10 Sep Setting up a Small Business: Step-by-Step Guide (Part 1)
Starting a small business involves immaculate planning and critical financial decisions, alongside a series of legal activities. To help you plan, prepare, and manage your new business, here is the first part of a guide with all the essentials you need to know.
Of course, it all starts with an idea. Therefore, if you are considering to start a business, it is important your idea is realistic enough so that you can turn it into a service or product. There are several bodies that can help you with developing business ideas, such as the:
Note: Always make sure you protect this idea as it instantly becomes your intellectual property. That way, it will be much easier to take legal action against anyone that will try to copy, steal or otherwise use your idea without your permission. Some of the ways you can achieve that is by registering your business name and logo as a trademark, patent a new working part, use copyright, and more.
How to Make your Idea a Business
In brief, you need to research your market, and identify potential customers that would want to use your service or product. Does your idea meet a need? Are people willing to pay for it? Talk to them and find out. Then, it’s time to test your service or product and make any necessary changes to it. Continue testing with real customers until you are absolutely convinced that there is an opening in the market and there is a demand for your service or product.
In addition, you should also consider finding suppliers and partners, people that you will be selling your idea to and developing it with. Finally, determine which legal structure best suits your business and register for tax (consult your accountant).
Explore Funding Sources
The most common way to get funding is via a bank loan. To manage to get a loan, though, you will have to give cash flow forecasts and proof that you will be fully capable of paying back the loan (plus interest). You might also be required to provide security against the loan (i.e. a car or house). This is the point where you need to consider very carefully just how much risk you can take on before you make a decision.
Note: You should definitely check out the British Bankers’ Association’s Finance Finder tool, to find finance in your area. There are wealthy people that invest in start-ups, called business angels, alongside regional funds that you could get your hands on.
However, you could also benefit from the various government-backed schemes to get funding for your business. For additional help, you can contact Jobcentre Plus and find out if you are qualified for financial help from them. Alternatively, the Finance Finder tool is a great help when trying to find the schemes you are eligible for.
Another way to get funding is through equity funding, which includes crowdfunding* and venture capital**. When this happens, you and any outside investor will own the company jointly, meaning investors are entitled to business profits and have a saying in the running of the company. This is why you need to get legal advice first before you take any further action.
* crowdfunding is similar to business angels, only, in this case, there is a large group of people that invest in start-ups.
** venture capital involves companies that invest in new businesses that they foresee will grow rapidly.
More information about private equity and venture capital here.
However, before you proceed to that equity funding, you may want to fund your growth plan by selling business shares to family and friends and raise some money.
Coming up, How to Research your Market, Develop a Business Plan, and Find Premises/Suppliers/Partners.