Every year thousands of people start their own businesses in the UK. To be more precise, according to gov.uk statistics, between 500,000 – 700,000 new businesses are launched each year. So does that mean that you can start a business quickly and easily?
On one hand, yes. It takes only a few minutes to register your business and, technically, you are set up and ready to go! On the other hand, if you want to make sure you start a business that has the potential to succeed and doesn’t fail in the first few years, it takes more time and a lot more work and preparation.
These are the nine steps that will help you start a successful business!
1. Make sure you’re legally allowed to start a business
If you’re from UK or a country that is a part of EU or EEA, you don’t need any special permission to start a business in the UK (the only exception is residents of Bulgaria and Romania). Although the UK has now withdrawn from the EU, the rules stay the same, however, they might change in the future.
2. Research and test your idea
Before starting a business, you need to know that it has the potential to grow and be successful.
The first thing you need to do is identify your ideal customer. Understanding who needs products or services you offer will help you come up with appropriate marketing and sales techniques, so you give your customer what they want instead of what you think they want.
When researching your target audience, you need to identify basic characteristics such as age, gender and location as well as their socioeconomic status and psychographics.
Then you need to analyse your competition. No matter what business idea you have, you’ll always have competition. Even if you have a completely unique idea, you’ll have indirect competitors that sell different products or services but still serve the same customer needs. Once you identify your competitors and things like their prices, marketing strategies and strengths and weaknesses, you can then come up with your unique selling point and even learn from the mistakes without making them yourself!
When you know your target audience, it’s time to test your idea with real people! Find a small group of people that match your ideal customer and speak to them about your business idea. You can use online surveys, focus groups or even face to face interviews. Find out what they like and dislike about your idea as well as their shopping habits. This will help you understand what changes you need to make and how to actually reach your audience.
3. Create your branding
When just starting up, the most important bits are your business name and logo. These are the first things your customers will notice about you. That’s why you need to make sure they are memorable and make you stand out.
When it comes to choosing your name, try to go for something short, simple, easy to pronounce and something that represents what you do. When creating a logo, forget about trends. Create something timeless, appropriate to your audience and, again, memorable and simple. People remember visual information better than written, so even if they don’t remember your name after hearing it once, make sure they remember your logo!
4. Write a business plan
A business plan is an essential document that helps turn an idea into an actual business. It guides you through every stage of setting up and running as it outlines what actions you need to take in order to successfully launch and grow your business.
A business plan also helps you secure funding. Most times investors or banks want to see a well-researched detailed business plan before investing. It helps them understand how you operate your business and what your cash flow predictions look like, so they know whether they will receive a return on their investment.
A lot of business owners think that a business plan is something you write once and never get back to. However, it’s a live document that needs to be reviewed and updated regularly. As your business grows, you might add a new revenue stream or change your objectives. This should be reflected in your business plan.
When writing a business plan, you need to include things such as an executive summary, a description of your business and any products or services you offer, market analysis and financial projections.
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5. Choose your structure and register your business
To start a business, you need to register with HMRC and Companies House if you’re a Limited Company. When registering your business, you need to choose a legal structure that fits your business. These are the options:
If you’re a sole trader, you own and run a business on your own and you keep all the profit after tax. It’s a popular business structure for people such as photographers or hairdressers. If you set up as a sole trader, it’s easier to operate your business as you have fewer regulations and filling duties. On the other hand, the owner of the business has unlimited liability to all debts and legal actions.
A limited company can be set up by a single person who will be both a shareholder and director or by multiple shareholders. Benefits of setting up a limited company include:
- Liabilities such as debts or legal action are limited to the company, which means that if the business fails, you’re protected from going personally bankrupt.
- Corporation tax on profits is lower than the ones sole traders have to pay
- If you ever decide to sell your business, it’s easier to do it
- If you want to employ staff, you can pay salaries via the Pay As You Earn scheme
Every year a limited company must put together statutory accounts and send an annual return to Companies House and a Company Tax Return to HMRC. You also must comply with statutory rules and disclose information to the public.
A partnership means that there are two or more people owning and running a business together. You must register all the partners with HMRC. However, a partner doesn’t have to be a person – a limited company also counts as a partner. In the partnership, partners share the business’s profits, and each partner pays tax on their share.
In the same way as sole traders, the partners have unlimited liability and are responsible personally for the partnership debt.
6. Check if there are any additional rules or regulations for your type of business
Depending on the business you run, there might be some additional rules and regulations you need to follow. For example, if you want to open a convenience store and sell alcohol, you’ll need a special licence and if you want to start a mobile takeaway, you’ll need permission to park anywhere you go.
You also need to make sure you get the right insurance for your business.
7. Work out your costs and source funding
Many entrepreneurs misjudge how much money they need to start their business. If you spend more than you budgeted and don’t make a profit straight away, you might not be able to afford your business essentials such as rent or supplies. If you underspend, you might be taking away the opportunity to succeed. Being able to save money is a great skill to have. However, sometimes you need to invest more to give your business a realistic chance and get a return on that investment.
Once you have a business plan in place, you’ll have a better understanding of how much money you need to start and run before making income. Then you can think of the ways to fund your business. Think if you can self-fund it, need to get a startup loan or find some investors.
8. Choose where you’ll work
Paying for business premises can be very expensive, especially when you’re just starting up. If you have a chance, consider working from home.
However, if you’re renting, running a business from the property might be prohibited under the terms of your tenancy agreement. Even if it’s not mentioned, you still need to get permission from your landlord. And if you have a mortgage, you might need to get permission from your mortgage provider.
Running a business from home might also affect your tax. If you dedicate a part of your home exclusively for business purposes, you will need to pay business rates on that part of the property. Also, if you ever decide to sell it you’ll have to pay capital gains tax on that part.
If you need to rent a commercial property, consider things such as location (is it easy to get to for you, your employees and customers?) and costs (can you afford to pay rent and other bills?).
Nevertheless, whether you work from home or from commercial property, you need to be aware of business rates. Read more about it here.
9. Find business support
While we left it as the last step, there’s no one right time to find the support you need and you should never be ashamed if you need help at the very beginning!
Starting a business can be a difficult journey… when you go on it alone! Getting advice from someone who has already been through all of the highs and lows of starting a business can help you set up for success. With years of experience and the right knowledge, a business advisor can guide and support you at every stage of your journey.
Business advisors also have a lot of connections. If you need help from an expert (e.g. help with creating your marketing materials or even getting a business loan), they can point you in the right direction. They can also help you expand your own network by introducing you to other professionals or letting you know about the industry-specific workshops or networking events.
If you decide you’d like to work with a business advisor, you don’t have to look far! We have a team of experienced professionals who have helped hundreds of people to start and succeed. And they’re ready to help you now!