more sales and profits, of course!

• More money - Customers are more likely to spend more money at businesses they feel they can trust and rely on.

• Eager customers - Repeat customers are actually eager to see new product offerings from your business, because they already trust your brand. Therefore, it’s also easier to sell to them.

• New customer costs - Spending money for advertising on existing loyal customers is cheaper and has better results than spending it to acquire new customers.

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Here are Top 10 Ways to Create Repeat Loyal Customers

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1. Deliver Excellent Customer Service

As an entrepreneur, your main goal is to keep the income flowing in order for your business to not just survive but also survive in highly competitive industry. The best way to do that is to create a loyal customer base who will support your business by making consistent purchases of your products or service. All you have to do is provide excellent customer service to achieve this goal.

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Here are a few tips on how to deliver excellent customer service.

• Offer live demos and training - We’ve talked to some people about their experience with learning and adjusting to the new products they’ve purchased and they all say that the user’s manual is either too technical, too lengthy or too complicated to understand. They would often go to YouTube to find video tutorials on how to use the products effectively. Why let other people demonstrate to your customers how your products work when you can meet them halfway yourself? Create your own live demos and training and interact with your customers in real time and help make them comfortable with your products.

• Live chat - In Forbes 2020 Achieving Customer Amazement Study that interviewed over a thousand people revealed that 96% of customers will leave you for bad service. This should be a wakeup call to all entrepreneurs and allocate time, resources and effort to avoid bad customer services – you can start by adding a live chat feature on all your channels.

• Resolving problems through co-browsing - Sometimes customers encounter obstacles in your business that just can’t be solved through videos and instructions. Take for instance, signing up to create a customer profile on your site. Despite your best efforts to make the entire process seamless and simple, some of them are going to find some areas to fill up difficult. For such scenarios, co-browsing can come extremely handy.

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2. Automated Customer Conversations

Autoresponders and AI customer service chat bots can help your business a lot, especially if you serve customers from all over the world. Obviously, you’ll have customers joining from different time zones at different hours of the day, and they’ll expect to talk or chat with someone ASAP.

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Here are some ways bots can help with your customer service.

• Chat bots makes your customer service run 24/7 addressing customer concerns with impeccable responses. This gives you a higher probability of customer retention and prevent them from switching over to your competitors due to delayed responses or bad customer service experience.

• The best thing about AI-powered chatbots is that they’re self-learning software and today they are even sold to businesses that need such a program to help with their customer service department handle inbound calls from customers. Freshworks offers various plans and pricing for AI-powered chatbots to help resolve customer issues in real time. Find a plan that suits your business now!

• An improved customer service experience means you’ll have a higher customer retention, low churn rate, more repeat customers and higher profits.

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3. Extensive Education about Products

Any customer feels empowered and confident about products only when they understand the entire features and benefits of it. Hence, without timely customer education and training, your customers are likely to be lost and confused about how to get the maximum value out of your products.

If you focus on providing high-quality comprehensive customer education, then your customers will be highly satisfied with your brand and will stick around for much longer.

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Here are a few ways in which you can educate your customers.

• Make the best possible first impression through a comprehensive onboarding process for all your products and services.

• Utilize all kinds of communication channels such as blogs, social media, one-to-one live chats, video sessions, and chatbots to be available for your customers for every hurdle that they gave during their customer journey.

• Offer high-quality video tutorials and demonstrations so that your customer gets highly accustomed to your products.

• Frequently initiate conversations and connect with your customers to let them know that you are always available to educate them through their journey with your brand.

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4. Create Customer Loyalty Programs

A successful customer loyalty program can contribute heavily towards retaining your customers and turning them into repeat customers. In fact, a customer who is a part of your loyalty program is 47% more likely to make another purchase from you when compared to other customers.

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Tips on how to use customer loyalty programs to increase repeat customers.

• Offer attractive rewards - It is now widely known that the striatum (the reward center of the brain) can cause a person to be addicted to certain things and if you play it right, offering valuable rewards in your loyalty programs to your customers can make your customers feel they get more for their money’s worth and will make them buy from you again and again.

• Give customers a head start - Offer your customers a 50% bonus rebate or points to make them feel that they only need to make a few more purchases to complete the other 50% of the points/rebates to get the discount or freebie advertised on your loyalty program.

• Provide welcome points for new customers - Giving welcome points on top of your other rewards for your customer loyalty program incentivizes your customers and nudges them to come back for more. In fact, the most successful customer loyalty programs starts off with giving something of value to their customers for absolutely free.

• Make it interesting and creative - Don’t just offer rewards bluntly. Make the reward a secret surprise or put a twist to the prize money or item that you’ll give your customers once they’ve reached a certain threshold. You could, say, give them an expensive watch once they reach 100 loyalty points on their account, but add a secret surprise once they claim the reward and tell them that they’ll also get a lifetime gift on their birthday!

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5. Offer Discounts and Incentives to Repeat Customers

A little bit goes a long long way, isn’t that what they always say? Well, did you know that it applies to customer retention as well? Everybody loves something either free or half the price, heck these days they’ll even want it for 15% off! So what does this tell you? That’s right! Offer discounts on your products and services to give your customers an incentive and make them buy from you more and more.

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Below are some tips on how to give discounts and incentives to your customers.

• Provide onboarding offers - First impressions, lasts. The same is true when onboarding new customers and just by simply giving them offers like free shipping or some exclusive discount codes will make them think that you’re the greatest company in the world!

• Offers after first purchase - Make their subsequent purchases count by giving them discounts and price cuts. They’ll think they’re getting the same products for half the price which will not only make them happy, but will also make them share the experience with their family and friends, which can be your future potential customers as well.

• Keep experimenting - If you love what you do, then it won’t feel like you’re working or stressing out to make profits. You’re going to be very creative in your own right and come up with amazing ideas that will resonate with your customers and in turn keep them happy and buying from you. But if you really need to, then hire a creative team to help you brainstorm ideas.

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6. Collect Feedback and Update your Products

Since you may not be able to talk to your customers like you can talk to your close friends, you need to know what they want and what they think about your business. You do this by collecting customer feedback via surveys, social media comments, reactions and direct messages. You can also find out what your customers are saying about your business through the BBB (Better Business Bureau) or forums and discussion boards talk specifically talk about products similar to what you’re offering.

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Here is how collecting feedback can impact your recurring customers.

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• Proactive customer communication - Utilize all the tools available to you to get customer feedback like automated chatbots, in-app messaging, and live-chat sessions.

• Observe common patterns - Sift through the feedback information that you got from your customers and start analyzing them to look for patterns, which are potential problems that needs your attention. It can be anything from, for example, 70% of your customers complain about certain features of your product or the lack thereof. By simply addressing such concerns, you not only will boost sales but get more repeat buys from your loyal customer base.

• Upgrade your products - Listen to what your customers want about your products or services and make the necessary corrections or upgrades in order to please them. Remember, a happy customer will always come back for more!

• Inform your customers - Create new ads to showcase the new upgrades and features you’ve included in your products, so your customers will know that you heard their feedback and actually done something about it. The second they’ll know that you care about what they think, you can bet they’ll be back at your store and make more purchases.

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7. Add Value Through Email Marketing

According to LinkedIn email marketing drives 3.5 times more conversions than just doing the basic across-the-board marketing. Sending out those weekly and/or monthly newsletters to your subscribers actually improves your overall sales and profits.

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Here’s what you can do with your email marketing campaigns to see improvement.

• Change your order confirmation email - The probability of turning a new customer into a repeat customer is high if you do these things: sending information about related products, special offers, and discount coupons to your customers with the order confirmation email of their first purchase

• Send follow-up emails - If the new customer has agreed to share their personal information including their email and they have opted to receive newsletters from you, then send them follow-up emails to let them know that you value their business. Make your emails personalized and proactively invite the customer to interact with your customer service agents who can assist them with any queries that they may have about your company.

• Add immense value - Don’t just firebomb your customers with sales emails. Anyone can tell you that such action is annoying and will easily get old, instead add value to your content. You can include personal testimonies from other customers who have used your products or services and they explain how it had a positive effect on their lives. This way your email newsletters will have more depth and people will actually want to read it.

• Keep your customers updated - Include updates on your products or services in your email newsletter that you’ll send out to your customers. You never know some of your customers are on the look out for new product releases from your company and are interested to make a purchase.

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8. Grow your Customer Base Through Referral Programs

A lot of businesses capitalize on referral programs for a good reason and that reason is because it drives sales. Create a referral program of your own and reap the benefits in sales and profits! This also has a sort of a double-edged sword benefit to it, where if you reward your customers who refers their friend to your company, you not only gain new customers but also keep your current customers loyal to you.

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9. Improve Customer Retention with VIP Programs

VIP programs essentially makes the customer sign a long-term agreement with you. This means a steady sales year after year, albeit limited to the top 10 percent of your customer base. Still, it beats spending a gazillion ton of money to gain new customers and get a meager amount of profits from it. There are customers who have more money than they can spend who also want to be first in line on getting your latest products and they want to maintain their elite status with your brand. Give them privileges such as invitations to special events, quick access to your new products, or sales days that they can choose for themselves.

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10. Never Ignore Customer Complaints

Keep in mind one very important thing – your customers are not children and so if you hear them complain about your products or company, do not treat it as a child throwing tantrums. Instead, do the sensible thing and listen and then help them resolve the issue so everybody can be happy. You must also understand that your relationship with your customers helps drive sales and boost profits. You basically asked them to trust you and your products indirectly and they in turn agreed. That trust can be destroyed in a matter of seconds through some misunderstanding or bad customer service. Resolve whatever concern they may have about your business to prevent it from going out of control due to your negligence, be it unintended or deliberate.

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Some mind-blowing statistics related to repeat customers:

• Repeat customers tend to spend 300% more on your products/services compared to new customers.

• You will spend 5 times more in acquiring new customers than to keep repeat customers.

• Repeat customers are 67% more likely to purchase new products from you than new customers would.

• The amount of money you need to spend to encourage a new customer to spend as much as your repeat customers is 16 times higher.

• Just a mere 5% increase in customer retention can lead to a 75% increased profitability for your business.

• It’s estimated that a repeat customer is worth 10 times more compared to the average first time customer.

• About 44% of companies today blindly spend more on customer acquisition, while only 18% of companies work on customer retention, which causes the disparity in profitability.

• Approximately 62% of customers have a common negative belief that the brands they are most loyal to are not doing enough to reward them for their loyalty.

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Repeat Customers are Vital for Every Business

From what we’ve learned above about repeat customers, we can surmise that these small part of your customer population have a vital role for any business, be it B2B or B2C. If you’ll divide your resources to a 50-50 setup where half of it goes to customer acquisition and the other half is used for customer retention strategies, you can scale up the profits of your business consistently. And when it comes to retention, engagement is still the best solution.

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There are now more UK billionaires than ever before in the country it is the first time the figure has risen past the 100 mark according to the Sunday Times. The official figure is 104 billionaires who are living inside the UK. The total combined estimated figure is £301bn between the 104 who are worth more than £1 billion. This figure is hugely substantial and important as it means the UK now have more billionaires per head of population than any other country. London in the main center for billionaires, it holds more billionaires than any other city on Earth.

The exact figure is 72 billionaires and the next closet city is Moscow which has a mere 48 in comparison. The Indian run company Hinduja Group are at the very top of the list with a fortune of £11.9 bn. The Arsenal FC main shareholder Alisher Usmanov was downgraded to second after his approximate figure shrank to £10.65bn.Many of the billionaires will be 'non-domiciles' who will pay very little tax when compared to a resident of the UK. This gives the owners tax benefits if their resident country has less strict tax regimes.

The number of billionaires living in the UK has increased from 88 in 2013 to the latest figure of 104 in 2014.New people who have joined the list include West End producer Sir Cameron Mackintosh who is now worth £1bn and the founder of estate agents Foxtons who has a fortune of £1.07bn.Philip Beresford, who compiles the list, told the BBC "culture, financial services, nice tax regime, good education for their kids and a nice lifestyle where they meet their friends" were some of the key reasons as to why they were attracted to the United Kingdom.

Update June 2016:

According to the Forbes Rich List 2016, the Hinduja family, who top the list of the UK's richest, rose to number 58 from number 60 richest families in the world. The family, whose riches came from Indian-born business tycoon and investor Srichand P Hinduja, has a net worth of $14.6bn.Among the UK's richest are landowners and real estate bosses, as well as Virgin's business tycoon Richard Branson. According to the Sunday Times Rich List 2016: The number of billionaires in London has fallen, but it's still the super-rich capital of the world. However, the number of billionaires calling London home has fallen for the first time since the financial crisis in 2008. (source: Sunday Times rich list).The capital has lost three billionaires compared to last year, a fall of three per cent, but remains home to more than any other city in the world with 77.

The number of billionaires in Moscow, Los Angeles and Mumbai also declined, down 15 per cent, 12.5 per cent and 22 per cent respectively, according to figures from the latest Sunday Times Rich List. Overall, the number of billionaires in the UK grew, hitting an all-time high of 120 and with a combined wealth of £344bn.There was a shake-up of Brit-born billionaires, with James Dyson overtaking Sir Richard Branson at the top, and 17th overall, with a £5bn fortune. There is some differing of opinion between Forbes and the Sunday Times Rich List.

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Here is a list of countries with their number of currently resident billionaires this year according to Forbes:

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US, 540 billionaires

China (mainland), 251 billionaires

Germany, 120 billionaires

India, 84 billionaires

Russia, 77 billionaires

Hong Kong, 64 billionaires

Japan, 64 billionaires

United Kingdom, 50 billionaires

Italy, 43 billionaires

France, 39 billionaires

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Here are the world top 10 billionaires, their net worth, business, age, and where they live: (source Forbes)

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#1 Bill Gates $75 B, 60, Microsoft, United States

#2 Amancio Ortega, $67 B, 80, Zara, Spain

#3 Warren Buffett, $60.8 B, 85, Berkshire Hathaway, United States

#4 Carlos Slim Helu, $50 B, 76, telecom, Mexico

#5 Jeff Bezos, $45.2 B, 52, Amazon.com, United States

#6 Mark Zuckerberg, $44.6 B, 32, Facebook, United States

#7 Larry Ellison, $43.6 B, 71, Oracle, United States

#8 Michael Bloomberg, $40 B, 74, Bloomberg LP, United States

#9 Charles Koch, $39.6 B, 80, diversified, United States

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The UK`s economy is seeing signs of positive growth. It is reported that the economy grew by 0.8% in the first quart of 2014. This is now the fifth period of continual positive growth, which has been overseen by the conservative government. It is the longest run of positive growth since the financial crisis in 2008.Gross Domestic Product measures an economies activity and if it has increased or decreased in size. However the Office of National Statistics has explained the economy is only 0.6% smaller than its highest peak in 2008.The Chancellor George Osborne has stated "Britain is coming back".

However has warned that Britain`s biggest risk would be to abandon the plan of prosperity and restraint. The US and Germany economies have now surpasses their pre-recession growth peaks, the UK is still not ahead of its economy peak from 2008.However the UK did suffer from server weather which would did have an impact on large industries such as agriculture. Agriculture dropped by 0.07% as a direct result to the server weather the UK faced earlier in the year. Further good news is the International Monetary Fund explained that the UK is to the most impressive performing economy from the world`s largest economies in 2014 with growth forecasted to be 2.9% for the 12 month term.

Update June 2016:

The UK Economic Outlook has seen a 2.2% rise in real GDP growth in the first quarter of the year giving the UK the 2nd fastest growth rate in the G7 membership. Figures for the first quarter also show a 3%consumer spending growth with inflation standing at 0.5 percent. Although our economic recovery has been relatively slow since mid-2009, it is still growing at a faster rate than most of the other G7 member economies over the same period. Consumer spending has remained strong and many economists put this down in part to lower global oil prices meaning less cost at the petrol pumps for British consumers.

Financial experts have mixed outlooks globally for the rest of the year with the unknown effects of the EU Referendum, as well as the continued recessions in Brazil and Russia, plus a slowdown of growth in China. Many economists have predicted an average growth in UK GDP of just over 2 percent during 2016, mainly driven by consumer spending. This will be helped by a combination of low food prices and energy bills being kept down. The Capital city of London is expected to continue to lead the UK recovery with growth levels predicted to be around 3 percent for this year, but other regions across the country are also expected to show growth levels between 1.4 to 2.3 percent overall by the end of the year.

Long-term views held by economists predict that inflation will remain low for now, but may see a small rise in rates over a gradual period as we head towards 2020.With Government targets set to clear the budget deficit before 2020, we may see some further drag on the economy due to fiscal tightening of budgets, but it is thought that the strength of the private services sector will help to offset this with continued job growth and productivity. Are you looking for a virtual office service? why not get in touch with our expert team today, we can really help to boost your businesses presence and give you that professional edge that others in your sector may lack. Take advantage of the UK's growing economy with the prestige of having a London based office service.

With Britain's economic recovery,  there's the prospect of the fragile growth being thrown off course by the damaging impacts of recent flooding? Mark Carney, The Governor of the Bank of England, warned last week that farming and other businesses hit by floods could have a negative impact on Gross Domestic Product (GDP). In previous periods of bad weather such as heavy snow, this has reduced quarterly GDP by up to 0.2%. However, severe cold is more widespread whereas flooding tends to effect a relatively small area of floodplain and coastline.

Extensive snow makes it almost impossible for construction to take place - since construction accounts for around 7% of economic activity, a wide-scale pause in building works has a much bigger impact than flooding. If there is any possible 'upside' to natural disaster it is that, in purely economic terms, GDP tends to bounce back quite quickly. Japan for example has often experienced devastating earthquakes which produce an immediate hit to GDP as well as immeasurable human cost. However, once the reconstruction of houses, roads, bridges and other infrastructure takes place, the economy receives a tremendous stimulus and recovers quickly.

In the UK it will be the insurance companies who are amongst the first to count the cost of the wettest January on records by comparison, the 2007 floods cost insurers about £3 billion. Some economists have pointed out that repairs to roads and railway lines will probably help support the economic growth not to mention retailers of items like carpets and kitchens in affected areas. There will clearly be some negative statistical impact of this years floods on the UK's fragile economic growth. Although this is no consolation to people who have been severely affected, the flooding is unlikely to derail the recovery and could even provide a modest stimulus over the rest of the year. Richard Bloomfield is the website editor at The Workplace Depot

Update June 2016:

Figures released in January this year by the Association of British Insurers (ABI) predicted that losses caused by flood and storm damage during the winter of 2015 would far exceed those of two years ago resulting from the wettest winter on UK record. Insurance companies were expected to pay out around £1.3 billion for claims following a series of storms, flooding and heavy rainfall during the winter of 2015.The economic losses from the winter 2013-14 have been worked out by the Environment Agency but are yet been published by the Department for Environment, Food and Rural Affairs.

The ABI predicted that insurance claims would cost £1.1 billion, including £446 million for businesses and homes that were affected by heavy flooding. The bill for damages recorded this past winter is expected to exceed the roughly £600 million in losses caused by flooding during 2012, but will be much lower than what was claimed for the summer floods of 2007, which totaled around the £3.2 billion mark. The UK Climate Change Risk Assessment that was published in 2012, estimated that losses from coastal and river flooding in England and Wales could possibly rise from about £1.2 billion per year today to between £1.6 and £6.8 billion by the 2050s.

December 2015 was the wettest December for the UK since 1910 when Met Office records began. Climate change experts say that six of the seven wettest years on record in the UK have all occurred from the year 2000 onward. The UK has also experienced its eight warmest years on record. Climatologists are predicting that climate change is making the UK a warmer and wetter country overall. The UK Climate Change Risk Assessment estimated that about 6 million residential and non-residential properties in the UK are exposed to some level of risk of coastal, river or surface water flooding.