T&Cs for Startups: What To Look Out For

Our recent research into entrepreneurship in the UK revealed that in 2023, there was a very high number of active businesses, with an increase of 563,847 businesses compared to 2022. We found that in some parts of the UK, an influx of new businesses brought down the average age of companies registered with Companies House. In some areas of London, businesses were under five years old on average.

With this in mind, we've put together some tips for anyone looking to start a new business - a checklist of everything to remember when choosing your suppliers and reading through their T&Cs.

1. Business Bank Accounts

When setting up a bank account for your business, you will be looking for a few specific things that might not be as relevant for personal bank accounts. Several banks offer accounts specifically intended for small businesses and startups. These types of accounts have features like free invoicing or free international payments and transfers for businesses with international customers.

Compare the costs and charges associated with different accounts. It’s common for banks to offer free business banking services for the first 12 to 24 months. If you are considering a bank, check carefully to see what the costs will rise to.

Our business bank accounts page has a handy table that allows you to check the monthly fee (if applicable), interest rate, credit options and free banking duration from trusted providers. We’ve also identified any additional special features offered by each provider that business owners might find useful.

Depending on your industry, niche and client base, it’s likely that you will want to be able to receive card payments. However, not all business bank accounts accept payments by card, so if this is something you need, check the terms and conditions to look for the card payment policy.

2. Commercial Lease Agreement

While not all businesses have physical premises, plenty do, especially those that are customer-facing and rely on walk-ups. If you are looking to rent your business premises from a landlord, you’ll need a commercial lease agreement.

One of the most important considerations is the length of the term. In the UK, commercial leases are generally for 1 to 3 years, but they can be longer. A short-term lease offers greater flexibility if you think you may need to move, for example, if you are looking to expand your business.

Consider whether you will need a break clause in the lease to allow you to exit the contract early without penalties for maximum flexibility.

You should also look out for the contract’s stipulations on property alterations. Certain types of businesses might need to make modifications to the space. For example, a cafe might want to expand the kitchen. However, any business might want to make minor changes, like renovating the bathroom or redecorating in brand colours.

Ultimately, a commercial lease should be reviewed by your business's legal representative, so please treat the above as suggestions on some of the things you, as a decision-maker, should consider when looking for business premises.

3. Energy Suppliers

Once you have signed the lease agreement for your business premises, the next step is to choose your energy supplier. There will probably already be one in place, with a ‘deemed contract’, which could be up to 80% more expensive than a contract you negotiate. So whether you decide to stay with the same provider or make a switch, remember that you might be able to bring the price down substantially.

One important choice to make is the type of tariff you will use. A fixed-rate tariff offers the security that the price will not rise during the contract period, but a variable rate tariff can give you a lower price for now, without the guarantee that it won’t change. There are other options in addition to these well known contract types, but some are only suitable for large businesses with a high cash flow, such as flex approach tariffs in which you bulk buy energy in advance.

Your contract will also specify your payment method, which can be an opportunity to save money, as many providers offer lower prices for monthly direct debit payments.

One last thing to bear in mind is that if you allow your energy supplier contract to expire and renew automatically, it’s likely that you will be moved onto a deemed contract, which as we have discussed are rarely cost-effective. So make sure you stay aware of the end date of your contract, and be proactive in signing up for your next contract, whether it’s with the same supplier again or a different one with a better offer.

4. Broadband

When selecting a broadband provider, be sure to find out your potential supplier’s policy regarding switching. There might be situations in which you need to either update your contact with your existing provider, or make a new arrangement with a different company. You might move premises, or be planning to expand, which would mean more devices would need to be able to connect.

Some broadband providers have the right to raise their prices at any time. If you are worried about being affected by a mid-contract price rise, choose a provider that allows you to switch to a different company without being penalised. However, many providers offer a ‘fixed price promise’ for the duration of the contract, guaranteeing that the price will not rise for 1 to 2 years, depending on your contract with them.

Many providers also offer broadband as part of a telecoms bundle with a business phone line so that you get both contracts in one, thereby saving money. While so much business is conducted on mobile nowadays, a landline number can enhance your company’s credibility, and a business phone line might come with added benefits.

While traditional fixed-line telephony is increasingly rare and set to phase out by 2025 in the UK, VoIP, or Voice over Internet Protocol, allows you to take phone calls over a digital line. Different providers will include some features as standard and some as paid extras, including call waiting technology or automatic ringback. Check the terms and conditions to see which provider is best for you.

5. Payment Solutions

This category of suppliers encompasses everything that facilitates your transactions with customers - from physical tech, like tills and card machines, to eCommerce tools that allow your customers to make purchases online. Some merchant services offer extra services. Consult the T&Cs to see which one will perfectly fit your needs.

Using merchant services can sometimes be a learning curve, so think carefully about how much support you will need using their services. Some suppliers offer free calls to the support team, but others charge. Some will offer 24/7 support, while others can only help you and your team during working hours.

As with any agreement with a provider, it’s important to determine how long the contract will last, as well as looking into how flexible it will be. If you needed to change suppliers, would you be subject to a charge? Termination charges can be common for merchant services.

Card machine suppliers, in particular, often offer a range of payment structures for you to choose from - which type will suit your business best? Interchange plus is one of the most common price structures, in which you pay a small percentage of each card payment received. There are also flat rate contracts (simple to use but expensive) and tiered pricing (often more beneficial to larger companies) to consider.

6. Business Insurance

The type of insurance you need as a business will vary depending on the services and products you deliver.

Public Liability Insurance is very important for businesses that either deliver work off-site on clients’ premises or that have clients come to visit. This type of insurance will cover compensation due to injury or property damage, repair costs to customers’ and public property, as well as medical and legal fees. If you have any number of staff working for you, you will also need Employers’ Liability Insurance. Different suppliers have options available that are tailored to various industries and include various add-ons.

If you provide your clients with professional advice or services or deal with sensitive information, you will need professional indemnity insurance, which will protect you in the instance of any negligence claims. Factor in whether the contract includes legal support.

Businesses of all shapes and sizes often use a van to transport goods, products or tools between the workplace or warehouse and clients’ homes or places of work. Vans actually fit into a different tax category than cars, and they will need specialist insurance. This insurance can fit into one of three categories: carriage of own goods (suitable for entrepreneurs who also use their van to commute to work), carriage of goods for hire or reward (best for delivery vehicles) or haulage (delivering items without multiple stops and transporting larger items).

Insurance is another type of cost that can sometimes automatically renew and rollover. Still, if you stay alert to when your contract is set to expire, you may be able to negotiate a better fee. Contracts that have automatically renewed are generally more expensive.

Ready, Set, Go

We hope this helps cover some of the most common types of contracts new business owners have to set up. We’ve aimed to include plenty of information about what you need to look out for when choosing your suppliers.

Perhaps the biggest takeaway is to bear in mind that there is a wide range of providers available, many of which will have deals that are tailor-made for your industry or type of business.

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Sam White