How to start a business and become self-employed: 14 steps for success

Starting a business or becoming self-employed can be an exciting venture that offers a world of possibilities. Whether you have a brilliant idea, or a skill you want to leverage, taking the leap to become self-employed requires careful planning and practical strategies. 

In this blog post, we will provide you with actionable tips and information to help you navigate the journey. So, let’s explore 14 essential steps to starting a business and becoming self-employed.

Step 1. Define your vision

The first step of starting your own business and becoming self-employed is to define your vision. Namely, it is crucial to explore potential business ideas that align with your skills and interests.

Start by reflecting on your strengths, talents, and areas of expertise. Consider activities that bring you joy and fulfilment, as well as the knowledge and experience you have acquired throughout your career or personal pursuits.

Look for opportunities where your unique strengths can be applied in innovative ways. For example, if you have a knack for technology and a passion for environmental sustainability, you may explore business ideas centred around renewable energy solutions or eco-friendly innovations.

It is also important to consider real-life examples that can inspire and guide your ideation process. Take time to study successful entrepreneurs who have created thriving businesses. By examining their journeys, you can gain valuable insights into how they identified market gaps, leveraged their skills, and turned their ideas into successful ventures.

Remember, defining your vision can be an ongoing process. As you progress, remain open to new possibilities and be willing to refine your ideas based on market feedback and evolving trends. By combining self-reflection with inspiration from real-life examples, you will be better equipped to generate a business idea that excites you and has the potential for success.

Step 2. Research your market and validate your idea

Once you have identified a potential business idea, the next step to starting your own business and becoming self-employed is to conduct thorough market research. Market research provides valuable insights into your target audience, competition, and industry trends that enables you to make informed decisions and refine your business concept.

Start by understanding your target market. Identify the demographics, preferences, and needs of your potential customers. Conduct surveys, interviews, or focus groups to gather feedback and gain a deeper understanding of their pain points and desires.

Analysing industry trends and studying your competitors is equally important. Stay up-to-date with the latest market developments, technological advancements, and emerging consumer preferences. Evaluate your competition by assessing their strengths, weaknesses, and unique selling propositions.

To validate your business idea, consider creating a prototype or offering samples to potential customers. Their feedback will help you refine your product or service, identify potential improvements, and validate the market demand.

Remember that market research and validation are ongoing processes. To help your new business succeed, you need to continuously monitor and adapt to changing market dynamics, consumer preferences, and competitive landscape. 

By conducting thorough market research and validating your business idea, you can increase your chances of success and ensure that your product or service meets the needs of your target audience.

Step 3. Create a business plan

Effective business planning is essential for self-employed professionals to establish a solid foundation and pave the way for long-term success. 

While the core principles of business planning apply to both traditional businesses and self-employment, there are specific considerations that cater to the unique nature of being self-employed.

We have compiled a list below of areas you should consider when creating a successful plan for a new business:

Define your mission, vision, and values

Start by defining your mission, vision, and values. Clarify the purpose and direction of your new venture, outlining the impact you aim to make and the values that will guide your decision-making process.

Set business goals

Setting specific and measurable goals is crucial in self-employment. Outline both short-term and long-term objectives that align with your vision and are attainable within your chosen timeframe. Realistic goal setting will keep you focused and motivated, serving as a roadmap for your self-employed journey.

Analyse challenges and opportunities

Conducting strategic analysis, such as a SWOT analysis, is particularly valuable for self-employed individuals. Assess your own strengths and weaknesses, identifying areas where you excel and areas that may require further development or support. Explore opportunities within your chosen industry or market and anticipate potential threats that may have a negative impact on your new business.

Outline the resources you need

Developing a comprehensive business plan that encompasses marketing, operations, and financial strategies is essential. Outline your target market, competitive positioning and marketing tactics that align with your self-employed brand. Establish efficient operational processes and systems that enable you to deliver your products or services effectively. Additionally, include a detailed financial plan that covers budgeting, pricing strategies, and projected revenue and expenses.

Remember that a business plan is a dynamic document and it should be regularly reviewed and adjusted as your self-employed venture evolves. Continuously assess market conditions, customer feedback, and industry trends to ensure your business plan remains relevant and effective in achieving your self-employment goals. By strategically planning for your self-employed venture, you are laying a strong foundation for sustainable growth and success.

Discover more about how to craft the perfect strategy with our comprehensive guide on how to write a business plan. 

Step 4. Understand your startup costs

Even if you’re self-funded, you must still understand your startup costs. You should start by mapping out all of the costs you anticipate having in the first year of being self-employed. Then, determine how much money you need to earn every month to stay in business (e.g. your operating income and salary).

Bear in mind that it takes a few years to build up your revenue when you are self-employed. That’s why being mindful of your costs and cash flow is so critical, which leads us to the next step.

Step 5. Explore funding options

The next step in how to start your own business and become self-employed is to explore how you will get your funding. Securing adequate financing is crucial to cover initial expenses, invest in necessary resources, and sustain your operations. 

When figuring out the finances for your new business, there are many alternatives if you don’t have your own startup cash. The list below includes funding options you could consider:

Personal savings

If you have personal savings, you could utilise these to kickstart your self-employed venture. This self-funding approach allows you to maintain control and ownership of your business. Carefully assess your financial situation and set aside a portion of your savings to cover startup costs and initial expenses.

Friends and family

Consider reaching out to friends and family members who believe in your new business idea. Present a well-prepared business plan that outlines your vision, goals, and potential returns. However, be cautious when involving personal relationships in business matters, and ensure clear communication about expectations and terms of any financial arrangements.

Crowdfunding

Harness the power of the internet and engage with potential customers and supporters through crowdfunding platforms. Create a compelling campaign that showcases your business idea, its unique value proposition, and the impact it can make. Encourage individuals to contribute funds in exchange for early access to your products, services or other meaningful rewards.

Microloans and grants

You could explore microloan programs specifically designed for self-employed individuals. These loans, typically offered by nonprofit organisations or government agencies, provide smaller loan amounts with favourable terms. Additionally, a small research grant may be available and can provide financial support without the need for repayment.

Personal loans

If you have a good credit rating, you can take out a personal rather than a business loan. You can also borrow against credit cards or a personal line of credit. Just be aware of long-term interest and tax implications before you do so.

Alternative funding

Investigate alternative financing methods such as peer-to-peer lending, invoice financing, or revenue-based financing. These innovative approaches provide alternatives to traditional lending institutions and may be more accessible for self-employed individuals.

Explore more start-up funding options with our helpful guide to funding for new businesses. 

Step 6. Determine your business structure

Now, it’s time to define what type of company you plan to run: your business structure. Are you better off as a sole owner or proprietor? Do you have a partner? Do you plan to incorporate? Each option has its advantages as well as associated tax reporting responsibilities and regulatory requirements.

Here are definitions of the most common company structures:

Sole trader

A sole trader, also known as a sole proprietor, is a type of self-employed business structure where an individual operates their business as the sole owner.  A sole trader is personally responsible for all aspects of the business. 

Partnership

A partnership is formed by two or more individuals who come together to carry out a business venture. The partners share in the profits, losses, and decision-making of the business as outlined in a partnership agreement.

Private limited company (Ltd)

A private limited company (Ltd), is a privately owned business structure where shareholders have limited liability protection. The company is managed by directors appointed by the shareholders, and profits are distributed among the shareholders.

Limited partnership

A limited partnership consists of at least one general partner and one or more limited partners. The general partner(s) have unlimited personal liability and manage the partnership, while the limited partner(s) have limited liability and typically contribute capital without active involvement in management.

Limited liability partnerships (LLP)

A Limited Liability Partnership (LLP) offers partners limited personal liability for the debts and obligations of the partnership. LLPs are commonly used by professionals, allowing them to form a partnership while limiting personal liability. Each partner's liability is limited to their investment in the partnership, and they are shielded from the actions and debts of other partners.

Step 7. Investigate your legal requirements

Before you start your business and become self-employed, consult a lawyer to ensure you’ve considered all the legal requirements and remember to include legal fees in your financial planning as well. It’s important to have a good lawyer on call to solve legal and contract disputes, and for advice before signing new contracts.

Here are some of the questions to ask, and services to request, from a lawyer:

• Should your name or logo be registered as a trademark?

• Do you need copyright protection?

• Can they create standard contracts for negotiating with other businesses and vendors?

• What’s involved in being a sole trader, forming a partnership, or incorporating your business?

• What’s the process for sharing equity when seeking private investors?

Different laws apply to every type of business, product or service. Your local government website is an excellent place to begin your research about requirements. You should also consult national consumer and privacy laws for collecting personal customer information.

Step 8. Create and register a business name

After you’ve had a conversation with your accountant and lawyer, it’s time to register your business name. Do your homework to understand all the requirements.

First, ensure your name is available. The quickest way to find out is through the Companies House online name checker.

If you plan to conduct business in multiple countries, be sure to check for the use of your name in each country as well. There are local government services you can use to check if the name is owned by someone else as well. You’ll need to conduct an online search to find each of those services, depending on where you’ll be operating.

Once you have checked to see if the name is available, you should register that name (to make sure it’s accepted) before creating business cards, logos, websites, and more. It’ll save you stress and most likely a major headache later on. Again, registration sites differ by country.

Finally, if you decide to register your name as a trademark, you need to do this when registering your business name. Your lawyer can guide you through this process but bear in mind that there are additional costs associated with every registration.

Step 9. Apply for permits and business licences

Visit the government’s licence finder site to find out whether you’ll require a licence of any sort.

When applying for permits and business licences, check to see whether you qualify for self-employed tax breaks. Speaking of tax, you need to register for VAT if you expect your turnover to exceed £90,000 (unless your goods or services are exempt).

Step 10. Open a small business bank account

There are different types of business bank accounts and products that can help you save money and grow faster when you are self-employed. As soon as you’re ready to start trading, arrange a meeting with a business banking specialist to determine which type of account is right for your business.

Cross-reference the bank’s advice on any savings bundles or special accounts you might need with your accountant.

If you’re planning to generate a high volume of sales in overseas markets, opening a bank account in those countries makes sense as well. You’ll save money on bank transfer and currency exchange rate fees.

In addition, establishing a financial presence country by country will make it easier for your bookkeeper and accountant during tax season, as they’ll be able to see separate statements for country-specific revenue.

Step 11. Set up your accounting systems

When starting a new business and becoming self-employed, you’ll likely need to rely on accounting software. If your accounting system is set up correctly from the start - with future growth in mind - you’ll save yourself time and money in the long run.

Many self-employed business owners outsource their accounting to a bookkeeper or chartered accountant. Whilst that can save you a lot of time, you still need access to tools that enable you to see how your finances are doing month-to-month. Since cash flow is critical in the early days of starting a business, don’t launch without - at the very least - a cash flow spreadsheet in a tool like Excel as well as a balance sheet template.

You might also evaluate accounting software that automates this process and can help you visualise money coming in versus your monthly outgoings.

Regardless of the option you choose, maintain an exhaustive record of all of your finances in one place. Every level of business has legal and tax obligations for record-keeping. Nailing your bookkeeping from day one frees you up to work on growing your business.

Step 12. Outsource essential functions early on

When you become self-employed, you might be tempted to do everything yourself to save money. But the time spent on tasks that aren’t your specialty can cost you money. Prioritise your time on the business objectives that will help you generate revenue.

Then, delegate or outsource tasks that aren’t your area of expertise (e.g. accounting, admin, or public relations). If you have the funds and legalities worked out, you can hire a few employees to share the workload.

If money is tight but you still need help, you can enlist contractors or freelancers to help you cover areas which aren’t your strength. Managing your sanity is just as important as managing your time.

Step 13. Familiarise yourself with payroll and tax

Employees’ salaries require taxable amounts to be withheld from their payments. You must treat certain contractor payments in a similar fashion. Speak with your accountant to ensure you meet all tax responsibilities.

Digital payroll software takes the hassle out of payroll, allowing you to:

• Set up and track employees’ health insurance, pensions, deductions, and benefits

• Monitor employees’ payroll data and annual changes (e.g. bonuses and salary bumps)

• Pay tax digitally 

• Automatically add new employees to your payroll system

• Enable automatic direct deposits, which transfer funds into your employees’ accounts worldwide

For more information on what’s involved in setting up and administering payroll, check out our advice on using payroll software.

Step 14. Build a support network

The last step of how to start your own business and become self-employed is to build a strong support network. As a self-employed professional, you don't have the built-in support system of a traditional workplace. However, there are various ways to establish a network that can provide guidance, collaboration opportunities, and emotional support.

Join professional associations and networking groups

Explore professional associations and networking groups relevant to your industry or niche. These communities offer valuable resources, networking events, workshops, and mentorship opportunities. Engaging with like-minded professionals can expand your knowledge, foster relationships, and open doors to potential clients or partnerships.

Attend industry conferences and events

Participate in industry conferences, trade shows, and seminars. These events provide opportunities to connect with peers, industry leaders, and potential clients. Take advantage of networking breaks, panel discussions, and social events to exchange ideas, share experiences, and build relationships within your field.

Seek mentorship

Identify experienced professionals who can serve as mentors in your industry. Mentors can provide guidance, share insights, and help you navigate the unique challenges of self-employment. Their expertise and perspective can prove invaluable as you make important business decisions and develop your career.

Collaborate with peers

Collaboration can be key to self-employment success. Seek opportunities to collaborate with other self-employed professionals, either within your industry or complementary fields. By combining your skills and resources, you can tackle larger projects, expand your reach, and offer comprehensive services to clients.

Cultivate personal relationships

Don't neglect the importance of personal relationships in your support network. Family, friends, and trusted confidants can provide emotional support, motivation, and a sounding board for your ideas. Share your aspirations, challenges, and victories with your loved ones, as their encouragement and understanding can be a valuable source of strength.

How to start a business: the verdict

In this post, we’ve outlined the steps you should follow to start a new business and become self-employed. 

By defining your vision, conducting thorough research, and taking the strategic steps outlined here, you can pave the way for a successful venture. Remember, entrepreneurship requires dedication, resilience, and continuous learning. So, embrace the challenges, stay adaptable, and keep pushing forward. 

Always remember, fortune favours the bold. But it also smiles upon those who are prepared. With the right mindset and preparation, you can turn your dreams into reality and thrive in the world of self-employment.

Grow your business with Quickbooks

When starting your business, one of your biggest priorities will be to streamline your accounting processes and save time managing your finances. Luckily, we’re here to help. QuickBooks offers powerful accounting software tailored for small businesses and self-employed individuals. 

With us, you can take control of your cash flow with informative insights and intuitive dashboards. You can also create and send invoices on the go from your laptop, smartphone, or tablet, all the while ensuring compliance with HMRC’s Making Tax Digital rules.

Join 6.5 million Quickbooks subscribers worldwide and explore our range of plans today. 

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