So you want to start your own business? The how-to guide for complete beginners
Dec 18, 2017
Perhaps you’re sitting on a business idea that you think could make you millions, and you want to make it a reality, or you’ve just got inspired by The Apprentice winner last weekend… Here’s some useful stuff you should know about getting started with your own business.
Before you launch, sell a product, or win your first user, you need to follow the first practical steps and make sure your business is set up properly.
Test your idea
Having a great idea is only the first step. Before you do anything, you need to be brutal with your business concept and challenge its relevance and practicalities.
Is there room for your business in the market?
Tough competition isn’t entirely a reason to change direction or call the whole thing off, but it’s unrealistic to think you’ll automatically stand out in a saturated market. Detach yourself briefly and remember there are plenty of people who may already be inexplicably loyal to a rival service or prefer it. Could you convince them to switch?
Do people need or want your product/service?
Very few ideas are completely original, but that doesn’t mean there’s not a demand for them. To be sustainable and keep growing, your business needs to satisfy a need or a want that isn’t fully satisfied right now. Just because a different service offers something similar doesn’t mean they’re ticking all the right boxes.
How are you going to get in front of your ideal customer?
You know there’s an audience out there, and you know your rivals aren’t scratching their itch. How you appeal to that audience is a tricky one though. In a world full of free trials and instant shipping it’s very hard to get someone to press ‘Buy’. You might be the product brain rather than the marketing brain, so don’t fear asking for help or partnering up.
The essential first steps
Once you’ve answered some questions and tested your business’ profitability, you need to know how to set up and satisfy your legal and financial obligations.
1. Check regulations won’t stop you from trading
Trading Standards will regularly visit businesses, no matter how small, and force them to stop trading completely if they break the rules. Even if you’re convinced what you’re selling or creating is perfectly safe, there could be laws that dictate what you can manufacture with, who you can sell to, and where, particularly if it’s edible or cosmetic. Make sure you’re educated before you set up.
2. Buy the domain name before someone else does
You don’t have to be hot on web development, platforms like Wix and Squarespace provide easy drag-and-drop design tools and the coding is done for you. Buying the domain and creating the website can cost under £100 if you choose wisely. If you’re not selling anything online and your audience spends a lot of time on social media, a presence on Facebook or Instagram may be enough. Buy that domain name now though; you could need it in a couple of years.
There’s no need to splurge on this at the beginning, many of the biggest startups had primitive and even ugly websites when they first launched.
3. Do you need a patent?
If your idea is truly brand new, you might want to consider applying for a patent, or another form of Intellectual Property protection. Patenting is expensive and can take a long time, so whatever it is, you really need to believe in it and have explored every option. Alternatively, keeping it very quiet and insisting vendors sign Non-Disclosure Agreements could be a much cheaper way to protect your idea.
4. Register as a private limited company… or not
It costs just £12 to register as a limited company but it has all kinds of legal and financial significance. You’ll be listed as the director and you’ll have certain responsibilities, including filing your accounts and Tax Return, paying Corporation Tax, and keeping certain company records. You could register as a sole trader, which involves less paperwork, but you’ll have no separation from your business legally and there are downsides. Gov.uk has the most comprehensive resources if you’re new to it all.
5. Create a business plan and sales forecast
Your business plan needs to explain the concept, the strategies you’ll use to launch it, a summary of the markets you’re going to enter and where you fit, plus details of anyone you’re partnering/working with. You’ll also need a sales forecast, which needs to summarise how many customers you expect to gain and lose over a year, what their average spend would be, the potential to upsell, and seasonal highs and lows. You’ll need to know market averages to make these assumptions.
6. Find out if you need business insurance
If you hire at least one person, you’ll need to take out Employer’s Liability Insurance, which covers that employee if they’re injured at work, or become ill because of their work. If you want to protect your business against defamation and libel, loss of goods, loss of documents or professional negligence, you’ll also need Professional Indemnity Insurance. There are different products available for different sectors, business types and specialists.
Funding, loans or investment?
Funding can be really difficult to find and even harder to sustain if you can’t afford to foot the bill yourself.
1. Find investment
When you’re first starting out, you’re obviously not going to be hot property for a big Venture Capital firm. If you want someone to help you fund your idea from the very beginning (they’re likely to expect you stump up some cash too), you’ll need to use your existing connections or make new, relevant ones. Entrepreneur Mark Suster put together this helpful guide to what many startup investors look for before they sign on the dotted line.
2. Apply for a startup loan
The government provides loans and mentoring for some startups. If you can say ‘yes’ to these ten questions, you’re in a good position to apply. The Start Up Loans Company will assess your application and make a decision within 6 weeks. If you’re successful, you could receive a low-interest personal loan of up to £25,000, which will need to be repaid in 1–5 years. You’ll also be entitled to free mentoring pre-loan support and lots of useful startup guides.
3. Use your own cash
Many startups lay the groundwork with hardly any cash flow whatsoever. ShutterStock founder Jon Oringer used his own bank of amateur photographs to set up the platform on a budget, and famously challenging assault course Tough Mudder began with the contents of Will Dean’s savings account — £5,000. This can be a preferred option for some founders because they don’t have to share the company with an investor, and they can develop on their own terms.
Everyone has to start with the basics — creating the website, writing up a business plan, and familiarising yourself with the competition. There a lot of affordable tools available which have democratised starting your own business, but there are still complex legal and insurance requirements to meet, and that’s before you’ve even started operating.
If the practical stuff doesn’t faze you, find out if you have the right personality traits to be a start up founder.
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