The number of people starting their own business in the UK has been growing steadily for over a decade, in part due to the uncertainties brought about by the economic downturn. It is also because working for yourself can mean a more flexible lifestyle and the chance to earn more money than you might working for someone else. What, though, do you need to do to start your down business?
Develop your business idea
Every business starts with an idea. You probably already know what yours is, but now you need to turn it into reality. Talk through what you want to do with friends, family or industry experts, getting their opinions on whether your idea is viable and how you can make it work including routes to market, potential income, and how you can stand out from competitors.
Think about what you want to achieve by setting up for yourself. Do you want to earn more money, for example, or are you looking for a better work-life balance? If it’s the latter, and your business idea means you’ll be spending a lot of time away from home or hours at your desk, then you might need to rethink it before going further.
Write a business plan
Once you have a good idea of what you want your business to be, you need to get it in writing. Create a business plan that includes your:
- Company’s name, aims and objectives
- Products and services
- Target markets
- Marketing and promotional plans
- Competitors and competitive advantage
- Management and staffing structure
- Financial requirements.
You’ll be using your business plan to attract investors and find funding. While you want to excite potential investors with your ideas, you don’t want to overpromise or exaggerate any claims. Keep the details in your plan factual and realistic, especially when it comes to any expected profits.
Brand your business
In order to attract customers, you’ll need to create a brand that looks good and lets them know who you are and what you do. Branding is especially important if you’re setting up in an already crowded market. Develop a logo, tagline and mission statement and use them in all your marketing and correspondence, which will make use easily recognisable to customers when you’re contacting them.
If you’re not creative, it’s worth investing in the services of a graphic designer or marketing specialist to help you develop your logo, taglines and content (e.g. for your website). Also, make sure it isn’t too similar to any competitors, or you could lose customers to them by mistake.
Understand your finances and look for funding
Setting up your own business costs money. Create a cash flow forecast, one that has potential income and expenditure, including any initial purchases you need to make (e.g. IT, supplies and equipment). Use this forecast to identify whether you’re able to fund your business through savings or if you’ll need to fund it in other ways. This might include borrowing from family or friends, apply for a business loan or grant, getting support through a government scheme or looking for investors.
Each type of funding will require you to take a different approach, and not all will be right for you. For example, as a sole trader, you may find it harder to get a loan from a bank or, if you are borrowing from family and friends, you might want to put in place legally binding agreements that outline the amount of any loan and when and how you will pay it back, protecting everyone involved.
Decide on a business structure
Depending on the type of business you plan on operating, potential income and associated risks, there are a number of business structures you can choose from including:
- Sole trader: Setting up as a sole trader is quick and easy. There’s little paperwork or financial reporting. You own the business outright and can keep all the profits. However, you’re also liable for any losses, which could put your personal assets at risk.
- Partnership: As with becoming a sole trader, creating a partnership is a simple process with little financial reporting required. However, unlike as a sole trader, the business is owned by at least two people. This can lead to complications, especially if you need to wind the business up, or you don’t agree on the direction your company should take.
- Limited company: With a limited company, you become a legal entity registered with Companies House. You’re required to have certain types of documentation, e.g. articles of association, directors and shareholders, pay corporation tax and submit annual accounts. Limited companies also have limited liability, which means your personal assets aren’t at risk if the company fails.
- Limited Liability Partnership (LLP): This is a combination of a limited company and a partnership. With an LLP some or all of the partners hold limited liabilities, but there is more flexibility, which is outlined in member’s agreements. Any profit is taxed as income, which partners must disclose. If you don’t start trading within a year of registering an LLP, you will be struck off.
As a sole trader or partnership, you’ll need to register with HMRC, though you don’t need to do this before you begin trading. As a limited company or LLP, you’ll need to register with Companies House; this can be done online and takes 24 hours or by post, which can take up to ten days.
Once you have your funding in place and a structure agreed, you’re ready to start trading. Remember, it takes time to build a business so don’t get disheartened if things don’t happen as quickly as you hoped.
Stick to your business plan, reviewing it and putting in place actions to address any areas that aren’t going as you thought they would and continue to reach out to potential clients and customers because without people buying your goods and services, you won’t succeed.
