A 10-step plan for starting your own business
For many people, being their own boss is a dream. There are many different reasons for wanting to set up your own business including: being able to make a vision come true; wanting to be the one to profit from their energy and ideas; spotting a gap in a market and solving a problem or not having to answer to a manager. But then the question comes - how do you turn that into reality?
Some people can set up an income-earning side-project while they are still working, such as running an online shop, freelancing outside working hours or turning a hobby into a profit-making enterprise. Others may find themselves redundant, wanting to work differently after a move when children arrive or because they are fed up in their current situation and are ambitious. But however you start, for your business to thrive you need to prepare and have a plan to put you on the path to success.
The UK has one of the most straightforward and transparent systems in the world for setting up and registering a new business. Follow these steps and you could soon go from idea to running your own start-up business.
1. Have a great business idea
You may have spotted a gap in the market that no-one else has thought of before, want to open a new shop, employment agency or nursery, or you may want to have a business that uses the skills you’ve trained in such as plumbing, engineering or the law. Begin by discussing your idea with trusted friends and family and consider how your business idea might set you apart from rivals. For example will you:
- offer something innovative or disruptive in a traditional market
- be cheaper than potential competitors
- provide a better solution to a problem for customers
- give better service than others
- be able to find new markets that competitors have not yet entered.
But before you set up, you need to make sure there will be a demand from customers for your business in the location or business landscape you are planning for.
2. Do your market research
The internet and social media have made market research much easier. There’s lots of information that you can find online and through the business section of your library that can help you find out the size of particular market sectors. Make sure you fully understand the landscape in your sector and what economic headwinds are prevailing and what impact that could potentially have.
Define and analyse your target market and customer
It doesn’t matter whether your intended business is consumer-facing or you want to sell to other businesses, you need to fully understand who your potential customers are, what might drive them to want your product and service or stick with existing suppliers or products.
Think about what drives their buying behaviour and their attitudes. Can you sub-divide your potential customers into smaller groups that may behave slightly differently?
Evaluate potential demand
While all the information online and number crunching based on assumptions can help, nothing beats actually talking to potential customers. Famously, when the founders of Innocent drinks were starting up, they set up a stall at a music festival and had two bins with a notice posing a question asking ‘Should we give up our jobs to do this full time?’ Customers had to place their empty bottle in a 'yes’ or ‘no’ bin. At the end of the weekend the yes bin was full, and the rest is history.
While you don’t have to do an event like this as it might not suit your product or service, there are a number of ways you could try to evaluate demand, ranging from going to your local shopping centre or coffee shop with a clipboard and asking people who might be target customers what they think, to sounding people out at a conference or trade fair. Or you could opt for a more formal focus group.
If you are producing something and have prototypes or have a website, you could potentially watch people interacting with it.
Try not to ask too many leading questions and listen carefully. You could gain many useful insights into how to improve your business idea and how you present it.
3. Create a marketing plan
Based on the feedback you’ve now received, think about how you could go about getting customers. Will it be as simple as setting up a market stall or a shop and just waiting for footfall and people coming in? If you are aiming to sell to businesses, how will you find the right ones and the right people in those businesses to tell about your product? Will you have a website or target people through Instagram, Twitter or an online marketplace like Amazon or Not on the High Street? Will you be listed on one of the many tradesmen recommendation websites? Will you pay for direct mail or advertising? Consider what is appropriate for your sector and how you can tackle it.
Be realistic rather than optimistic about sales because you will need to feed this information into your wider business plan.
4. Decide where you’ll work
Where you'll work from could have a big impact on your initial costs. Can you set up an office at home or will you need to find separate premises? You can usually work from home without seeking planning permission as long as:
- the look of your home doesn't change significantly
- the business doesn't become the first purpose of the property
- you don't cause inconvenience to your neighbours.
Always check with your home insurance company about running a small business from home to make sure you’re still covered.
If your business has grown and you need more space, think hard before renting a large or long-term property, especially when you're just starting out. Serviced offices are a useful option – they can be more expensive but give you more flexibility.
Of course, you may need premises – such as retail space, café or restaurant premises, garage or workshop, a manufacturing space or storage facilities. You’ll need to factor this into your costs in terms of mortgage or rent and don’t forget the business rates, utility bills and other costs such as fitting the space out – where payable. But make sure you explore all your options. Could you try a pop-up, food van, market stall, mobile service or some other way of testing out your concept first that could reduce your costs?
5. Test your business model
Based on your findings from your market research and where you will locate, check whether your figures will add up. Will your income or sales more than meet your costs? What will happen if your predictions are under or over? How will this impact you as your fixed costs remain the same? Do you have the right resources in place to meet the level of demand? Will there be seasonal peaks and troughs and how will that affect your business. Think of a range of different business scenarios and how they could play out.
6. Choose a name for your company
Choosing a name needs careful thought as it will need to work for the long term. It ideally should be concise and encapsulate your business idea, but being too specific could also cause you problems if your business expands or changes focus. It can take a very long time to get your business name into the minds of customers, even just locally or in your specific field. Hence the need to get it right yet also memorable.
It could be the starting point for making your company a household name. If you use a name that has been used by someone else, it can lead to serious legal issues. You will have seen articles in the press about large companies telling smaller companies that they need to change their name because it is too close to theirs. Check that the name you have chosen is still available by searching through Google and Companies House.
If you are planning on having a website, also see whether the company name will be available as a URL for consistency.
7. Write a business plan
Once you are sure your business model works you can think about translating it into a more formal business plan. Your business plan should be a formal document because you may need it to borrow money, convince backers, suppliers and potential customers
8. Seek additional funding if necessary
While some people may be able to use money from an inheritance, redundancy or savings, you may need to find additional funding to start your business. But to do that you’ll need a robust business plan so that any potential backers or your bank can be reassured that they will get their money back.
But remember that there are lots of successful businesses that started on a shoestring.
9. Choose the right business structure
How you set your business up will depend on the business type you choose. Most businesses will register as a:
- Sole trader – you run your business for yourself and are responsible for fixing any problems and debts, have several customers, provide your own equipment and charge an agreed fixed price for your work.
- Partnership – you share responsibility with your partners, including being responsible for losses, you share profits but pay tax on your own share. Partners can be limited companies.
- Limited company –
- when limited by shares the business is legally separate from the people running it, has shares and shareholders and keeps any profits after tax.
- when limited by guarantee this is generally a not-for-profit company where the business has guarantors and a ‘guaranteed amount’ and profits are invested back into the company.
Which you choose will depend on where you work, whether you have people helping you such as shareholders and your purpose, such as a social enterprise or profit-making business. You may want to seek professional advice about which is best for you.
10. Tell the right people about your new business
All planned and ready to go? Make sure you start by telling the right people:
- Your bank – open your business account as soon as you can.
- Companies House – you’ll need to register your business as a limited company or limited liability partnership (LLP). If you have an accountant already, they can help you with this.
- Your accountant – it’s a good idea to employ a reputable accountant to help manage your cash-flow records. They can also advise on what you need to tell HM Revenue and Customs (HMRC), whether you need to be VAT registered and remind you of important payment dates, such as Corporation Tax.
- HMRC – you may need to pay tariffs or get permission for some types of trading if you’re planning to import/export.
- Specialist registrations and permits - certain types of business need these. For example, if you are opening a food business, you’ll need to register with the Food Standards Agency.
- The Information Commissioner - under the Data Protection Act businesses that process or store personal information need to register with the Information Commissioner's Office (ICO), unless they are exempt. Complete the ICO self-assessment to find out if you need to do this.
If you’re working from home, as mentioned earlier, you should tell your insurance company to see if it makes any difference to your policy. You should also make sure you understand what is covered or not. You may well also need to take out business insurance too. If you have moved into new premises you’ll have to tell your council so you are registered for business rates, if applicable.
11. Other sources of advice for start-ups
There is lots of available advice – quite a lot of it free – for people wanting to start their own business. It makes sense to tap into all the different types of help you can get and learn from the expertise of others to prevent and solve potential problems that could arrive, help you to make your business more profitable and enable you to see and take advantage of new opportunities.
A good place to start for more information is our entrepreneur’s guide – Yes Business Can. This 177-page guide now covers starting up, scaling up and going global and is useful for businesses of all sizes and sectors. It combines expertise from a variety of contributors and contains practical guidance from securing funding and investing in intellectual property, to trading overseas and safeguarding mental health in the workplace. Download your free copy now.
Sources of potential help include:
Regional government help
You can contact the government’s Business Support Helpline for free advice.
You can also find free support, advice and sources of finance through your local ‘growth hub’ from Local Enterprise Partnerships (LEPs).
Get business support online, or over the phone.
Get help with your business online, or by calling the Business Wales Helpline.
Find business advice and support. You can also contact the Invest Northern Ireland helpline.
Other help and advice sources
Access to 15,000 trained volunteer business mentors from the SME community to boost local mentor networks.
Supports companies across the UK to export through International Trade Advisers. DIT provides advice on export capability and opportunities, contacts in overseas markets, e-commerce, market research, export training and arranges overseas visits.
Provides grant funding to support research and development for companies across the UK, mainly through web-based competitions.
A small national programme that helps businesses use design to improve performance through bespoke packages of design support and coaching, delivering through Design Associates.
While this service is no longer running and has shifted to the government website, there is still a lot of helpful advice on their website about business planning, manufacturing, innovation and efficiency, raising finance and growing the supply chain.
Provides services such as workshops, intellectual property awareness raising and online assessment tools. It also trains independent business advisers as intellectual property auditors. The website also offers information on how to value, protect and copyright your ideas.
Advice from the government designed to inspire small businesses to take their business plans further, and to highlight the support available to help them grow. It focuses on four main areas:
- finance and business planning
- innovation and technology
- leadership and talent
Helps businesses both large and small with productivity and improving leadership capability with mentoring programmes, advice and a benchmarking tool.
For young entrepreneurs
The Trust has helped over 86,000 young people to start their own business – and you could be next. It works with 18 to 30-year-olds living in the UK to turn their ideas into a reality. It offers training and mentoring support to funding and resources at local centres and in an online programme.
A not-for-profit company, that offers financial support, mentoring and business advice to thousands of young entrepreneurs across the UK. But some of the advice, information and master classes on its website will be useful to new entrepreneurs of all ages.
Important legal information
Lloyds Bank is a trading name of Lloyds Bank plc, Bank of Scotland plc, Lloyds Bank Corporate Markets plc and Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH.
Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC327000. Lloyds Bank Corporate Markets plc. Registered office 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 10399850. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278, 169628 and 763256 respectively.
Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is a wholly-owned subsidiary of Lloyds Bank Corporate Markets plc. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH has its registered office at Thurn-und-Taxis Platz 6, 60313 Frankfurt, Germany. The company is registered with the Amtsgericht Frankfurt am Main, HRB 111650. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht.
Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.
While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.