How to start a business
Follow these 8 steps to start a business idea
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In 2019, we ran a poll to find out what our users considered to be the biggest barrier to starting a business. Over 6,000 people responded and we learned a huge amount about the problems faced by new business owners in the UK.
We wanted to use this data to help you, so we decided to create this article: a one-stop-shop for everything you’ll need to know.
In this article you can find the steps you need to take when you’re launching a new venture. Not happy with just providing those steps, though, we have also tracked down a number of exceptional entrepreneurs so that they can share their advice and tips with you too.
Our poll highlighted a number of areas where new businesses struggle, so we’ve made sure to provide advice to tackle those obstacles – from raising finance to feeling confident in your abilities.
If you find this article useful, then you may also want to consider getting tips in the future – to get advice direct to your inbox, sign up to our email database today.
So, without further ado, read on to find out how to start a business. The links below include the steps you need to take – if you only want to know about one or two, feel free to skip ahead to whichever one you’re interested in.
Self-evaluation is probably one of the steps completed least often by new founders, but it’s as important as any other on this page.
In our poll, we found that confidence, knowledge and experience are all considered to be serious barriers:
- Knowledge: 18.4%
- Confidence: 9.8%
- Experience: 3.8%
Just under a third of people consider one, or a combination, of these things to be a barrier, either because they’re worried about failing, or concerned that they don’t have the right experience.
Evaluating yourself is a vital step in starting a business; lacking experience or confidence shouldn’t have to be a barrier. Identifying the areas where you might need support is the best way to overcome obstacles in the future.
Understanding your strengths and weaknesses is also a good way to decide on the business you want to launch. If you know that cooking isn’t a skill of yours but that communication is, then you’ll likely be better suited to a front-of-house role if you plan to start a restaurant.
Our poll also found that Time is the biggest barrier for 2.2% of people. Commitment is by far one of the most important soft-skills a founder needs; new businesses don’t launch overnight and you’ll need to put in time, and effort, especially in the beginning.
As a simple task, consider running through this checklist to begin your self-evaluation:
- What skills do you have?
- What are you passionate about?
- What is/are your area of expertise?
- Are you committed to starting a business?
As well as the questions above, you may also consider these practical points. These will also be touched on later:
- How much can you afford to spend?
- Do you need to raise or find extra capital?
- What sort of lifestyle do you want your business to provide for?
You don’t need to formalise these questions – although it can’t hurt to share them and discuss with others; knowing the answers, though, can be a real help in the following steps.
Come up with a business idea
Most people looking to start a business will already have an idea of what that business might be, even if that idea is a bit rough. In our poll, only around 3.3% of people felt that the idea was the biggest barrier.
However, having a business idea is only half of this task. For example, you might know that you want to work in construction, but need to drill down a little more to find a specific enough venture to launch.
If you haven’t got any tangible ideas at all, then our annual Business Ideas campaign is a great starting point for you – we research top industry trends to suggest the best new ideas for you to start.
Whether you have a business idea already or not, there will be some questions for you to consider.
Taking a look back to the self-evaluation step above, you should think about the idea you have in relation to the questions we asked: do you know about this business? If not, what do you need to learn? What makes your business idea stand out?
Market research is essential to pinning down your business idea – find out more about it in the next step.
Market research is essential if you want to make sure that your business idea is going to work.
Research provides the perfect opportunity for new founders to understand their customers or audience; what methods should you use to target them? What costs are going to be associated? What products or services already exist that you’ll compete with? What makes your product or service worth the money?
Comprehensive market research is one of the best ways for you to evaluate the strength of your new business; it is also important if you want to raise capital at any point. Investors and banks will want to see evidence that you understand your market, and that your business has a chance of success.
Whether you want to start a local business or a global venture, market research is a must.
Test your idea
Market research comes in a number of stages; sometimes it will all be based on research and data, but those things are never a perfect substitute for a real-life test. Whatever it is that you’re looking to launch, trialing it before a full launch is a definite bonus.
Just like traditional market research, testing your idea is important whether you want to go local or international – small or large scale.
By the time you’ve completed your market research and any testing, you should have a much better notion of what your business idea is. Initially you may have been keen to start a retail business, by now you should have a clearer picture of what that retail store will stock, who the customers will be, and what sort of price your products will be.
Assess your finances
Now that you’ve evaluated yourself and completed market research, you will hopefully have a clear understanding of what sort of capital you will need to start. If that is the case, then you will also know whether you have enough already, or if you need to try and raise more.
Unsurprisingly, finance was the biggest barrier to a huge number of people in our poll; 54% of people identified money, in some form, as the reason they would struggle to launch their business.
The reasons for this vary: obviously a key problem in is having enough in the first place to actually invest in your idea, but there’s also the longer-term issue of having enough to support yourself, or your family, while your business is in the early stages.
Of course, the finance you need will depend entirely on the business you are launching. Some will be relatively cheap, whereas others may require thousands of pounds to even consider starting.
One way to assess your finances is to break your needs up into categories so that you can see exactly what you need to spend:
- Essential investment: the things you definitely need, your business cannot operate without. These should be at the top of the list.
- Helpful investment: the things that will help you operate, they might improve efficiency or success. These should be second in the list.
- Nice to have investment: these things aren’t essential, and might not improve efficiency, but may provide smaller benefits. These should be last in the list.
To put the idea into practice, consider the categories that a high-street retail store may need.
- Premises, stock and a till system – a shop cannot operate without each of these
- Website – though not essential for a high-street store, it might drive awareness and sales
- Coffee machine – definitely nice to have for customers and staff, but not essential
Compare finance options
There are a number of options available, whatever your situation, and whatever your business, though some will require more work than others. For more comprehensive information, we have a few pages that you may want to look at.
Sources of business finance: this page covers the more well-known finance options, including bank or startup loans and investment. These options are more suitable for larger business ideas, or for founders who need to raise a large sum.
10 ways to find your business: this page covers alternative forms of finance that don’t require traditional bank loans or investment. These options are more suitable for smaller, cheaper businesses, or for founders who only need to raise a little extra capital.
There are a number of common finance options to consider. We work with several experts who can help you.
- Startup loans – the Startup Loan company is a government backed scheme where you can borrow up to £25,000 with a fixed interest rate of 6% p.a.
- Business loans – business loans are similar to a startup loan, except that they are not just for new businesses and don’t have the same caps. Select this option to compare business loans with KnowYourMoney.
- Bridging loans – select this option to compare bridging loans with KnowYourMoney. Bridging loans are a type of short-term loan, taken between two weeks or three years.
We do get paid a commission if you follow these links and choose an option, but we only work with people we trust, so you can feel confident in whatever choice you make.
As well as the options above, you may also consider investment and funding from other sources. For example, The Startup Series is the UK’s only funding EIS and SEIS funding competition, offering early-stage businesses the opportunity to win up to £250,000 in investor backing.
Consider finance tools
With finance, there are other considerations too. Although having enough capital in the first place is vitally important, it is also essential that you are able to effectively track and manage your money.
One of the first steps for a business founder should be to make sure that they are tracking their business’s finances effectively. In the list below, we have included a number of tools that you might need to consider. As above, we may be paid if you sign up for some of these products, but we only work with suppliers that we trust.
Business banks – a business bank account is one of the first, and most simple steps, toward properly handling your business finance. An ordinary bank account may be sufficient for a minority of people who are self-employed, but a business account is almost always needed, especially when you’re planning to build a business.
Having a business bank account is a requirement if you're a limited liability company; you're legally required to have a business bank account so that your business finances are separate from your personal finances.
Visit our page on how to open a business bank account now for a more comprehensive overview or, if you want to take a look at options today, you can compare business bank accounts with KnowYourMoney to see which providers may suit you best.
Accounting tools – as well as business bank accounts, which are a legal requirement for some forms of business, there are also other tools and services that exist to support small business owners in their money management.
Accounting tools like FreshBooks are created to help businesses spend less time filing receipts and formatting invoices. The purpose of these tools is to simplify and organise tasks that traditionally may have taken hours of work just to understand.
Freshbooks, and other tools like it, are geared specifically to small businesses and may not be suitable for larger scale ventures. At that stage, you may want to consider building a finance team, or outsourcing your accounts to a provider to help, but it is unlikely that you would do so in the early stages.
Create a business plan
Completing the above steps will provide you with solid foundations for a comprehensive business plan, which will act as the blueprint for your business going forward.
If you have evaluated yourself, done market research, and worked out your financial situation then you’ll be in a strong place to tailor your plan entirely to your situation.
You can see that, in Erica Wolfe-Murray’s experience, creating a business plan actually encompasses almost every step that’s been listed above. Also, it’s worth bearing in mind Erica's point around investment – if you are applying for it, then your business plan and market research will need to be more thorough than if you’re starting your business without external support.
For a step-by-step guide, visit our business plan template page to create your own.
Choose a business structure
You’ll need to decide if you’re going to start a business as a sole trader, a partnership or as a limited company. All of these have different tax issues to consider, as well as different liability considerations: take a look at our article on choosing the right business structure, which discusses the merits of each.
Many businesses will set up as a sole trader to start with as it involves minimal red tape, but it's worth assessing whether a limited company might offer more benefits. It’s possible to change your business structure once you've started, but it makes sense to think about it now.
The difference between the main structures are included below:
- Sole trader – exclusive ownership of a business, entitlement to all profits, but also liable for losses.
- Partnership – similar to the option above, but profit and liability split between all founders.
- Limited company – a private company where your liability is only tied to the amount you have invested.
- Limited liability partnership – as above, but with multiple partners tied to the amount they have invested.
Brand your business
A strong brand is integral to the success of any business; think about the brands you know and what makes them stand out. The chances are that you will choose certain products based entirely on the brand that creates them – whether you choose iPhone or Android is a perfect example of this principle in action.
Branding comes in a number of forms, and how you choose to brand will depend on various factors. A lot of these factors will depend on your market research but there are several core considerations that you will need to bear in mind:
- Who is your target audience?
- What is your product?
- What is your unique selling point (USP)?
- What platforms should you use to advertise?
This is by no means an exhaustive list; for more information, take a look at our marketing category.
Depending on your business type, there are various elements of branding to consider:
- Logo – do you need one? Where will it be used?
- Premises – if you’re running a restaurant or opening a shop, how will your brand inform layout and decor?
- Marketing – what kind of branded marketing material will you use? This could be anything from flyers or posters to online ads or social media.
As above, this is not an exhaustive list, and you may need more (or less) depending on your type of business.
One of the core themes that you will need to consider in your branding is your USP – what makes you stand out, and why should people choose you. If this isn’t present in your branding or marketing, then you will struggle to gain customers from other businesses.
Marketing and finding customers are, largely, one and the same thing. Today, there are so many ways to approach this that providing direct advice might be tough. Instead, you should think about your market research and about the businesses you admire in your space.
How do other people find customers? What channels do they use? How do you get the best return on the money you put in?
It’s also important to remember that, sometimes, this will be a process of trial and error. You might have a target audience in mind, but if you’ve never marketed to them before then you may need to test a number of methods and approaches before seeing results.
As Sophie has said, sometimes luck will play a huge part in your business’s success. Try a variety of methods, and then over time you’ll get a clearer picture of where you should continue to invest your time and money to get the best results.
Build a website
The importance of your website will depend entirely on the form your business takes. It might be that your entire business is web-based, meaning that you will likely be investing a lot of time, and a lot of your finance, into a functioning, state-of-the-art domain. For other businesses, a website may just be a nice addition – a form of marketing to let people know that you’re around.
There are two or three basic approaches to building a website
- Build it yourself – this requires experience and knowledge that is quite specialist; if you’re not experienced in this area, then it may be best to avoid.
- Pay someone to create one for you – this allows you to build a bespoke site, without the drawbacks in the option above. This is often an expensive option though, and the more complex the site, the more it’s likely to cost.
- Use an off the shelf web builder – people like Wix and Squarespace are well-known now as simple and efficient tools for web creation. As these builders have progressed, they have fast become more than sufficient to suit the needs of even the most complex online business.
Take a look at the web builders below if they seem like they could be a good fit for your business.
If you want more information on this section, visit our how to build a business website page.
Protect your business
Protecting your business can come in several forms; from physical alarm systems and online virus software, to legal protection and copyrighting, depending on the form of your business, you should consider what exactly you need.
Depending on how much you’re looking to spend, and what your business is, there are several forms of protection to consider:
- Intellectual property protection – does your idea need to be protected? This can cover your business, brand and products.
- Trademarking – a trademark is a legally registered symbol, meaning your business legally owns it, protecting you from having it used elsewhere.
- Insurance – business insurance is essential for any venture, protecting you from financial or legal problems in the event of unforeseen issues.
There are several forms of insurance that you might want to consider, so it’s worth taking a look at our other articles to get the right policies.
Some businesses may also want to consider hiring consultants to help in the early stages; having a legal advisor outside of the company can help you to navigate any legal set-up in the beginning. HR advisors and health & safety consultants may also be useful if you want to make sure staff are being treated correctly.
As Erica mentions in the comment above, protecting your business is also a strategic decision; a one-sided, non-adaptive business may struggle. Thinking ahead and protecting your business through robust marketing and operation is as vital as insurance or legal support.
Find your premises
As with other stages in the starting a business process, the premises you choose will depend on the business you’re launching.
If you’re launching a retail store, then you’ll need a space for it. Bear in mind that it’s not always vital to have a premises for every business, particularly when you’re just starting out. A huge number of entrepreneurs start their businesses from home, in a spare bedroom or in the kitchen It might not be a permanent solution, but it is a great way to save money.
If you reach a point where you have a team and require space, coworking spaces and managed offices can be a good option, providing the added benefit of networking potential with the companies – big and small – that you might be sharing the space with.
You should know from either your market research or your own experience what equipment you need. It could be as simple as a laptop or a mobile phone, but if you don’t have the right equipment you could be starting at a disadvantage.
Of course, you need to stay on budget, so you might have to be savvy. Take a look around and do your research to make sure that you’re getting the most suitable products at the best prices. In the early stages you may not have all of the best equipment you could possibly get, but if it gets the job done then it’s sufficient.
Remember, you can upgrade to a nicer office with better equipment once you’ve made your business successful!
Choose your vendors or source your product
Not all businesses will need vendors. If you are providing services or manufacturing your own product, then this step may not be necessary.
If you do need to choose vendors though, then there will be considerations.
What did you find in your market research? What is your business’s USP? These questions, and others, will dictate which vendors you work with and the products you get from them.
Selling comes in a number of forms and depends on the form of business you are operating. If you’re starting a market stall, for example, the process is simple – not to say easy! – you will purchase goods, likely at wholesale, and sell these from your stall.
In this sort of business, the steps to selling are relatively transparent:
- You’ll need to actually be the salesperson working in the stall
- You’ll need to take cash from customers – it’s simple enough to take cash, but for more success, ensure that you can take card payments
These steps are similar enough in retail stores and restaurants, though the marketing and branding will deliver customers in very different ways.
Some businesses may take a different approach; if your model relies on staff travelling around and visiting prospective clients, then you will need a sales process. It may be that you yourself will be doing the selling – if not though, you will need to think about what sort of team you’ll need to build; this will be covered a little more in the next section.
Yet another form of selling may be required for online businesses; if your entire venture is based around a website then your selling will probably happen through digital marketing. Digital marketing comes in a number of forms; you should decide which form to use based on your business plan and market research, it’s likely that some will be more appropriate based on the audience you are targeting. For more information, visit our page on the types of digital marketing.
Build your team
Building your team is another part of starting a business that may not be relevant to everyone; it also may be a step that needs to happen earlier in some industries. For example, if you’re business is around manufacturing or software development, and you don’t have these skills yourself, then you may have built a team very early on to help deliver.
Thinking back to the first step in this process, building a team should be based on factors that support you and help your business to thrive.
In the early stages of a business, as Titus comments above, hiring ist critically important. If you are investing in people, you need to make sure you’re investing in the right people. They need to bring skills that your business needs, and they need to fit your business culture; on paper you might find the most well qualified candidate you could ask for, but if you don’t think they’ll mesh well with you or any business partners, then they may not be the right fit.
Building a team can be a challenge, and it might not ever be perfect. One of the most important things though, is to know in advance what you want.
Think of your business like a football team, what positions are filled already, and which positions need to be filled? What characteristics are going to be most suitable for those roles, and how can you find candidates that fit all the boxes?
In the early stages, you may want to use a recruitment consultant to help fill roles; this can be expensive, but you are paying a premium for experience and connections which may be difficult to replicate. Of course, if you have experience in people management or hiring already, then you may be more than comfortable completing the entire hiring process independently.
The next steps are difficult to define. For most businesses, it’s obvious: grow!
At this point though, you’ll know your business better than anyone and you’ll be best placed to choose what is going to be coming up. It is always good to set objectives though. What do you want to achieve in the next five years, and how will you know that you’re on the right track? What milestones should you be aiming for?
Setting these objectives is not only good for you, but it’s good for your teams too, and can be good for your customers. Knowing where you’re heading is the first step in getting there.
The tips we’ve provided are a good base, but without expert advice starting a business can feel incredibly tough. The experts that have contributed to this piece are…
Titus Sharpe – founder of several businesses over the years, Titus’s biggest company is MVF Global, an international lead-generation business operating over a range of regions and sectors.
Robin Knox – founder of IPOS, sold to iZettle in 2016, Robin is a serial entrepreneur who most recently founded Boundary Technologies, a smart home solutions company.
James Omisakin – founder of CompareEthics, James and his partner launched the company in 2018 as a comparison site for conscious consumerism, including products ranging from vegan to cruelty-free.
Sophie Fleming – founder of a luxury bag brand, Sophie Fleming, Sophie launched a brand that combines style and practicality while working full time.
Erica Wolfe-Murray – founder of Lola Media and director of TAXO’D, Erica is a serial entrepreneur and business author with decades of experience. Named a leading UK business expert by Forbes, Erica is passionate about new and small businesses.