Start your own business in 10 steps

Technology has made starting your own business cheaper, quicker and easier than ever. People of all types do it and some 360,000 new small businesses are started each year in the UK.

Many people start their own business to generate a full-time wage and be their own boss. Redundancy is the catalyst for some, while others come up with a brilliant idea or spot a gap in the market. Many people start their own business to gain more flexibility to better balance their professional and personal lives.

Lots of people start a “side hustle” to earn a few extra quid, and part-time, spare-time or seasonal businesses can be very successful. Some new businesses only sell online, some offline only , while others do both. Customers can be other businesses, consumers or both, whether in the UK or overseas.

There are no guarantees of success and many new businesses fail. It takes hard work, knowledge, good ideas, sound management, great marketing and some luck. If you’re thinking of starting your own business, here are 10 steps you need to take to get off to a good start. 

1. Think of a great business idea – and test it

Coming up with a ground-breaking business idea could make you enormously successful and wealthy, but, in reality, few business ideas are unique – most are variations on an existing idea. You can still be successful, as long as you find ways to set your new business apart. Be special. Give customers a good reason to choose you. 

And just because you think you’ve come up with the greatest idea since sliced bread – doesn’t mean others will agree. Very early on, speak to potential customers (not just friends and family) and get their feedback on your business idea(s). Use it to make your business idea more attractive. If feedback tells you your idea is a non-starter – bin it and think of something else. You may just have saved yourself lots of time and money.

2. Decide which type of business you’ll start

Full time, part time or seasonal? If it’s a side hustle, can you run it at the same time as your job? How much time can you dedicate to your new business and how much income do you need it to generate? Answering these questions will help you to decide whether to start a full-time, part-time or spare-time business. Also decide how you’ll sell, who your customers will be, how you’ll satisfy their needs and when you’ll launch.

3. Carry out some basic market research

Many businesses try to sell to everyone, but many others target specific customers. They focus on that “market segment” and aim to become a leading supplier within that “niche”. Once you’ve decided who your target customers are, do some basic research. Find out what they buy, when and how. How much do they spend? What are the future trends within your market? Speak to potential customers, note their comments and use them. Ask them whether they’ll pay the price you’re thinking of charging.

Also research your competitors. What do they sell and how? What services do they offer and, crucially – what are their prices? Are their products/services better than yours? Be honest. Focus on their strengths and weaknesses and find ways to be more attractive. Competing purely on price isn’t always effective, quality and value are often key.

4. Work out how you’ll fund your new business

Minimise your start-up costs. That doesn’t necessarily mean spend no money, but spend as little as you can to get your business off the ground in a good way. Borrow and buy second-hand where possible. Do swap deals with other businesses. Don’t burden your new business with excessive debt. And don’t just put it all on a credit card – it can prove very expensive. 

Work out roughly how much you need to start your business. You’ll probably need to cover some or all of your start-up costs yourself. If you need more, for example, to take on premises, buy a vehicle, equipment or stock/materials, think carefully about how you’ll pay for it.

If you plan to accept investment from friends and family there are risks, because new businesses often fail. Don’t expect to get a grant or bank loan, although a government-backed start-up loan may be an option (work out how much interest you’ll pay and whether you can afford to pay it). You may not earn any income at first, so also think how you’ll get by until you do.  

5. Develop a winning business brand

Your brand is the perception customers will have of your business. Establish your brand values; these are the things that your business stands for. Come up with a strong brand identity (ie business logo, typeface, colours, strapline, etc). Find ways to distinguish your brand – never simply copy other brands. Be authentic – be you. Getting professional help with your branding can be a wise investment. 

Coming up with a good business name is crucial, so dedicate enough time and effort to it. Picking a bad name could limit your ambitions. Keep it simple. Choose a business name that tells people what you sell; something short and easy to remember. Ask others for their opinions on your preferred names shortlist.

6. Start marketing your business ASAP

People can’t buy from you if they don’t know you exist – so tell them. Use channels that are most likely to reach your target market. For some businesses that could be a leaflet campaign, card in the newsagent’s window or advert in the local press. Social media may prove more successful for others, although it can work well for all types of business. Set up your social media channels and start posting early. Never underestimate the power of word-of-mouth. Try to get your customers to say nice things about you on social media and in reviews.

7. Create an impressive website

If you’re selling on marketplace websites such as eBay and Etsy, set up your pages. If you need your own website, using a proven template from a DIY website building solution can save you money. Your website should also be optimised so that it ranks high up in Google searches. If you really don’t have what it takes, paying to have a basic website created for you could prove a good investment. Your website should be a fantastic online shop window. Even if you don’t sell online, many potential customers will want to find out more about you by checking out your website.    

8. Learn some tax and finance basics

You must comply with tax rules and requirements, otherwise (UK tax authority) HMRC may fine you. Your new businesses should also be as tax-efficient as possible, so increase your basic tax knowledge (or reach out for expert guidance). Claim all of your tax expenses. Realise the importance of keeping your cash flow healthy. Cash always will be king – you can’t run a business without it.

Read: 20 common tax and accounting terms that sole traders should understand and 45 allowable expenses you can claim when you’re a sole trader.

9. Use time- and money-saving apps to your advantage

Harnessing the power of software and apps can enable you to complete tasks successfully, while saving you time and money. Good accounting software can allow you to stay in control of your finances and run your business more effectively. By law, you must maintain accurate financial records for your business and keep your yearly records for six years. Apps can make a wide range of pivotal business tasks much easier, from filing your Self Assessment tax return to managing your customers and stock.

Find out more about Coconut – “The accounting & tax app for self-employed people”. It enables you to keep business accounts and track your income, manage invoicing, claim your expenses and work out how much to set aside for tax.

10. Register your new business

• When people start working for themselves, most choose to become a sole trader. There are about 5.5m businesses in the UK and 3.2m of them are sole traders.
• If you earn more than £1,000 in a tax year (6 April to 5 April) and choose to become a sole trader, you register for Self Assessment. You must register for Self Assessment before 5 October in your business’s second tax year, otherwise HMRC can fine you.
• As a sole trader, you must complete and file a Self Assessment tax return (the SA100 form) every year, as well as supplementary tax return page SA103, summarising your taxable income and expenses. You pay Income Tax on your taxable profits and any National Insurance contributions that are due.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.