Starting a business from scratch
Starting your own business can be nerve-wracking, and there’s a lot of administration that you need to get right. This guide covers everything you need to consider, from choosing a name and registering your company to paying tax and securing funding.
How to start your business
There are six steps you need to take before you can get your business off the ground.
1. Come up with an idea
The first step in starting a business is having a good business idea. Think about what you're passionate about and where you think there might be a gap in the market. Your idea could be related to jobs you've had in the past or even your hobbies. Try to ensure that your product or service solves a problem.
These unsecured and secured loans could help you grow your business, cover running costs or even fund a new company.
2. Road-test your plan
Speak to your friends and family to see what they think about your idea. Consider market research to get feedback from potential customers or buyers. Make sure you completely understand your target audience. Consider their disposable income and determine whether you can charge enough to cover your time and make a profit.
3. Check out the competition
Look online to see if anyone else has had the same or a similar idea to yours. Most businesses aren't wholly unique, but if similar products or services exist, you'll need something to make yours stand out from the crowd. You might be able to achieve this with cheaper pricing, improvements in quality, better customer service or a new twist or innovation.
4. Work out how to market your business
Once you launch, you need a steady stream of customers or clients to make the company successful. Think carefully about how you’ll attract new business. You could rely on word of mouth, social media, marketing or traditional advertising. All these approaches need resources, whether in terms of time, money, or both. You need to consider how you will find those resources.
5. Think about the future of the industry
Research market trends and think about the future of your industry. For example, is there a chance that AI will replace your skills, or are people turning away from your product because it's not environmentally friendly? You need to ensure that your business idea is as future-proof as possible. Thinking about the future may reveal new opportunities or ways to make your business more attractive.
6. Create a business plan
Use all this research to create a proper business plan: a written document that describes your business and outlines its future. It should include important information such as how much turnover you expect to make in the short and medium term and your strategy for achieving this.
All business plans need to contain several key sections, including an executive summary, an elevator pitch, company information, owner information, market research, marketing strategies, competitor analysis, product and service design and development plans, operations and logistics plans, and financial information, including costs and pricing. The Prince's Trust has a helpful template to get you started.
How to name your business
You want to come up with an original name that will help sell your goods and services. Check online to see what similar businesses have called themselves, and try to choose something that stands out.
Limited companies have to register their business name, which provides some protection, but whatever type of business you set up, you should consider trademarking to protect your brand. Trademarking will prevent other businesses from stealing your intellectual property, including slogans, brand names, logos, etc. To find out more, read our guide to trademarking.
How to register a business
Once you've decided which type of company to set up, you'll need to register it. The process differs depending on the type of company structure you choose. There are three main options: sole trader, limited company and limited liability partnership. Read our Sole trader vs limited company guide to find out which is right for you and the steps you'll need to take to get started.
How much does it cost to start a business?
The cost of setting up a business varies greatly depending on your industry, the type of business you want to start, and what you need to get started. Many jobs require nothing more than a computer and a wi-fi connection, such as freelance writing, bookkeeping or being an e-book novelist. Some jobs require some goods or materials to get started, such as wool for a knitting business or supplies for a cleaning business. Some enterprises have much larger overheads, such as offices, factories or heavy equipment.
Many entrepreneurs either self-fund their new business or seek investment from friends and family. However, if additional start-up capital is required, numerous options are available. Most fall into three categories: loans that require repayment, grants that do not, and funding from investors in exchange for equity.
Read our in-depth guide to funding options to learn more
Tax and finance
Taxes and finances are a huge part of running your own business. Self-employed individuals must complete a personal tax return each year. Depending on the nature of your company, how much it makes, and whether you have employees, you may also need to consider national insurance contributions, VAT registration, corporation tax, workplace pensions and more.
You should also keep comprehensive records, including all your sales and expenses receipts. Hiring an accountant will cost money, but they can help you navigate all your responsibilities and ensure that you comply with UK legislation.
You'll need to set up a business bank account if you’re running a limited company or in a partnership. Sole traders do not need a business account, but it can be useful for keeping your business finances separate from your personal ones. You can also use a business bank to arrange finance, such as a business credit card or overdraft.
Insurance is another critical area to consider. There are plenty of different types, and while they don’t tend to be compulsory, they’re usually well worth having. These include:
Employer’s liability insurance (a legal requirement if you have employees)
Critical illness cover
Equipment insurance
You could also consider hiring a financial adviser and planner who can help you navigate all the financial areas of your business and your personal life.
Find out more about the benefits of working with a financial advisor
Choose the best business bank account for your company with features including no set up fees.