Now that we have regained some normality in the wake of the Covid-19 pandemic, business opportunities are now starting to look increasingly appealing to entrepreneurs – the hospitality and leisure industry being just one sector that has seen innovative start-up businesses.
With the post-pandemic UK travel boom, more people have enjoyed and are continuing to experience the custom of local hospitality and leisure activities which is enabling new businesses in this sector to achieve a lot of success (if done right).
A recent report from Barclays found that 41% of consumers surveyed said they are now more drawn to go out for entertainment in their local neighbourhoods. In addition to this, they found that 45% of consumers surveyed are more likely to choose a UK holiday location than before the pandemic. These statistics show that there is increasing demand for local customs and opportunities for success.
This article provides a number of top tips to consider when looking to start a business in the hospitality and leisure sector.
Before delving into planning how to start your business, it is important to consider whether you have a strong business concept, commercial understanding of the marketplace, the right product/services, financial backing, the right support and are in a position to receive the best advice.
Firstly, you should focus on identifying a strong business concept. A concept for your business should be based on more than just a short-term trend or business boom (such trends tend to have an initial burst of success but can become stagnant over time). Instead, a business concept that is broad and has scalability opportunities can provide a much more fruitful foundation for a start-up business.
A well-thought-through business plan is vital when starting a business in any sector.
A business plan should detail the operational and financial objectives of the proposed business and should include comprehensive research of similar businesses in the marketplace, as this will allow you to ascertain a starting budget to work with and estimated initial start-up costs. Any business plan should also consider the timing of starting a business and any recent market trends. For example, opening a pub in light of the increased energy prices and cost of living crisis may not, without a thorough business plan and strategy, be sustainable at present.
It is important to consider how you plan on structuring the start-up business. The four most common structures to choose from are:
It will also assist you in balancing factors such as tax and personal liability when taking on debt. If you operate as a sole trader or partnership, you will have unlimited liability for the debts of the business.
Given that success in the hospitality and leisure industry can be unpredictable to begin with, it may be that deciding to operate as a private limited company provides you with more comfort due to the higher level of personal protection afforded by this choice of trading entity. This way, you can limit your personal liability for the company’s debts in the event that the business is unsuccessful.
It is important to consider how you will fund your start-up business and the options available to you.
This might be via short-term funding at the beginning, where your outgoings and costs exceed your income as you build your brand and may be in the form of a bank loan. It is important to note that the bank will require a business case and realistic cash flow for you to prove that you will be able to pay back the loan along with any interest. The bank may also ask for security over all the assets of your start-up business and personal guarantees. It is worth researching if there are any government-backed schemes providing funding for your business.
If you operate as a private limited company, a further way to raise finance might be via the issue of shares. It is worth noting, however, that if you are trying to raise large sums, you may have to give a large number of shares in exchange, which may have an effect on your ultimate control of the business.
Our specialist hospitality and leisure solicitors have many years of experience advising entrepreneurs and people with new ideas on how best to prepare and protect their new business for the future as it grows and develops.
