Everyone loves your homemade marmalade, and you’ve started to wonder if you could actually create a business out of it. While the idea of being your own boss — and doing something you love — is exciting, you don’t know exactly where to start.
Creating a business from scratch can be daunting. It’s not enough to have a great idea; you have to work tirelessly to get it off the ground. That’s why we’ve adapted Sage One’s white paper, “How to start and grow your business,” into a clear, step-by-step guide for aspiring business owners.
If you’re making the leap, here are nine things you should do.
1. Define your business
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You need to assess how much time (and money) you’re willing to devote to your new venture. Will it be full-time, part-time, or seasonal? Additionally, consider if your business will require a bricks-and-mortar location, or if it can all be done online.
Once you have these basic questions answered, you’re ready to get started. You want to get it up and running quickly, but don’t rush the process or you might skip a few critical steps.
2. Ask the experts.
The best way to understand what you’re getting yourself into — and hopefully avoid common mistakes — is to do your own research and ask around. Read as much as you can about starting a business, but don’t hesitate to ask your bank, use UK Government Resources, or ask other small business owners for advice. You may also want to use an accountant for help with tax compliance and expenses, as well as basic business information.
3. Know your market.
Your business may not appeal to everyone. In fact, it might be very niche (e.g. an online store for new parents). It’s not enough to know who your customers are; you should also familiarise yourself with their needs and shopping habits. This could involve contacting potential customers and asking for feedback on your products and prices.
On the other side of the spectrum, you should know who you’re up against. Identify your competitors and learn what they offer, how they sell it, and how much they charge. Focus on their strengths and weaknesses so you can find ways to outperform them. (Just don’t assume lower prices will be the best way to do that).
4. Work out the costs.
Your business’ location could be your biggest overhead cost, especially if you’re eyeing prime locations. There is one way to reduce the cost: start it from home. If and when you need a physical space, be diligent about searching for one that is the right size and type — and always negotiate on price.
Work out the other costs, which could include equipment, furniture, and eventually wages. Keep in mind that it might be hard to get a loan or grant, so you may have to use your own money upfront.
5. Develop your brand.
Branding is, essentially, how your business looks and feels — from your logo and web presence to your signage and marketing collateral. It affects how customers view your business, so it’s essential to make your branding clear, consistent, and engaging. In many cases, you may need to enlist a professional designer.
Your website is especially important since it is often where customers judge your business before buying anything. There are many DIY solutions available, but regardless of which one you choose, make sure your site is well-designed and easy-to-use.
6. Make a business plan.
Now you’re ready to write your business plan, which should consist of the following: an executive summary, company overview, market description, competitive analysis, marketing strategy, operations plan, and your financials. In a nutshell, it’s a roadmap for your business.
Fortunately, it doesn’t have to be complicated or long. Sage Business Advice has great resources to help you start to plan, while the Sage Business Community is a great forum to ask questions about growing and running your business with other business owners.
7. Make it official.
It’s time to register your business. You’ll need to choose between being a sole trader, limited company or business partnership – the UK Government website has some great resources to help you work out which option will suit you best.
If you go for the limited company option, you’ll need to register your business with Companies House and appoint people to be directors. As part of this you’ll need to have a name and address for the company, at least one director and at least one shareholder, as well as setting your company up for Corporation Tax.
8. Track your finances.
It’s incredibly important that you stay on top of your finances from the get-go. First open a company bank account, preferably one that is separate from your personal account. By law, you’re required to keep bookkeeping records for five years — so automated, built-in software is an ideal solution. Consider using Sage One Cashbook, a low cost online cashflow tool which helps business owners quickly and easily manage the money flowing in and out of their business.
9. Explore crowdfunding.
If you’re looking beyond traditional funding (e.g. bank loans), you may want to look into crowdfunding. It’s increasingly popular among new businesses; in 2013, the crowdfunding industry is estimated to have raised over $5.1 billion worldwide.
There are two models of crowdfunding: peer-oriented donations (when someone makes a donation in hopes of receiving an incentive) and investment funding (where funders become owners or stakeholders in the company). Note that various crowdfunding sources will take a percentage based on the amount collected, and there are tax considerations as well.
Offer a menu of options at different price points, create a compelling story behind your idea (ideally incorporating a video), and use data to support your cause. Start with your own network and then branch out via social media. Just be sure to have a plan in place if your crowdfunding campaign succeeds.