So how do you get off to a flying start and avoid running into problems? Our handy checklist shows you how to start a business and help steer you on the path to success. Here are our seven steps for success:
- Step 1: Research the market and your competition
- Step 2: Write a business plan and choose your business name
- Step 3: Register your business
- Step 4: Finance your business
- Step 5: Build your business brand
- Step 6: Build a successful business behind the scenes
- Step 7: Launch your business
Step 1: Research the market and your competition
Some people dream of turning their passion into a full-time or side business, such as becoming a yoga teacher, a dog walker, or selling handmade clothing and crafts. For others, it’s more about being your own boss, starting a business from home, achieving the lifestyle you want, starting an online business or switching to a new career. Whatever your motivation for starting a business, it’s essential to research the market.
Will your business idea answer a genuine customer need and desire? Without that, you don’t have a market or a mission. Is the market likely to grow and develop? Is there a gap in the market or room to develop a unique selling point (USP) that your competitors don’t have? Are you in the right location or can you reach new customers online?
Once you’ve identified an audience for your business, you can start thinking about your product or service and how to deliver it. Depending on the sector, your customers may expect a hybrid experience, with the ability to connect with you via multiple channels. For a yoga teacher, that could mean running classes both face-to-face and online. Remember that while price is important, today’s consumers are also looking for added value, including products and services that are environmentally and socially responsible.
Focusing on delivery is also a good way to spot how you can increase revenue and reduce costs. For a social media manager, that could include using your skills by publishing and selling online guides, as well as managing customers’ social media accounts.
This is the time to get expert advice and there are many government-backed support schemes available for start-ups. Working with business professionals and experienced entrepreneurs in your sector now will help you avoid many common pitfalls and help you research and test your idea. Especially if you’re moving into a sector that’s new to you.
Step 2: Write a business plan and choose your business name
Writing a business plan will help you to define and develop your business idea, including your mission and your USP. It also sets out your objectives and strategies for reaching customers, selling your products and services, forecasting revenue and costs, and developing future growth.
Your mission and USP will underpin everything you do, so it’s important to define them clearly. Thinking through how your business idea will work in practice will also help you to identify and iron out any issues early on.
Exploring the ‘what’, ‘who’, ‘how’, and ‘why’ behind your business idea is a good way to develop the right name for your enterprise. Your name should reflect your mission and your USP as it will stand at the centre of your brand identity.
There are a range of free and low-cost marketing tools you can use to experiment and see how your name works as part of a logo, or across different marketing materials. Does it sound, look and feel right? Does it differentiate you from your competitors? Will it resonate with your customers? Will it stand the test of time and grow with your business?
Step 3: Register your business
Once you have a company name, you can decide on the structure of your business, which will be important for legal and tax purposes. We recommend you speak to an accountant and/or a solicitor, to get detailed, personalised advice on the options we’ve outlined below.
Sole trader
As a sole trader, you run your own business as an individual and are self-employed. You keep the profit your business makes after paying tax. However, you’re also personally responsible for any losses your business makes.
Running a business as a sole trader is simpler than setting up as a limited company and it’s a popular option for many small business owners including freelancers and tradespeople.
You’ll need to register the company with HMRC and file an annual Self Assessment Tax Return. If your turnover is over the VAT registration threshold1, you’ll also need to pay VAT. National Insurance2 is also something that you’ll need to investigate.
Partnership
As a partnership, you and your partner(s) share personal responsibility for your business including any losses. Together, you share the costs and profits, with each partner paying tax on their share. A partner can be a ‘legal person’ such as a limited company, as well as an actual person.
It’s simple to set up a partnership, you just need to register with HMRC. You’ll need to choose a business name and a ‘nominated partner’ who’ll be responsible for submitting the new company’s tax returns and keeping business records ongoing.
A partnership is a good way to share the responsibility of setting up a new business, but it could make things more complex further down the line, especially if you need to shut the business and if you no longer see eye-to-eye with your partner(s).
Limited company
As a private limited company, your personal and business finances are kept separate. This means you can run a business without any risk to your personal wealth or assets, as liabilities including debts and legal action are limited to the company.
You may also pay less tax. Limited companies pay corporation tax on profits, which could be less than the income tax paid by sole traders and partnerships.
Being a limited company could make you more attractive to potential customers, especially in B2B sectors where you may be tendering and competing for contracts, and to investors. However, setting up as a limited company is more complex compared to registering as a sole trader or partnership.
In the UK, private limited companies can be limited by shares, or by guarantee. Companies limited by shares are set up with share capital, with each share representing a percentage of the company. Shares are divided between one or more shareholders. Companies limited by guarantee are set up without share capital and are owned by one or more guarantors. Each guarantor agrees to pay a set amount towards any debts if the company becomes insolvent.
You can set up a limited company as an individual and be the sole shareholder or guarantor, as well as the company director; or appoint multiple shareholders/guarantors and directors. Either way, you will need to register with Companies House and prepare documents agreeing how to run your company. You’ll also need to keep company and accounting records and have an official company address.
If you’re going into business with someone else, a Limited Liability Partnership (LLP) combines the protection of a private limited company with the shared responsibilities of a partnership.
Step 4: Finance your business
How much does it cost to start a business? This can vary hugely and there are many ways to finance a new business. Here’s some of the options that may be available to you.
Start-up grants and loans
There is a wide range of funding available for small businesses in the UK, including start-up grants and loans. It’s well worth taking the time to explore the help available. You’ll find that many grants and loans are aimed at achieving specific objectives, such as supporting young entrepreneurs, saving the high street, or driving innovation and sustainability. For example, you could get funding towards investing in an electric van, or to work on social projects designed to support local communities.
Many banks and building societies also offer small business loans, including the British Business Bank. Before applying, use a business loan calculator to work out exactly how much you’ll pay back with interest each month. Building a good business credit score can help you to access better interest rates. This takes time, however, tools like Experian My Business Profile not only allow you to see your business credit score, but also show the factors affecting your score, so you can take steps to improve it.
Check and improve your business credit score
Being denied company credit can be bad news for your business, especially if you need finance to grow. With My Business Profile, you get full visibility of your business credit profile, enabling you to understand what’s affecting your company credit score.
Find out more
Crowdfunding and peer-to-peer lending
There are a growing number of alternative funding and finance options for small businesses in the UK. You could raise funds through an online crowdfunding campaign, by inviting a large number of people to invest a small amount of money. Or alternatively, borrow money through a peer-to-peer lending platform rather than go to a bank or building society.
Asset finance
Asset finance is another popular option for a startup as it enables you to finance the assets you need to get started, such as machinery or vehicles, without having to invest upfront.
Investors
If you’re looking for significant investment, attracting angel investors and venture capitalists could be an option. Investors are likely to bring expertise and experience to your business, but they may expect a lot in return. Such as a say in your business or a guaranteed return on investment.
Financial management
One of the best ways of financing a startup in the longer term is through careful and robust financial management. It’s important to choose the right business bank account for your needs and develop a good relationship with your bank. You’ll also need to think about things like small business insurance and setting up a merchant account for electronic payments.
Investing some time in learning about the financial side of your business will put you in good stead to succeed. From increasing revenue and reducing costs, to meeting compliance with your financial responsibilities as a small business owner. Something as simple as knowing what business expenses you can offset against tax will help you save. As well as using the services of an accountant, there are a range of online business tools you can use to manage your finances, including accounting software.
Step 5: Build your business brand
Your brand goes beyond what your business does. It communicates ‘who’ your business is and what you stand for – to stakeholders including customers, investors, suppliers, partners and employees.
An effective brand starts with a clear mission and USP. From there, you can start thinking about how your brand should look (your visual identity) and sound (your tone of voice). You could work with a graphic designer to develop your brand, or access free online tools to create elements such as your logo.
Once you have a logo and you’ve chosen your brand colours and fonts, you can start creating marketing materials including your website, social media, and email marketing campaigns. You’ll find online tools to help you if your budget doesn’t stretch to hiring a professional, including drag and drop website builders and content writing tools.
As a small business entrepreneur, you can capitalise on the trend towards meaning and authenticity by sharing your unique personal story, aligned to your customers’ needs. This will ensure your brand feels honest, fresh and relevant and will help you connect with your customers. Remember, people do business with people they know, trust and like.
Step 6: Build a successful business behind the scenes
To build a successful business, you’ll need to deliver a seamless, consistent customer experience, often across multiple channels. Start by mapping out the customer journey to understand what you will need to do. This will help you to think about everything from marketing and communications, to how you will provide your products and services.
It will also help you to identify the elements you’ll need behind the scenes, such as equipment, technology and services provided by third parties, like couriers for an online clothing business.
This is also the time to research the external factors that could affect your business, including the general and sector-specific regulations and legislation you will need to comply with, both voluntarily and by law. Remember that regulations and legislation can vary depending on the countries you’re operating in.
There are a wealth of free and low-cost business tools you can use to support your business processes including project management platforms and Customer Relationship Management (CRM) systems. Getting your internal processes right from the start will help you fulfil your brand promises and encourage your customers to spread the word about your business.
It could also help you to increase revenue and save costs. For instance, using a CRM system will help you keep track of your interactions with customers and market to them more effectively with personalised offers and communications. It’s important to ensure the data you have in your CRM is up-to-date. Business data ages quickly as people change jobs and companies, so if you’re marketing to businesses, staying on top of the data will help keep you in contact with your customers. With our up-to-date business marketing data, we can help you to enhance your B2B marketing lists.
Building a great workplace and an internal brand based on your values will also help you to attract and retain great employees, now and in the future. Thinking ahead with contingency and continuity planning will help you stay agile and safeguard your business against risks such as fraud and cyber-attacks.
Step 7: Launch your business
Depending on your business plan, you may want to launch with a big splash or build things up more slowly. Either way, remember that word of mouth is one of the most effective ways to promote yourself. Connect with your customers on social media and keep the conversation going by sharing relevant and engaging content. That could mean sharing photos of your latest creation, behind the scenes videos, or in-depth guides for a taster of what you can do for your customers.
Keep focused on delivering a great customer experience and you will be much more likely to attract and retain a loyal following and encourage repeat business.
Don’t forget to look after your own health and wellbeing. Running a startup can be stressful as well as rewarding. Taking time out to relax and reenergise is essential, to make sure you don’t burn out. There is plenty of support for small businesses out there, so reach out and get help.
How can we help you?
We provide tools and solutions to help small businesses make better decisions about their suppliers and customers, understand and manage their own business credit score, and improve their marketing with market leading business data tools:
- Experian Business Express allows you to run credit checks and monitor any company you work with, so you can spot signs of trouble early on and make informed decisions. Financial problems, like County Court Judgments (CCJs) and bankruptcy, are flagged, which means you’re able to set credit limits, ask for upfront payment or even not work with those who pose a risk.
- With My Business Profile, you get full visibility of your business credit profile, enabling you to understand what’s affecting your company credit score and preventing you from being able to obtain that all important company finance.
- BusinessView helps you find new customers fast. Your small business marketing relies on up-to-date business marketing data. Knowing that your data is segmented and targeted to your most profitable business prospects means you can lower your marketing costs and conduct your sales campaigns with confidence. You can also assess the accuracy of your business customer data with a no obligation free report.
Sources
[1] Register for VAT, Gov.uk
[2] National Insurance: How much you pay, Gov.uk
