Connor Campbell
What’s inside
- Starting a business: your 8-point checklist
- Step 1: Examine your situation
- Step 2: Come up with a great business idea
- Step 3: Carry out market research and test your idea
- Step 4: Write your business plan
- Step 5: Assess your finances
- Step 6: Register your business
- Step 7: Set up your business
- Step 8: Promote your business
- What happens next?
Through good times and bad, the UK’s entrepreneurial spirit is unwavering. That drive has led small and medium-sized enterprises (SMEs) to become the nation’s business backbone – so much so that they account for 99.9% of the country’s total business population, and make up over 60% of the country’s employment.
These figures are bolstered by the 753,168 new businesses that were registered across 2021/22, despite the stresses of the Covid-19 pandemic, rising inflation, surging energy prices and the cost of living crisis.
To many, the thought of joining the ranks of the nation’s entrepreneurs can feel as daunting as it is exciting. That’s why we have put together a guide on how to start your own business – from assessing your strengths and weaknesses to getting your brand out there.
By following these eight steps, you can get your new business off to the best start possible, and hopefully secure a long-term future in your chosen industry.
Starting a business: your 8-point checklist
- Do you know your own strengths and weaknesses?
- Have you analysed your business idea?
- Have you carried out thorough market research?
- Have you written a detailed business plan?
- Do you know how you will finance your business?
- Have you chosen a business structure and registered your business?
- Have you set up everything you need to run your business legally and effectively?
- Do you know how you will market and promote your business?
Step 1: Examine your situation
As an entrepreneur, you are at the heart of your business. It’s likely that, as time passes, you will become your business.
That is why it is so important to examine both your personal and professional situation before starting a business.
You should ask yourself:
- Why do you want to start a business?
- What are you passionate about and how can you harness that for your business?
- What are your personal and professional strengths that you can utilise to your advantage?
- What are your main weaknesses and how will you address them when starting a business?
- How much time do you have to dedicate to starting a business?
- Do you have the financial resources or will you be able to access the financial resources required when setting up a business?
- What responsibilities do you have and how will they interact with starting your own business?
- Would your business idea be better served by partnering with someone with complementary strengths or greater business experience?
By honestly answering these questions, not only will you have a better sense of whether or not you can or should start a business, but you will begin to have a stronger idea of what type of business is suitable for your skillset and situation, and whether you need to consider getting help from someone else.
Step 2: Come up with a great business idea
This is maybe the most important step of them all: actually coming up with a business idea. And not just any idea – a great business idea, one that has legs and stands the best chance of succeeding.
Of course, there is a very good chance you have an idea already. However, there are a few ways you can approach generating a business idea if you are looking for inspiration.
Solve a problem
Can you solve a problem for customers or businesses?
This could be an issue you encounter in your everyday life, such as a badly designed household appliance; an annoyance you’ve come across in your career such as a frustrating piece of software; or a bigger, global problem such as the climate crisis.
Predict the future
Is there a problem people might not know they have yet?
Is there a product you think will only become more vital in the future, or a service that can take a slice of a niche but growing market? Spot a situation like this and you have the makings of a successful venture.
Be cheaper
Do you think you have a way to provide a product or service that is cheaper than the current market rate, without sacrificing quality? An easy way to attract attention is by offering something people already want and use, but for less money.
Do it better
Being cheaper isn’t the only way you can improve on a pre-existing product or service. Someone else might have had a good idea, but executed it poorly. If you think you can do it better, you might be on to something.
Innovate and disrupt
Do you think you can shock an industry that has long been set in its ways? The rise of so-called online-only challenger banks shows that, with a bit of innovation, even the oldest of professions can be forced to change.
Step 3: Carry out market research and test your idea
A great business idea isn’t worth the paper it is written on without thorough, extensive market research. This can include, but isn’t limited to, surveys, questionnaires and interviews.
First up, there are two big questions to ask of your business idea:
- Is there any demand for the product or service you intend to offer?
- Who is your target market?
Competitor landscape
You need to gain a greater understanding of the market your business will be operating in, including:
- who your biggest competitors are and how they are positioned
- what differentiates each competitor and what traits they share
- what’s your unique selling point (USP) – how you can differentiate yourself from your competitors
- any issues your chosen industry or market is facing
Target market
When it comes to your audience or target market specifically, you need to ask yourself:
- Who will buy your product or service?
- What are people looking for from that product or service?
- What pain points have they experienced in the past?
- How much are they willing to pay for your product or service?
- How will you communicate with your target market?
Step 4: Write your business plan
Once you are confident that your business idea has legs, it is time to write your business plan. It will give you clarity, help you to spot potential issues that need to be addressed, and can give you hard goals with which to measure your progress.
While you can assess your finances first, creating a business plan beforehand will help give you a better idea of exactly how much money you need. It will normally also be required if you apply for a start up loan or business loan.
Your business plan will likely need to include:
- an executive summary
- a company description
- details on management and organisation
- market analysis
- marketing and sales strategies
- details on your service or product line
- funding requirements
- financial projections
For a detailed guide on what your document should look like, read our article on how to write a business plan.
Step 5: Assess your finances
Writing a detailed business plan will help you figure out how much money you need to start your business. Then it is a case of finding funding.
You may need to combine the various funding options below in order to get your start up off the ground.
» MORE: Start up funding
Your savings
You may have money saved that you can use towards the initial costs of starting your business. If you are using your own savings, it is wise to make sure you are not putting yourself in a financially precarious situation when it comes to your personal finances.
Friends and family
At the beginning of your business journey, you may want to turn to your friends and family for financial, as well as practical and emotional, support.
Borrowing money from friends and family can be tricky. So it is best to draw up a written agreement, as you would with any other lender, with specific repayment terms, in order to avoid any disagreements in the future.
» MORE: Lending money to friends and family
Business grants
There are a range of non-repayable and partially repayable start up business grants across the UK, as well as for businesses in England specifically.
Similarly, there are dedicated grants if your business is based in Scotland, Wales and Northern Ireland.
You may also be able to find options for specific groups, such as business grants for women.
Business grants can be competitive, so make sure you take your time with your application, and check the eligibility criteria beforehand to avoid wasting your efforts on schemes you do not qualify for.
You can find a list of the full range of government business loans and grants using the Department for Business, Energy and Industrial Strategy’s search tool.
Start up loans
A start up loan is a form of funding designed specifically for new businesses. As with other forms of business finance, you will borrow a lump sum and pay it back in monthly instalments, with interest on top.
You should make sure you understand the different types of start up loans before applying.
With the government-backed Start Up Loan, you can borrow up to £25,000 over a term of one to five years, at a fixed interest rate of 6% per year. You should be aware, however, that the Start Up Loan is structured as a personal loan, meaning that you, rather than your business, is liable for repaying the loan.
Other start up loans will be structured as traditional business loans and come with different interest rates and maximum borrowing amounts.
Government business loans
Alongside the Start Up Loan scheme, there are other government business loans that may be available to your organisation.
This includes loans from various investment funds around the country.
Business loans
If you are ineligible for the government-backed Start Up Loan, you could look into applying for a traditional business loan.
These can be more difficult to secure as a start up, as lenders use your business credit score and trading history to assess whether or not to approve the loan. However, it is not impossible.
You may need to offer a personal guarantee in order to successfully apply for a business loan. Alternatively, you could provide an asset as collateral and apply for a secured business loan.
When taking out any form of loan, you should only borrow what you can afford to pay back.
» MORE: How do business loans work?
Angel investors
Angel investors tend to be wealthy individuals looking to invest in new businesses in order to make a decent return down the line. Normally, this will involve them offering you funding in exchange for equity or convertible debt. They may also offer mentorship and support as you develop your business.
There are a number of platforms, such as the UK Business Angels Association and the UK Angel Investment Network, you can use to find potential angel investors.
» MORE: What is an angel investor?
Crowdfunding
Another option for financing your start up is crowdfunding. This involves securing funding from more than one source.
There are three main types of crowdfunding:
- Debt-based crowdfunding:This is where you are matched with investors on a crowdfunding platform. You then repay the amount you have raised in monthly instalments, with interest.
- Equity-based crowdfunding:This is where you offer a stake in your company to investors in exchange for funding.
- Rewards-based crowdfunding:This is where you offer tangible rewards, such as early access to a product or service, in exchange for funding.
» MORE: Crowdfunding for business
Step 6: Register your business
One of the first official steps you will take when starting up is choosing a business structure and then registering your business. You should take your time and research which business structure will best suit your needs.
» MORE: Should I register as a sole trader or limited company?
Sole trader
If you are a sole trader, you are the exclusive owner of your business, and can keep all of your business’s post-tax profits. It also means there is no separation between you and your business – making you personally responsible for any losses your business makes.
How to register a sole trader
As a sole trader, you are not legally required to register your business at Companies House. However, you must register as a company director with HM Revenue and Customs (HMRC) in order to pay tax each year through Self Assessment.
You can register for Self Assessment here.
Partnership
A business partnership is when two or more people, labelled as partners, share the responsibilities of running – or owning – a business. This includes sharing the risks associated with the business, any profits or losses, and the bills associated with running the organisation.
There are three main types of business partnerships:
- Business partnerships:Sometimes known as general or ordinary partnerships, this type of partnership works in a similar way to sole traders. Partners are not legally distinct from the business. Therefore, if one partner resigns, dies or goes bankrupt, the partnership must dissolve. This does not mean, however, that the business has to stop.
- Limited partnerships:A limited partnership must have at least one ‘general’ partner and one ‘limited’ partner. General partners manage the business of the partnership, while limited partners do not participate in day-to-day operations and have less liability.
- Limited liability partnerships (LLPs):When incorporating as a limited liability partnership, you must have at least two ‘designated members’ at all times, as well as any number of ordinary members. Designated members are responsible for registering the business, keeping accounting records and submitting them to Companies House, as well as reporting any changes to the business.
How to register as a business partnership
In order to register as a business partnership, you will need to:
- Choose a business name, following the government guidelines.
- Choose a ‘nominated partner’ – they will be responsible for managing your business’s tax returns and keeping your business records up to date.
- Register the partnership with HMRC in order to pay tax through Self Assessment.
- Register for VAT if you think your VAT taxable turnover will be greater than £85,000.
You do not need to register with Companies House.
You can register as a business partnership here.
How to register as a limited partnership
In order to register as a limited partnership, you will need to take the following steps:
- Choose a business name, following the government guidelines.
- Register the address of your principal place of business.
- Appoint your general and limited partners.
- Register with Companies House.
- Register with HMRC for Self Assessment.
- Register for VAT if you expect sales to be more than £85,000 a year.
You can register as a limited partnership here.
How to register as a limited liability partnership
In order to register as a limited liability partnership, you will need to:
- Choose a business name, following the government guidelines.
- Register your business address, which will be publicly available.
- Choose at least two designated members.
- Create an LLP agreement detailing how the partnership will be run.
- Register with Companies House.
- Register the business for Self Assessment with HMRC.
- If you expect your business sales to be over £85,000, register for VAT.
You can register as a limited liability partnership here.
Limited company
If you choose to incorporate as a limited company, you as an individual will be legally and financially distinct from your business. As a limited company, you will have shares and shareholders and can keep any post-tax profits.
How to register as a limited company
In order to register as a limited company, you will need to:
- Choose a business name, following the government guidelines.
- Choose your directors and a company secretary.
- Decide who your shareholders or guarantors will be.
- Identify the people with significant control (PSC) over your company.
- Prepare a document detailing how your company will be run.
- Research which company and accounting records you will need to keep.
- Register your office address.
- Figure out your standard industrial classification of economy activities (SIC).
- Register with Companies House.
- Register with HMRC in order to pay Corporation Tax.
You can register as a limited company here.
» MORE: How to register a company name
Step 7: Set up your business
Once you have chosen your structure and registered your business, it is time to go about setting up your organisation for its day-to-day operations.
Rules and regulations
Depending on your business and industry, there could be a number of specific rules and regulations you will need to adhere to, as well as licences and permits you may need to apply for.
A business that sells physical products, for example, will likely have different concerns to one that offers online services. So too will a business with its own premises when compared to an organisation you are running out of your own home.
These regulations will also be informed by how you have set up your business, and whether you are a sole trader, or the type of partnership or limited company you’ve set up.
You can find more government guidance on business regulations here.
Keeping on top of your accounts
Making sure you are on top of your business records and accounts is a must if you want to avoid getting into trouble with HMRC and even having to pay a fine. Especially when it comes to paying your taxes, from Corporation Tax to VAT.
One option you may consider is hiring an accountant. They can help to ensure you are filing everything correctly. Similarly, you could purchase accounting software in order to take control of your records yourself.
A good first port of call is opening a business bank account. While you can use your personal account if you are a sole trader, the moment you incorporate as a limited company or partnership, you must open a business bank account.
» COMPARE: Joint business account
If you are a sole trader, opening a business bank account still has its benefits, as it will help keep your personal and professional finances separate. For example, a business account can make it easier to track your allowable self-employed expenses. You can even find specific business bank accounts for start ups.
» MORE: Benefits of a business bank account
Building a business website
Depending on your business, a website might be something you need from the very beginning. However, this doesn’t necessarily mean developing one from scratch.
There are online services that will allow you to quickly build a website, using templates and plug-ins that can be customised to suit your needs.
Finding business premises
If you are looking to set up a business with premises , you will need to find the perfect business location. Factors to consider include, but are not limited to:
- what size of building your require
- how much the commercial rent (if leasing) or the commercial mortgage (if buying) will be
- how much footfall an area gets
- whether the location is suitable for your target market
- how accessible the building is
- what the local competition is like in your industry
- whether you need any specific permits to run your business in that area
- how much your business energy bills will be
- how much your business rates will be
» MORE: Business rates
Building your team
While you may be able to start your business completely on your own, certain ideas will require you to build a team.
The cost of hiring someone in the UK isn’t cheap, so it is important to get the process right. Understanding what to put in a job description will help you narrow down the field, as will learning how to interview someone properly.
When hiring, you will also need to be aware of your responsibilities as an employer, from paying the right level of National Insurance to taking out employers’ liability insurance.
» MORE: 70 questions to ask in an interview
Getting protection
Protecting your business can mean many things. For example, you may need to consider business insurance. This could include public liability insurance if you regularly come in contact with third parties, or professional indemnity insurance if your business involves you providing advice.
You might also need to look into trademarks, to make sure your business’s intellectual property is protected, or create a set of terms and conditions so your customers know exactly what they can expect from your products or services.
It could even be as simple as installing CCTV and burglar alarms at your premises to keep it safe overnight.
Step 8: Promote your business
Now that you have everything set up, it is time to get your name out there. You can’t grow your business if no one has heard of you, so think carefully about what paths of promotion you want to spend time and money on to maximise your exposure.
» MORE: How to promote your business
Ways to promote your business
Here are just some of the ways you could promote your new business:
Marketing
What kind of marketing you choose will depend, among other things, on your budget and your business. Types of marketing to consider include:
- digital marketing – website articles, online stores, reviews, pay-per-click and display advertising
- offline marketing – posters, billboards, TV advertisements
- email marketing – sharing content, deals, promotions via email
- social media marketing – utilise platforms like Facebook, Twitter, Instagram and TikTok
- affiliate marketing – working with partners who will advertise your products or services
Also bear in mind your audience – business-to-business (B2B) marketing and business-to-consumer (B2C) marketing tactics will likely differ.
For example, if you’re targeting other businesses you might rely on LinkedIn as your primary social media platform, whereas a brand targeting consumers might depend more on Instagram and TikTok.
Social media
You can utilise your own personal social media accounts, as well as those of friends and family, to help your business reach a wider audience.
Before posting on social media, make sure you know what demographic you are targeting, and tailor your content accordingly.
Local listings
Ensuring that your business is featured in the local listings of your area is a great way to get the right sets of eyes on your services.
Similarly, there may be industry-specific listings that you can contact for additional exposure.
Asking for reviews
A good way to build up buzz for your business is by asking your customers to post online reviews. From dedicated sites such as Trustpilot and Feefo to the ratings function on Facebook, encouraging customers to leave reviews can help build trust in, and awareness of, your brand.
Media relations
Another route you can take to promote your business is by building your media presence. While you might not be able to appear in the big broadsheets and tabloids immediately, you could start by approaching local news outlets in order to drum up interest in your business.
Search engine optimisation (SEO)
When you create a business website, it is important to consider search engine optimisation (SEO). This is to ensure your website is findable on search engines, such as Google or Bing. After all, the higher you rank on a search engine, the more likely your business is to be seen, and the more customers you may be able to secure.
Your site’s technical configuration, the content on its pages and how often it is linked to all play a part in a good SEO strategy.
What happens next?
Now comes the hard part: maintaining your business’s day-to-day operations, while trying to grow and expand.
Starting a business requires patience – you may not see immediate results, and will need to strike a balance between sticking to your original plan, and accommodating changes in the market, and your own personal situation, when needed.
If at any time you are feeling overwhelmed by the pressure of running your own business, there are avenues of support you can reach out to.
In England, there is the Business Support Helpline, as well as The Local Enterprise Partnerships Growth Hub.
In Wales, you can contact the Business Wales Helpline, in Scotland there is Business Support Scotland, and in Northern Ireland there is the Invest Northern Ireland Helpline.
» MORE: How to grow your business
Image source: Getty Images
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