Steps to start your own business
Starting your own business from scratch is a big investment. Time, money, energy and passion are all needed to be driven into your idea to get it off the ground. Although potentially draining, in every sense of the term, starting your own business can be incredibly rewarding both financially, professionally and personally.
We’ve put together a guide on some of the ways you can start to get your business from your head, to paper and into profit.
Identify your potential market
This is probably the first thing to look at for any budding entrepreneur. Is there a market for what you’re offering? Even if you’ve had some interest in your business from others, you need to do some serious research to see if it can be financially viable. Are there enough potential customers out there who will buy your product or service to make it successful? Finally – why would they use you?
“Why” is the key question that you need to answer. To succeed, you need a USP (Unique Selling Point) to appeal to your customers. Are you the cheapest, the highest quality or the most innovative? Identify what you will offer your customers that they can’t get anywhere else, and then run with it.
Analyse your competition
Keep an eye on what already exists in your target market. Ask yourself what you could improve on with the current situation in your market and how you could set your business apart from the rest.
A great method to do this is by conducting a SWOT analysis to identify Strengths, Weaknesses, Opportunities and Threats. You can look at your own business model and that of your competitors to gain better insight into what your market situation is like. The aspects can be further explained as follows:
- Strengths: characteristics of the business or current project that give it an advantage over your competitors.
- Weaknesses: characteristics that place the business or project at a disadvantage compared to your competition.
- Opportunities: possible opportunities that the project could work to its advantage.
- Threats: elements in the environment that could cause trouble for the business or project including competitor activity.
The important thing to remember is that you need to put this analysis into action. Simply gathering this information will not help unless you act upon it, develop a new strategy or solve possible problems.
Choose to be either a Sole Trader, Partnership or Limited Company
Carrying on from the registration of your company, you’ll have to make your decision based on what type of business you’re going to operate. The structure of your business affects how it is viewed both legally and financially so you’ll want to make the correct choice. The three options are:
- Sole Trader. This doesn’t mean that you have to work solo, but means that you’re considered to be self-employed. You will be personally responsible for the entire business including any debts. This means that if you were to go into negative equity, your personal assets could be seized to cover the costs.
- Partnership. This is similar to the Sole Trader status; however the responsibility of the business will be shared amongst the partners. Each partner must pay tax on their share of the business profits and be equally responsible for debts with personal assets at risk.
- Limited Company. This is set up as an organisation that will run your business. Any debt or profit is linked to the company, so if your business were to fall into negative equity, it will not put your personal assets at risk. Any profit is taxed via Corporation Tax before it can be distributed to directors.
Register your business with companies house
After thinking of a name for your business, check that it’s not already in use by another company. Equally important is not to have a name that is too similar to an existing business, which could leave you open to lawsuits or draw negative publicity and confusion. Registering is easy and can be done online.
Aside from these checks, you’ll want to decide if you wish to be a sole trader, partnership or limited company. These differences affect how your business will be run, their tax status and legal implications. Sole Traders can operate out of a personal bank account, but Partnerships and Limited Companies are not. With these, finances must be kept separate from your personal accounts, so you will need a business bank account for these types of business.
If you’ve got this far, you need to look at where you’ll be based. Do you need an office? Are you working from home? The main area of operation for your business will have to be registered as its address. You can gain tax advantages if you’re working from home too and may be able to claim a proportion of your costs for things like, heating ,electricity, Council Tax, mortgage interest, internet and telephone use.
Write a realistic business plan
Essential to both give yourself direction and to secure finance; you’ll need a viable business plan. Outline your objectives, challenges, projected incomes, costs and target market. Writing these down can help you decide what you need to focus on in order to get your business off the ground.
‘Realistic’ is the operative word here.
When forecasting, it’s wise to stay on the cautious side to gain the trust (and finances) of potential investors. If you’re over optimistic then you’re giving a false representation of your business and leave yourself open to financial vulnerability if sales figures are lower than expected or costs are higher than budgeted.
Research and gather as much relevant information as possible on your market, customers and potential opportunities within the industry that you could exploit. If you can back up your predictions with solid figures you’ll have a business plan that an investor can count on.
Look at sourcing capital
You will need start-up capital to begin trading. Be this in the form of savings, investments or a loan. One of these methods, business banking, is a safe method of getting much needed support from financial experts who will have a vested interest in your success.
Armed with your realistic business plan, you will have a good chance of securing a loan for your new business. Many business banks now offer start-up specific loans and packages that can give a lifeline when your finances are stretched.
In addition to low interest rate loans, there are commercial current accounts for start-ups, which offer interest free overdraft facilities, low cost or free balance transfers and access to expert advisors. Typically these are only offered to businesses that have been operating for less than 12 months but offer up to 18 months of attractive rates and fees.
Take advantage of any free resources available to you
Many free advice services for businesses exist, which can set you in the right direction. The gov.uk website has some extensive guides to help explain different aspects of running a business. Similarly, if you’re opening a business bank account there is often a financial advisor who will be able to assist with building your company from the ground up.
Hopefully this guide will have given you a few technical pointers towards starting your own business and an idea of what facilities are out there that can support you. Make sure to fully research every step of the way to ensure your business doesn’t fall into any of the pitfall traps that can crop up.