Starting a business? When do you need commercial insurance?


Setting up a business is a dream for many of us. Being your own boss, setting goals of your choice, and making your millions – at least, that’s what we all hope for!
To get to that point, you’ll need to put in considerable time – and money. Your livelihood is at risk, making it crucial that you protect your investment with insurance for commercial businesses.
So, what types of businesses need cover, and what features can be included in policies? At Insurance Choice Commercial, we’re experts in arranging cover for all types of firm, from hairdressers to pubs to offices to mechanics. Read on for our quick introduction to all you need to know.

Who wants to start up their own business?

If you’re thinking of becoming an entrepreneur, you’re by no means alone. Some one in five Brits say they’re contemplating starting a business in 2021, rising to one in three 18 to 34-year-olds.
That’s according to research conducted among 2,000 adults in December 2020 for small business support network Enterprise Nation and the government backed Start Up Loans scheme.
And only six per cent of those surveyed were doing so because they’d lost their jobs. Some 37% say it’s something they’ve always wanted to do, although more than half see their endeavour as being a side hustle – at least initially.
All sorts of business ideas are popular. Health and wellbeing is the most appealing category, attracting 11% of budding businesspeople. Next come manufacturing, tech, and business services, which each win over 10% of would-be entrepreneurs.
Of those surveyed, one in 10 are actively planning the steps they need to take to make their business idea a success.
Even at an early stage, setting up a business can involve investments of energy, time, and money. So who needs to take out commercial insurance to protect their business, and at what point of the process?

How many businesses are there in the UK?

Let’s take a brief look at some statistics around the existing business landscape in the UK.
First, the good news: it’s rich and varied! There are almost six million businesses in the UK today, of which an astounding 99.99% are classified as small or medium enterprises (SMEs), with fewer than 250 employees. In fact, 4.5 million of them have no employees at all – they’re sole traders.
In the past year, an incredible 672,890 new businesses have been founded – that’s 77 per hour!
Now the bad news: there’s a high rate of failure. A fifth of start-ups cease operations in their first year, and 60% within three years. While many of those will not have invested large sums of money into their operations, others will suffer financially.
Some 42% of start-ups fail because they cannot find a market for their products or services, while 29% go bust because they run out of cash.
Your business can also fail due to unexpected setbacks. If valuable equipment is stolen or your stock is damaged in a fire, you might not have the funds to replace it. If you need to pause trading due to burst pipes, you’ll lose profits but might still have to pay rent, utilities, and wages. That could force you to close your doors for good.
These dangers and many others are just some of the reasons why you should get a commercial insurance policy.
But of course, many budding entrepreneurs simply treat failure as a lesson, and they’re soon up and running again with a new idea!
A computer on a stand on an office desk

What businesses are the most profitable?

If you see yourself as a future tycoon, you’ll be keen to know which areas of commerce are the most profitable.
Surprisingly, perhaps, recent research into small business profitability puts couriers at the top of the list. While you might not make your billions delivering takeaways by bike, moped or van, it could be a great way to put you on the road to success.
Second most profitable are coffee shops, so if you love the buzz of caffeine and conversation, this could be the venture for you. Of course, you’ll need to invest a fair amount in your premises, equipment and staff, so reliable commercial insurance is a good idea to protect against accidents, burglary, fire and business interruption. Make sure you’ve got good public and employer’s liability cover included!
Car washes, sandwich bars, food delivery, restaurants and catering companies also score highly. Again, setting up one of these requires a hefty investment in equipment.
Also, on the list are internet-based companies and professional services such as accountants. While you might think these are lower risk, bear in mind that if you make a mistake in the service you provide, you could cost your clients money. Professional indemnity insurance policies can cover you for claims made against you for negligence or a breach of duty or care. 
Those are just some of the ideas that you could pursue. But who knows what the next big thing will be in the world of commerce? Perhaps it’s your own novel business idea!

Starting a business – writing a business plan

Now you’ve read this, we hope you’re fired up to get started with your own enterprise. How can you lay the groundwork to give you the best chance of success?
You’ll need to begin by writing a business plan to set out your ideas in a structured way. You can find templates and guides online or follow the rough outline below. Your business plan doesn’t need to be lengthy – but it must be realistic!
Begin with your executive summary, giving an overview of what your business is about.
Then look at the business landscape for your type of company: what is the market like, and who are the main competitors? What makes your business special?
Continue with your marketing strategy: how will you attract your customers? What channels will you use, such as a website and social media?
Now go into more detail about your products or services. What will you stock or provide? Who will your suppliers be, and how might you expand your range if your business takes off?
Take a look at staffing next. How will you recruit, train, and manage your people?
Now things are getting serious: it’s time to examine the financials! You should include forecasts of profits and cashflow. It’s essential you get this bit right, as it shows potential investors that you’ve got a head for business and a realistic plan to turn a profit.
Of course, to put together a proper business plan, you’ll need to do some research. Take a look at the following sections for ideas.

Starting a business – market research

No matter how exciting your business dreams, you could come down to earth with a crash if nobody wants your goods or services! So, you need to carry out some market research before you invest any savings or seek any external sources of funding.
You need to find out three main things: is there a market for your product in your area? Are there other businesses who would be your competitors? And what is your unique selling point (USP) that will make you stand apart from your rivals?
You also want to know what prices people might be willing to pay, and if there’s anything you can add to your offer to attract customers, like a wider product range.
There are a few ways you can go about this. Social media is highly useful: you could join a local group and start a discussion about what shops people would like to see on their nearest high street. Or you could sign up to a survey website and run a few questions there.

Starting your business – financials

You know your business is starting to take shape when you’ve got that appointment with a bank manager to discuss loans!
Another funder you could approach is the government-backed Start Up Loans, which can provide up to £25,000 to get your company off the ground.
Any prospective funder will want to see your business plan to make sure your idea is viable, and that you’ve got the drive and the skills to see it to fruition. If you don’t have a head for figures, it’s wise to employ the services of an accountant to do your book-keeping.
A calculator on-top of accounting sheets

Starting your business – your assets

Loans or savings will help you purchase or hire whatever you need to get started: equipment, stock, and premises.
Do your research and choose wisely. Remember that scrimping and saving can be a false economy: for example, if one empty shop premises is cheaper than another, it’s probably due to a lack of passing trade, which could mean your business falters.
Likewise, cheap equipment might not last, or meet the needs of your business if it grows.
As soon as you’ve made a financial investment in your business, you should look for suitable commercial cover.

Starting your business – other paperwork

Depending on the nature of your business, there might be some other legal hoops to jump through. We’ll just run through them quickly here, so check the official government guidance on setting up a business for more details.
You’ll need to register for tax purposes. This is simple for sole traders, and more complex for partnerships or limited companies.
Check what licences or permits you might need, and what rates you might have to pay. Usually, it’s your local authority which manages these processes.
Are there any certificates you need – for example, in food safety and handling? It’s best to get these under your belt before you make any major investments.
Finally, don’t forget your commercial insurance. Certain elements are legal requirements, for example, cover for any vehicles you operate. Other features might be a condition of your membership of a professional body, e.g. public indemnity insurance. Make sure you know what’s what!

Starting your business – hiring staff

As we mentioned above, most businesses employ nobody. But if you have plans to expand and build an enterprise empire, then you’ll need to consider staffing.
Employing people can be a bit of a headache for a new business. You’ve got to consider recruitment, retention, and training. You’ll need to set up payroll and learn about national insurance contributions and tax.
It’s also a legal requirement that you have employer’s liability insurance to cover costs if a staff member is taken ill or injured because of their job. It’s one of the many benefits included in commercial insurance policies.

Starting your business – marketing

For some entrepreneurs, this is the fun part. For others, it’s a mystery! Either way, you will almost certainly to have to do some marketing to get your company known and attract customers.
Go back to your market research and think about the customers you are targeting. How old are they? Where do they live? How much disposable income do they have to spend? This will help shape your marketing strategy.
Start with developing a brand: a distinctive name, look and logo. It’s a good idea to invest in some graphic design support at this stage, unless you’ve got great artistic and computing skills yourself.
Then think about what channels are best to reach your target audience. A website and social media pages are pretty much a given these days. For older audiences, ads in the local paper can be effective, while a younger crowd will take more notice of web and social media ads.
And what promotions or offers could attract people to your fledgling firm? Discounts and vouchers might be a good way to drum up new business.
With hard work, solid preparation, and a bit of entrepreneurial flair, you could be turning a profit in no time. Good luck!
A man in a suit writing "marketing" on a clear screen in bold red pen

Get a quote from Insurance Choice today

Starting a business is rewarding but can be complicated. Fortunately, getting commercial insurance is far simpler if you choose Insurance Choice.
We’ll do the legwork for you, searching insurance providers to find policies that suit your business and your budget.
We arrange cover for all sorts of companies, from tradesmen to pubs and restaurants to accountants. So, contact us today for a quote, and get your business started!

Policy benefits, features and discounts offered may very between insurance schemes or cover selected and are subject to underwriting criteria. Information contained within this article is accurate at the time of publishing but may be subject to change.