How to start a business: 10 steps to becoming a business owner
With the government-backed Start Up Loans scheme (launched in 2012) and an ever-evolving landscape of entrepreneurs, the UK is one of the top places in the world to launch a business. Our cities are amongst the best creative and SME tech hub locations in Europe. But starting a new business venture isn’t easy. There are plenty of stats to suggest that many start-ups fail within the first few years. That means knowing how to start a business correctly is very important.
Here are 10 key steps to setting up a business effectively and with the best chances of success:
1. Research the market
Doing enough research before you launch your business can significantly boost your chances of survival. The questions you should be asking yourself include ‘Who is my customer?’, ‘Who is my competition?’ and ‘What USPs can I offer to stand out from my competition?’.
A study by Ormsby Street reveals that four in ten small businesses don’t succeed within the first five years. Understanding your market before you try to penetrate it really isn’t something that should be ignored. If you can’t get the data on your own, or you’re working on a product needing in-depth analysis, there are plenty of third-party companies who supply research data. Alternatively, you could hire a market research firm depending on your budget and the data that you need. Speak to other business owners either face to face or on forums as well as making sure to read online reviews before you choose one though.
2. Write a business plan
The most important starting point for any business is a business plan. Without it, you won’t be able to secure funding or take out a business loan. It’s fundamental for getting your company off the ground financially, plus it’ll provide a map for the future of your organisation, giving you direction and helping you manage your activities with the right sense of purpose.
There is no one way to write a business plan, however, by committing your plan to paper, you can set out guidelines for yourself or any other members of staff you take on in the future. Below are a few key pointers that you should include in your business plan to ensure you’ve covered the basics. Make sure to include as much information as necessary, without waffling and if you are stuck, research online examples of business plans in your field to give you confidence that you’re on the right track.
- An overview of your business
- An operations plan
- Market research and analysis
- Sales and marketing outline
- Competitive analysis
- Finance plan and projections
3. Review your finances
For anyone who wants to know how to start a business with big growth potential, good financial planning is a must. Most start-ups fail because of limited cash flow, so understanding the money side of things is important to your survival.
Before you launch, review your personal finances to understand how much is needed to fund your idea. Your business plan should have given you a good starting point by now, and you should have a clear view of what’s required to move forward. A lot of small businesses can get by without initial investment and often raise funds by themselves. If you need financial backing, there are a number of options available. These include loans and grants, finding Angel investors, crowdfunding, or business financing.
For insider tips from successful entrepreneurs, see our guide on how to get funding for your start-up.
4. Register your business
Before you register your business, there are two things you’ll need to think about; your business name and business structure. Your name needs to be representative of your products/services and shouldn’t be long or overly complicated.
When it comes to choosing a business structure, you’ll need to familiarise yourself with the pros and cons of being a sole trader vs. a limited company. For example, it is much quicker to set yourself up as a sole trader and although you personally take on any debts incurred by the business, you enjoy a greater amount of privacy than incorporated businesses. Limited companies, on the other hand, are taxed more efficiently and grant you greater legal distinction from your business while you must fulfil Director’s Fiduciary Responsibilities (legal obligations).
The amount of tax you pay, the amount of administrative and regulatory demands there are, and the level of financial exposure can differ depending on structure. No matter how you set up your business, you’ll need to register your business for Self-Assessment (and Companies House for limited companies).
5. Set up a business a bank account
The habit of co-mingling personal and business finances isn’t uncommon, particularly with sole traders first starting out. However, separating company cash from your own bank account is essential if you want good financial management. A business bank account means having to pay additional bank fees and expenses, but it ensures accurate bookkeeping and provides a clean data trail for HMRC. To cut costs, shop around and use a comparison site to find the best deals.
6. Set up your office or workspace
Your workspace is extremely important and must include everything you need to run your business effectively. You should consider this when writing your business plan, to ensure that you can cover any expenses. The cheapest option is to work from home if you’ve got a room that can be turned into an office. You can also find affordable hot desk space or shared offices in your area, by doing a quick search online or asking your local council, to cut down on costs. For businesses that require a bigger setup (for stock, warehousing or production equipment), you’ll need to consider buying or leasing commercial premises prior to launch.
7. Get business advice
There are many places you can get business advice in the UK including ‘Growth Hubs’ in your local area and the Government’s Business Support Helpline (0300 456 3565). Talking to an expert can be beneficial, as they’ll know the ins and outs of how to start a small business, how to manage it effectively, plus any regulatory requirements that you may need to comply with.
8. Create a bookkeeping system
Good bookkeeping is key! Whether you choose to hire an accountant or decide to submit your own tax returns, having an accounting system is an essential part of running a business successfully. Spreadsheets are a cost-effective way of doing your accounts, or there are also accounting software products on the market that can help you stay organised. It all depends on your needs, the complexities of your finances, and your budget as to what might be best.
9. Build a website
These days, having your own company website is vital to business survival. No matter what your services are or what industry you are entering into, having a website is the best way of getting noticed. For those who want to know how to start an online business, a website is the first step.
More than 3 billion people worldwide are now online, and with mobiles, tablets and IoT devices taking over communications, accessing the internet is easier than ever. Paying for website design and development is a worthwhile investment, but many start-ups can also create their own basic sites using Wordpress or other easy-to-use website builders such as Wix and Squarespace.
10. Have a marketing startegy
So, you’ve got everything set up. What next? Your next step is to create a marketing strategy (something you will have touched upon in your business plan). This will give you the tools and knowledge to promote your products/services to your target audience. There’s no denying that marketing costs time and money, but it’s not impossible to market your business with a tiny budget. Start-ups do it all the time, and with today’s world of social media and content marketing opportunities, there are many things you can do for free.
Some of the fundamental things to look into that will aid your marketing strategy are:
- How to make your website search engine friendly
- How to set up a Facebook business page/Twitter profile, if appropriate to your business
- How to create a brand identity that works online and offline
- How to leverage the right advertising channels
- How to grow your network effectively