For many, starting your own business can be a daunting task, but this guide should provide you with all the necessary information you require. With this setup plan, you should feel ready to get started with your business idea tomorrow! The guide contains six main points on how to start your own business, from market research to financing the business.
1. Do the Market Research
The first step on the road to a successful business is knowing your market and knowing your customers. Carrying out a mixture of desk and field research is vital to gain a good grasp of what your potential customers are looking for. This will vary depending on each business, and its product and service offering. Any data collected will ultimately shape your business, from pricing to the target market. Some questions you need to ask yourself are:
- Is there room for you in the market? You need to consider what you’re offering and if you will be able to attract customers from the competition. Is there too much competition in the local area? If you want to open a hair salon, there may already be two or three on the same street.
- What is the unique selling point of your product/service offering? What will make your company stand out from the crowd? Will your business be able to compete, in terms of having its own niche?
- Who is your competition? It’s a great idea to have a look at the competition and think about what they are doing well. What makes them a good competitor? Are there any areas they could improve in? Answering these questions in the mind of competitors will provide valuable insight into what a successful business looks like.
2. Make a Business Plan
A business plan is vital to any business. A good business plan can attract investors, which will enable the company to succeed. To put together a fantastic business plan, follow these steps:
- Make sure to use all the market research data you have gathered and have solid data to back up your business idea. This will make it clear what you are selling, to who, and what exactly your unique selling point is. Remember your plan needs to reflect what a success you believe your business will be and it’s important to persuade investors to believe in your idea, too.
- Long-term objectives will show investors about realistic opportunities and growth that the business will experience. Including small milestones, which are achievable in the short-term future would also be a great idea. By highlighting these, you are showing real goals for progression and growth.
3. Choose the Best Legal Structure
This is necessary when starting your business. There are various options available, dependent on what will suit your business needs. For more information on this topic, check out our guide on company structures here. Legal structures enable you to share financial responsibility or take sole responsibility yourself. The following three structures have different tax issues as well as business liability. Most businesses go for the options below:
- Sole Trader – This is perhaps the simplest option in terms of setting up your business, however, the whole business is your responsibility including any debts. As a sole trader, you will be self-employed. This means that all profits will be yours, but on the other hand, any losses will affect your personal finances.
- Partnership – The partnership structure is an extension of the sole trader model. A partnership is when two or more people decide to start a business together. This means the business responsibility and profits are shared. All partners have to pay tax on their share of the business and also share the responsibility for any debts the business may come into.
- Limited Company – Choosing the limited company structure, means you will have less pressure on personal finances. By opting for this model, your personal assets will be safe if the business does not work out as planned. However, there is more paperwork to complete with this structure and you will need to decide how to get paid. In terms of getting paid, there a few options, such as a salary, dividends, or directors’ loan. The appropriate paperwork must be completed to accompany the most suitable payment method. A limited company accountant can help with all this.
4. Building the Right Company Image
Creating the right brand image for your company is one of the most important steps in starting your business. Image and brand are vital when it comes to attracting the right clientele. In order to create a good brand image, you will need to know your customers, how to resonate with them, and understand their wants and needs. Look at your brand as a character and make sure it is everything your business embodies. Choosing the right name and logo for the company is an important part of this. Make the name short, easy to spell, and memorable. When it comes to your logo, pick something that represents your business, but is also unique and memorable.
5. Finance Your Business
There are various different choices when you are deciding how to find the funds for your business. To discover more on how to fund a small business, take a look at our previous article here. First of all, you can set up your business using personal funds and this is sometimes the only option for many business starters. Financing the business yourself does offer some independence, however, there is also a big risk of losing your money if things don’t go to plan. Other options include:
- Friends and Family - you could ask friends and families for a loan. Although, there is the risk that this could affect personal relations.
- Bank Loans – just like most other parts of starting your business, this requires a lot of research. You need to know what you are looking for, and what kind of loan you want. Selling your idea and getting a loan from the bank can be a difficult task, and many will be rejected several times. However, there is the chance, if you pitch your business well, that you will succeed and get the loan you need.
- Apply For a Start-Up – these are government-backed loans that range from £5,000 to £25,000 and are charged at a fixed rate of 6% per year. Successful candidates even receive mentoring and help with their business plans, which can be beneficial.
- Angel Investing – This is when angel investors will provide investment in exchange for a share of your business. The main benefit of using an angel investor is the investment money coming in. Also, if the investor loses money, this will not affect your personal finances.
6. Be Legally Smart
When setting up your own business, you need to be legally smart. You need to research all the legal requirements, regulations, tax information, and any other laws that may affect your business.
- Tax Law – There are five different tax laws that you need to know about: Income tax, national insurance, corporation tax, VAT, and business rates. If you want to learn more about corporation tax, then head over to our guide on this topic. You will need to make sure that you keep up to date with tax rates, as they change annually.
- Intellectual Property Law- Investors will always ask if you have acquired the necessary patents or trademarks for the product you are selling. If you are starting a new business and have a unique product, then it is important to protect it. Looking into intellectual property law will protect you from any risks in this regard.
- Employment Regulations – When you start employing members of staff, you need to be aware of employment regulations. We have put together a handy checklist on employing staff, so please take a look if that interests you. You need to understand the responsibilities you have as an employer and create a professional relationship between yourself and your staff. Some employment laws include providing your staff with a payslip and giving statutory pay to your employees on the fourth day of illness.
- Small Business Insurance – As a business owner, there are a variety of different insurances available to you. All employers need to have employer’s liability insurance, and this is a legal requirement. You could also choose to have professional indemnity insurance, public, and product liability insurance, building, and content insurance.
And that’s about it! If you follow these six steps, then that will give you a great start on your journey as an entrepreneur. We wish you the best of luck on this adventure!
If you’re interested in setting up a part-time business, then check out our guide here.
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