How to start a business from scratch
- Theme: Plan to start your business
There’s no doubt that setting up and making money from your own business is one of the most rewarding ways to earn a living. You’re in complete control of your own destiny; the power is in your hands to increase your chances of success and outwit the competition.
However, it’s not as straightforward as having an idea and quitting your day job straight away. There’s a lot of ground work you need to put in from the outset in order to prepare your business to tackle its future challenges head-on and handle any bumps in the road.
Deciding what type of business to start
For many entrepreneurs, they know what type of business they wish to start because they have a unique idea for a product or service. However, if you’re someone who simply wants to have a go at running your own business but don’t know what to focus on -make sure you chose something you’re passionate about. This way you can be sure that your passion and enjoyment of running your own business will never waver, even when times get tough.
Registering your business – what’s best for you?
For UK taxation purposes you will need to quickly decide what type of business entity you’d like to form. There are five or six different options for you to consider:
- Sole trader – an unincorporated business owned by a single individual
- ‘Ordinary’ business partnership – a registered business organisation involving two or more business owners that equally operate and own the business
- Limited and limited liability partnerships – similar to a business partnership, although your liability for business debt differs. Limited partnership debts that can’t be paid by the business are split among the partners. Meanwhile limited liability partnerships state partners are only personally liable for debts to the value of what they’ve invested in the business
- Limited company – an organisation that you can create to run your business – it’s responsible in its own right for all of its operations with its finances completely separate to your personal finances
- Unincorporated association – an organisation set up through an agreement between a group of people who come together for a reason other than to make a profit e.g. a sports team.
- Social enterprise –a profit-making business that also helps people or communities. If you’re setting up an organisation that doesn’t plan to make a profit, an unincorporated association would be more suitable.
Note: If you need any further information or assistance on registering your business, make sure you visit the Companies House website.
Find out if you can protect your intellectual property
One of the first things you should investigate as an entrepreneur is how you can protect and futureproof your business idea. It may be possible to trade mark your business name; if you’re planning to sell a product that you believe to be new to the market, you should search for copyrighted and patented works to see whether that is actually the case. If so, consider protecting your intellectual property with copyright.
This way, if someone infringes your copyright down the line, you’ll have legal grounds to pursue the guilty party and either demand they pay a fee for a license or compensate you for any financial loss you may have incurred.
Prepare a business plan
A business plan is an absolute necessity for any business aiming for long-term success and growth. It’s the perfect opportunity to set out your business plans for the coming months and years., Having a business plan will help when you approach potential partners and investors and will give them the confidence they need to invest in you.
Naturally, any business plan needs to be flexible and fluid, with the ability to change and adapt over time as your business evolves.
Unaware of potential obstacles? You’ve not done enough market research!
A fundamental aspect of setting up any new business is ensuring it resonates well with your target market, meeting an identified demand that’s altogether different to competitors operating within your space. If you’re going into this believing there are no potential obstacles to growth, you’re setting yourself up for a nasty surprise.
Thorough market research and competitor analysis gives new businesses like yours the ability to make informed decisions about the way you position your products and services to consumers. There are two types of market research you should carry out to find out exactly what your customers want.
Quantitative market research takes a data-led approach to understanding the demands and behaviours of your target customers. Questionnaires and surveys are the most popular and cost-effective quantitative research methods, allowing you to ask questions of your target demographic en masse.
Qualitative research allows businesses to lift the lid on what their target customers think and get insight into how they view your competitors and the industry as a whole, whilst helping you to better understand their own pressure points and needs. The key to long term growth as a new business is understanding your market and a combination of quantitative and qualitative research will help you take full advantage of the opportunities available to you.
At the British Library’s Business & IP Centre you can get access to a wide range of reliable and relevant industry reports to help your business stay ahead of emerging technologies and industry legislation and better understand how your marketplace is evolving. ‘The British Library for Business’ is a Mini Masterclass workshop that gives you practical guidance in using key British Library sources to help take your business forward.
Don’t run before you can walk
As a new business in the midst of new product development it’s important not to a) put all your eggs in one basket and b) spend all of your resource on something without proof of its market potential.
The Lean Startup methodology is adopted by many start-ups these days as, in the past, too many have begun with an idea for a product that they think people want. After spending months, sometimes years, developing and refining a product without ever showing or testing the product to their target demographic, it’s then a huge shock for a new business to find that it doesn’t meet consumer demand, resulting in the failure of the business before it’s even taken off.
Defining a minimum viable product to get the opinions of target consumers is a great idea. It’s a skeleton of the final product you’d take to market but it allows you to understand its potential before investing maximum resource.
Think of a market exit strategy to provide long-term focus
Setting up your own business is, on the whole, a genuinely rewarding experience. But whilst it’s important to work in the here and now, you should also play the long game too. It’s highly recommended that you have a market exit strategy in place as there may ultimately come a time when you decide to walk away from the business.
Whether you decide to sell it on, merge with a competitor or keep the business and entrust someone else to run it day-to-day on your behalf, it’s important to have an end goal in mind.
For a decade we have been helping entrepreneurs based in and around London start, run and grow their businesses. Isn’t it time you paid us a visit?
Now’s your chance. On 27 September we’re holding a day of free workshops, talks and events on everything from raising cash to getting your business online. You’ll meet like-minded people, talk to our seasoned business experts, including our 'Entrepreneur in Residence', Julie Deane OBE founder and CEO of The Cambridge Satchel Company, who will also be present to tell you how to start a business from your kitchen table. So come along to our 'Start-up Day' and get inspired to take your first step to entrepreneurship.