Starting up a new business can be as daunting as it is exciting. With so much to consider and to do to turn your vision into reality, it pays to plan well to give your new business the best chance of success.
What’s the big idea?
Running your own business can bring many benefits:
- Achieving wealth or financial security on your terms
- Being your own boss
- Making a positive difference in the world
- The ability to feel powerful, respected and in control
- Making a personal passion the focus of your job (e.g. travelling, baking, jewellery design)
But it’s also hard work, demanding commitment, passion and drive from you to make it a success, as well of course as time, money and the skills needed to take your idea to market.
It all starts with the business idea. While being passionate and believing in your idea will undoubtedly be a critical success factor, it’s also important to take a step and look beyond your subjective position when deciding to commit to your
You may have an idea in mind, but you will need to look beyond your own thoughts and understand who would buy it, how much they would pay and whether there is anything already like it available in the market. These are all huge considerations requiring research, planning and
How to start a business: step-by-step
Whether your goal is to open a profitable florist or conquer the financial services industry, the steps below will help you iron out a strategy and move forward with confidence.
- Expand on your business idea
- Assess your situation – is starting a business viable?
- Research competitors and customers
- Write a business plan
- Arrange business finances
- Choose an appropriate business structure and register your business
- Seek business advice
This is the basic ‘how to start a business’ checklist. Below, we discuss the key considerations for each individual step.
Expanding on your business idea
The first step in starting a business should be to fully explore your chosen business idea. This will involve checking out competitors and identifying your target market. Today, most businesses have a significant online presence, so this is something you must consider. If your product or service can be sold online, your initial commitment will be less, and you will be better able to reach your customers.
When mapping out your business idea, keep drawing the focus back to what it is you are offering and how this compares to similar products or services already available. Consider what it is about your business that will encourage your customers to choose you over competing brands. The following two questions can provide a good anchor for this analysis:
- What problem does your product or service solve?
- How do you achieve this better than your competitors? (e.g. better technology, superior customer service, or cheaper price)The answers to these questions will shape your proposition and brand identity as sustainable foundations for your business’ success.
Assess the viability of your business
In considering how to set up a business, you must dedicate some time to assessing the impact that doing so will have on your life. The business idea may look watertight on paper, but that does not guarantee that you will have the means or wherewithal to follow it through.
All new business owners must consider whether they have the time, financial means, and expertise to follow through on their plan. Setting up an online cupcake business is only a good idea if you have the time to commit to it, and if you know how to bake cupcakes. Identifying problems at this stage makes it easier to work around them.
Research competitors and customers
You should already have a rough idea of who your main competitors and intended customers are, but now it is time to delve a little deeper with the research. When it comes to understanding your target market and the industry you are entering, methodical research is essential.
When researching customers, consider:
- Using focus groups or anonymous surveys to gain a wide variety of unbiased responses
- Typical age, gender, and income level
- What people expect to pay for a product such as yours
- What they like/do not like about similar businesses they have previously encountered
When researching competitors, consider:
- How much they charge for their products or services
- Going through the purchase process and testing out competing products, to see how you feel you may improve
- How would you rate their customer service?
- Is there something you could offer, which they do not?
With the information gained from this research, you can create a tailored business plan to help you achieve your goals.
Write your business plan
This is the step that most people jump to when figuring out how to start a business. Keep in mind that you should only begin structuring your business plan when you have a fully formed business idea and a detailed picture of the industry you are entering. Based on the results of your market research, create a business plan for the first five years of operations, which includes the following:
- Complete predicted costs (production, advertising, wages, equipment, stock)
- How much you will charge for your product
- How many customers you will need to grow the business
- Your predicted monthly and yearly profits
- An overview of the current market
- A mission statement describing your proposition
Business plans need not be rigid, though you do want to get your plan as accurate as possible from the very beginning. Keep in mind that you will need a detailed and airtight business plan if you choose to apply for a loan to finance your start-up.
Plan your business finances
Your business plan should give you a good idea of initial start-up costs and what it will cost to keep the business running month by month. You may need to consider funding or finance options to help you access all of the assets and support you need to get your business up and running. There are a wide variety of start-up business finance options available, which include:
- A government backed start-up loan of between £500 to £25,000
- Issuing shares
- A local authority start-up grant or loan
- A start-up loan from a bank or online lender
- Using your own savings
- Borrowing from family or friends
If you are borrowing money to finance your new business, make sure you borrow the minimum amount required to cover essential costs. In addition, factor the repayments into your business plan to ensure you will be able to afford them.
Choose a structure and register your business
Entrepreneurs who are working out how to start a business are frequently intimidated by this step; when you are new to working for yourself, deciding what type of business you should register as can be a bit of a minefield. Here is a short break down of the options available to you:
- Sole trader – This is usually the simplest and most affordable way to set up a small business. Self employment is a model which works well for businesses who use the ‘cash basis’ for tracking income and expenditure (i.e. sales and expenses are only recorded when money has changed hands, physically or otherwise).
- A partnership – This structure works well for business owners who are partnering with people they know well, such as friends or siblings.
- A limited liability partnership – This structure works much like a standard business partnership, yet business owners will only be liable for debts up to the amount they personally invest in the company.
- A limited company – In a limited company, the business and its owners are separate entities (the opposite is true of sole traders). While managing limited company accounts is complex, they are generally more tax efficient than sole traders.
Limited company owners must register their business with Companies House and will be required to submit annual accounts. More information on how to register a limited company can be found on the Companies House website. Sole traders must register themselves as such with HM Revenue and Customs (HMRC) as soon as possible, once trading has commenced.
Seek business advice
Gathering sound business advice is one of the smartest things you can do to ensure your new venture is successful. There are a huge variety of free business advice services at your disposal, many of which can be tailored to suit your business. New businesses who use government-backed start-up loans will be entitled to free guidance and planning advice, as part of their agreement. New business owners are bound to encounter pitfalls and obstacles they have not considered, no matter how carefully they plan. Seeking advice from professional business mentors will help you to avoid any unexpected setbacks.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute tax, financial or legal advice, nor is it a complete or authoritative statement of the rules and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert tax, financial, legal or other advice should be sought.