Beginner’s Guide on Starting a Builders’ Merchant Business in the United Kingdom
Builders’ merchants have had a long, industrious history in the building and construction sector. According to the Builders Merchants Federation (BMF), the Builders Merchants Alliance was first to use the term in 1908. Since then, this trade business has come a long way and is undergoing rapid change. So, it is undoubtedly an exciting time to look at starting a builders’ merchant business in the UK.
The pandemic disrupted supply chains, causing material shortages that impacted the industry significantly. However, things are picking up again, and the Construction Leadership Council (CLC) forecasts a positive outlook. This is especially so with the National Retrofit Strategy – a two-decade construction industry blueprint – gaining momentum.
Competition in this industry has been quite rife as small and medium firms vie to find firm footing. Mergers and acquisitions are also becoming the norm as merchant conglomerates drive a trend towards consolidation.
Written for both the budding and savvy entrepreneur, this guide takes a look at the essentials of the business. We’ll explain what the business is really about and the best way to actually set up shop. We also highlight licenses and permits to ensure your business remains compliant. If you need more guidance, the experts at 3E Accounting United Kingdom will be happy to assist.
What is a Builders’ Merchant Business?
A dictionary definition of ‘merchant’ indicates a person who buys, sells, or trades commodities for a profit. A merchant can be a wholesaler or a retail business owner, storing goods and offering related professional services. A builders’ merchant will focus on the trade of products specific to the building, construction, or do-it-yourself (DIY) industry. They cater not only to construction outfits but also to DIY homeowners, self-builders, etc.
There may be some confusion between a builders’ merchant and its similarity to hardware stores. In the UK, hardware stores – also known as ironmongers or DIY stores – tend to stock general necessities and homewares. The primary focus of their business is unlike builders’ merchants, i.e., trade and supply for the construction industry.
You can pick up products as diverse as timber to complete kitchens and gardening kits at a builders’ merchant. They also provide professional advice on materials or tools, while some may recommend local experts for a job. A well-managed builders’ merchant can act as a nexus for local communities, creating jobs and strong local networks.
Guidelines on Starting a Builders’ Merchant Business in the United Kingdom
A builders’ merchant is a business like any other in that it should start with a well-written business plan. As you do your due diligence, you’ll also know how much to budget for your new business. This is crucial as builders’ merchants tend to have big physical stores and carry a fair bit of inventory. You should also have good relationships with suppliers and wholesalers to ensure that your supply chain is stable.
Deciding on the best business entity for your company can be a bit bewildering, especially for the budding entrepreneur. Therefore, it’s advisable to do some research and learn about the pros and cons of each type. For a one-stop information jackpot, 3E Accounting’s guide to company registration is a great place to start. Our guide is an informative read that explains all you need to know in detail.
In a nutshell, you can set up fast, easy, and cost-effectively as a sole proprietorship or partnership. Alternatively, you can incorporate with Companies House as a limited company or limited liability partnership (LLP). Incorporation creates a separate legal identity for your company, offering more protection in the form of limited liability. The following steps would be registering with HMRC for tax and VAT and opening a bank account.
You’ll also need to get really good insurance cover such as employer’s liability, public or product insurance, etc. Liability claims can be expensive, and decent insurance coverage can offer vital protection. Associations such as BMF usually recommend insurance providers that specialize in putting together packages for the merchanting sector.
Requirements for Starting a Builders’ Merchant Business in the United Kingdom
Most builders’ merchants usually have relatively large physical stores and warehouses for products and inventory. While buying online is widespread, don’t dismiss the lure of a well-laid out builders’ merchant store. Most customers prefer to look at and handle products on display and explore varieties on offer. Having their queries answered by trained and friendly staff is also something that people actively seek out.
Creating a space that customers feel comfortable shopping in is as important as the product range and pricing. By ensuring your customers have a memorable brand and shopping experience, you’ll be driving sales and repetitive purchases. You’ll also be establishing a great brand image. A clean, well-organized, and brightly lit store with trained staff can tip the scales towards a more profitable outcome.
Regardless of company size, investing in reliable software is crucial when starting a builders’ merchant business. Proper software will enable flexible and multiple solutions for both the business and its customers. Aside from facilitating secure e-payment gateways, you can drive online sales with click-and-collect services, customer loyalty programs, etc.
Builders’ merchant software also automates essentials such as inventory and stocks and provides sales data analysis. In addition, it can streamline your back-office system and ensure real-time data access with an integrated POS system.
Approvals for a Builders’ Merchant Business in the United Kingdom
Most businesses in the UK do not need a specific license to trade. However, there are some activities that do require a permit but may not be readily apparent. Here’s a non-exhaustive list of some of the permits and licenses you may need:
- Registration with the Information Commissioner’s Office (ICO) if you record or store clients’ personal data.
- Approval from the Financial Conduct Authority (FCA) to offer in-store finance or credit terms.
- A goods vehicle operator’s license, depending on the tonnage of goods, from the local Traffic Commissioner’s office.
- Music or content streaming on your business premises needs a Music license.
- Permits to display a signboard or items on the sidewalk outside your business premises from the local area authorities.
Another area that requires strict adherence and compliance revolve around the goods and products for retail. As a retailer and business owner, the onus is on you to follow all regulations. These include:
- Ensuring products are defect-free, safely stored, and meet safety regulations.
- Maintaining timber and timber product records for at least five years.
- Restrictions on selling knives, intoxicative substances, etc., to those under 18 years of age.
- Being aware of special regulations for substances, regulated or otherwise, with the potential to be used to make explosives.
For further reading, check out the Trading Standards Business Companion website. It’s got the seal of approval from the Department for Business, Energy, and Industrial Strategy and offers handy guidelines. Alternatively, you can engage a UK corporate service provider such as 3E Accounting United Kingdom. We can help ensure your business stays compliant with the proper approvals in place before you start trading.
How to Grow Your Builders’ Merchant Business
The construction and building industries are pretty mature, but a few key megatrends are transforming the market. Primarily, there is a growing demand for low-carbon, energy-efficient products and technology, and modular construction trends. Hence, market segments such as green insulation and building materials, prefabrication, multi-family homes, etc., are picking up.
In an e-commerce driven arena, it is necessary to innovate and pivot to grow your business. Implementing next-generation methodologies and digitalizing go-to-market strategies is a good place to start. Digitalizing sales and distribution is essential and can be done with data analytics software, etc. Leveraging on strong social media presence and having a high-traffic business website is also axiomatic for creating brand awareness.
Another idea is to look for value pockets and target those areas with a plan for ideation and creation. Choosing to focus on a specific segment and specializing in it can be a turning point for builders’ merchants. This is especially so if you transform it into a niche and integrate it as a product platform. Personalizing excellent service, investing in training, and offering product support are fantastic ways to build customer loyalty.
Long-term plans can include strategic mergers and acquisitions – buying, transforming, and building up smaller companies. Creating a chain or opening up franchising possibilities of your business is a great way to productize.
Builders’ merchants provide an essential service and trade for the building and construction community. It’s a great place to get specialist products as well as quality materials at trade prices. Starting a builders’ merchant business is a lot of hard work, but the returns can be gratifying.
The specialists at 3E Accounting United Kingdom can help you get your business started seamlessly. We offer comprehensive and customizable company incorporation services and fully digitalized solutions for all your needs. Contact us today to work with global industry professionals who prioritize your business needs above all.