Are you sick of working for someone else and want to be your own boss, but you are not sure where to start? Here is an overview of the main steps you need to go through to turn your desire to have your own business into a reality.
Your Business Idea
If you already know what you want to do as a business, then that is a great start. If not then you have some work to do in order to come up with a concept that has a good chance of succeeding. You will need to think of a business idea that you feel excited about, then do some research to see if it stacks up.
Business ideas are all around you if you keep your eyes open. Be on the lookout for problems that need a solution. What does not work well, what jobs have not been done properly, or ignored? Listen to your own frustrations and those of people around you. Could you provide a solution to those problems? Think about what you do well. What are you good at, what do you enjoy and what skills and talents do you have?
Testing Your Idea
Once you know what you want to do, it is important to undertake some research so that you have more than just a feeling to go on. Proper research will provide you with solid evidence that you can use to judge whether there really is a market for your product or service.
You need to consider who the customers are for your business and use them to test out your idea. For your business to work you have to have willing customers, so you must be able to identify who these people or businesses are. Depending on the nature of your idea and who your customers are, you need to find ways of engaging with them in a way that will give you feedback on your product or service.
The most obvious ways are either to approach your potential customers with a questionnaire and ask them a few carefully designed questions. You need to keep this brief and make sure each question you ask will give you some information that is of use to you. For example, you may want to know which companies they currently use, how much they pay now, what would make them swap to your business instead, how much they would expect to pay, etc.
An ideal way of testing out your market is to do some test sales. Obviously this is not practical for some types of business and works best if you have a product that lends itself to being sold on a market stall. If you are able to do this, take the opportunity to talk to your customers too, in order to more fully understand their needs. See how much you can sell and whether your price is right. You could try different prices on different occasions and see what the effect on sales is.
You should use this feedback to refine your ideas, address any problems you have identified and re-shape your business idea into something that you know there will be a demand for. If your initial research indicates that there is not much demand, you will need to do more research and testing after you have made adjustments to address the things that did not work. Do not be tempted to ignore the results of research if it is not what you want to hear. If necessary you must be prepared to scrap your idea and think of something else instead.
At the end of this process you need to have a clear understanding of what your customers want and how much they are prepared to pay for it. Part of the process should be checking out your competition and formulating a clear idea about what makes your product/service different or better than theirs.
Legal Status Of Your Business
You need to have decided on the legal format for your business before you launch it. The main decision you need to make is whether to start as a sole trader or register a limited company. The latter option gives you some financial protection if things go pear-shaped, but is more complicated and costly to set up. Most new businesses begin as sole traders, whereby any profit after tax goes straight to you, but you are personally responsible for any financial liabilities.
There may be advantages to you in working with one or more partners. Partnerships often come about when different people bring different skills and experience to the business. For example, if you are setting up an online fashion outlet, you may know all you need to about fashion, but benefit from a partner who will look after the technical and IT side of things.
If you are going to be taking on a lot of borrowing and the potential for financial risk is significant, it may be worth setting up a limited company, otherwise it is usually best to keep it simple to begin with. If in doubt get advice from an accountant or solicitor.
Writing A Business Plan
Only by writing a business plan can you pull together all the strands of your ideas and properly prepare for all the things you will need to do to get your business up and running. A formal plan of this sort is also going to be an essential tool in securing any investment or loans you need, but don’t forget that it is you who will benefit most from a good business plan.
Writing a business plan will help you to focus on the various things you need to consider before starting your business. You may wish to read the full step by step guide on to how to write a business plan in our Resources section. Your plan will pull together all the points in this guide and much more besides, taking you through to the next stage in getting your business off the ground.
Suppliers And Distributors
Most businesses need suppliers to a greater or lesser extent. If you are a manufacturer or retailer, your suppliers will be a crucial part of your business. You therefore need to invest some time up front in researching who you will use. You need to investigate what your options are in terms of suppliers and begin to make contact with them.
As well as finding out who will be able to offer you the best prices, you must be sure that they can deliver what you want, when you want it. Will they offer you discounts and can you get credit with them? You may wish to get references or take other steps to get a feel for how reliable and trustworthy they are.
If you are producing some sort of product, an essential part of your service will be how you get your product to your customers. If this involves using a distributor, you need to discuss costs as well as other details of how the service will work and again you should try to get third party feedback on reliability and service.
You ought to find yourself a good accountant at a fairly early stage. Setting things up properly in the first place can save you time and money further down the line. Depending on the nature of your business, you may also need some legal input. So spend some time identifying who you will be using for these professional services.
Premises And Day To Day Operation
Give consideration to where you are going to operate your business from. If you are distributing products all over the country your geographical location could be a big factor. If you are serving a very local market the same applies. You may be lucky enough to be starting small and working from home, which makes things nice and simple.
Do not forget to think through some of the more mundane elements of how your business will work on a day to day basis. Who will do what and how? Consider payment of invoices, taking payments from customers, paying staff, PAYE returns and National Insurance, etc.
Every business will need some form of insurance, so you need to allow for the cost of this in your financial forecasts and ensure that your policies are in place before you start trading. Anyone employing staff must have employers’ liability insurance by law. It would be sensible to have public liability cover too if you ever work away from your own premises, or if customers or public ever come into your place of work. You can compare quotes from major UK insurers on our main site.
Funding And Investment
Most businesses do not make a profit until some time after they are launched, so it is not unusual for there to be a need for funding or investment when you are starting up. The best way to get a clear picture of what funding you are likely to need is to prepare a cash flow forecast as part of your business plan. This will highlight when you are likely to be in deficit and for how long.
If you do need funding, whoever you are approaching will want to see good evidence for how much you need, what you are using it for and when they will get it back.
The main options you have for raising funds are to use your own money or that of family and friends, to get a bank loan or to find an investor (who will expect to see a good return on their investment) such as a private equity company. A new option that is now available is crowd funding, where lots of people make very small investments in companies. There are several websites offering to facilitate such bids for funding, including seedrs.com and crowdcube.com.