How to start your own business

How to start your own business – a practical guide

15 min read

So, you’re ready to take the leap and start a business. Congratulations! Making that decision might feel risky, but it’s a good thing. In fact, 74% of small and medium business owners are willing to take big risks to ensure they succeed. “Fortune,” as the saying goes, “favours the bold.”

Still, you should also consider…

  • Two thirds say the first year is the toughest
  • Half of small businesses survive five years or more
  • Competition, cash flow, and taxes are the top three threats

How to start your own business

Data from QuickBooks, TSheets, and Oxford Economics

Creating something all your own is both rewarding and an opportunity to achieve work-life balance whilst pursuing your passions. But, it isn’t easy. To help, this article guides you through the 15 steps to start a business along with a downloadable checklist you can fill out as you go from idea to launch to success:

How to start your own business

1. Define your vision

A business without a vision is like a ship without a rudder. You need to define this early on to set everything else in motion. Writing a mission statement is a good way to lay this foundation. In a few paragraphs, identify your company goals and high-level strategy to accomplish them. It’s helpful to visit some of your competitors’ websites to learn from what they’ve written. Asquith’s mission statement inspires customers and employees alike. Notice that it’s broken down into three parts you can likewise follow.

Mission statement:

“Our mission is to create clothes that make you feel good inside and out.”

Narrative: “Product. Planet. People. These three things are closest to our heart.”

List: “Mindful design” etc.

When writing your vision, be as clear and to the point as you can be. Use the example above to write a powerful and motivational message to inspire team members to work together towards a common goal.

2. Research your market opportunity

There’s a lot to consider when starting a new business—everything from developing your product or service to accounting, legal, marketing, and more. It’s easy to focus too much on the smaller details before you see the bigger picture.

That’s why you should first validate that you have a strong business opportunity. Here are some critical steps to follow:

  • Select a product or service: It may sound obvious, but what will your business sell and how do you plan to be different from your competitors? For example, what is your value proposition or unique selling point?
  • Define your target market: Who will your business serve? Begin with demographics like age, gender, income, location, etc. Then, go deeper through personas or a customer journey map.
  • Identify key competitors: Having competition is a good thing. It means there’s demand. Compare similar products or services to your own, both to replicate what your market loves and to differentiate.
  • Know your market size or opportunity: In the end, market research means quantifying the opportunity your product or service represents. It’s about estimating the current and future monetary value of your business idea and setting reasonable goals for how you will win a piece of that pie. But how? That brings us to our next step…

3. Write a business ‘canvas’ (then, a plan)

The good news is you’ve already done some of the work by tackling the first steps above. Keep in mind that your first business plan isn’t finite. Parts of it will most likely change as you learn more about your market and grow. Some experts even say you should instead start with a business model canvas, a one-page document that covers the critical information you need to get started. This option will save you time and get you up and running faster.

How to start your own business

Download the business model canvas and full checklist here

Once you’ve been in business for a while, or you’re ready to seek funding, then you can build out a more detailed plan. It should cover each section in the screenshot above in more depth—everything from:

  • Resources to operate
  • Your overall marketing plan
  • What your cost and sales structure will look like
  • How you’ll manage your finances, expansion, and more

4. Understand your startup costs

"The number one regret of owners looking back on the first year is they didn’t spend more time learning about financial management"

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Even if you’re self-funded, you must still understand your startup costs. Here are some important facts:

  • The majority start with less than £10,000
  • 75% rely on their personal savings
  • The number one regret of owners looking back on the first year is they didn’t spend more time learning about financial management
  • The majority require £50,000 or less in annual revenue to feel confident about their long-term health

You should start by mapping out all of the costs you anticipate having in the next year. 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. That’s why being mindful of your costs and cash flow is so critical, which leads us to the next step.

How to start your own business

5. Plan your own starting finances

Determine how you’ll fund your business if you don’t have your own startup cash. There are many alternatives that don’t involve seeking angel investments or venture capital, which are often better options:

  • Crowdfunding: You’ve likely heard of the crowdfunding platforms Kickstarter or Indiegogo. This is a popular route for many new business owners. It works by seeking funds from a large number of people, rather than one major investor.
  • Microloans: These are small business loans, often less than £5,000, that you can apply for to get your business off the ground. You’ll have to research your microloan options depending on what country you live in, as there are many different services to choose from.
  • 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.
  • Grants: Depending on what country you live in, you may be eligible for a small business grant, either from your government or private organizations. Again, you’ll have to research what those grants are, whether you qualify, and how to apply.
  • Friends and family: Last but not least, plenty of businesses get off the ground with the help of friends and family. Don’t be embarrassed to ask. All the same, take these pitches seriously by outlining all the work you’ve done through your canvas or plan.

6. Determine your business structure

Now, it’s time to define what type of company you plan to run: your business entity. 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: This is a popular option for anyone who doesn’t have a lot of liabilities (e.g. no employees or major investments) when they’re first starting out. As your business grows, you may wish to incorporate at a later date.
  • Business partnership: If you’re going into business with one or more partners, then you’ll need to register as a business partnership. Because each partner will have a stake, you must work with a lawyer and a tax professional to lay out the type, terms, and tax implications of your partnership.
  • Incorporated business: You can form a limited company in the UK. Some notable benefits of incorporating your business are tax breaks and avoiding personal or financial liabilities if, say, someone sues your business. Due to upfront costs, many sole traders wait until they’ve earned enough funds and are at the right stage to incorporate.

Speak with an accountant or bookkeeper to determine which option best suits your needs today and in the future.

Before you launch your business, consult a lawyer to ensure you’ve considered all the legal requirements. 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.

Grab all 15 steps in this PDF checklist along with the business canvas

How to start your own business

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 each country as well. There are local government services you can use to double check that the name isn’t 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.

Then 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’ll need to do so at this point as well. Your lawyer can guide you through this process. Bear in mind that there are additional costs associated with every registration.

9. Apply for permits and business licenses

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

While you’re at it, check to see whether you qualify for any tax breaks. And speaking of tax, now’s the time to register for VAT if you expect your turnover to exceed £85,000 (unless your goods or services are exempt).

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. 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.

11. Set up your accounting systems

If your accounting system is set up correctly from the start - with future growth in mind - you’ll save yourself time and money long term. Many small 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 visualize 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.

12. Outsource essential functions early on

When starting a business, 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 more revenue, faster.

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.

It might be tough at first to trust other people with your business, but if you find great employees, you’ll question why you didn’t hire someone sooner.

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.

If you decide to hire someone instead of outsourcing…

13. Familiarise yourself with payroll and tax

Employees’ salaries require taxable amounts to be withheld from their payroll. 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.

14. Build a basic web presence

If you don’t at least have a website and email address in today’s always-on, digital world, do you even exist?

To win new customers, a website must be included in your marketing strategy. Fortunately, you don’t have to spend a ton of money setting up your small business website. There are lots of affordable, user-friendly options available.

When you have the time and resources, you can move on to adding social media profiles and other digital marketing tactics like paid ads, reviews, and search engine optimisation.

In the UK, more than 1 in 3 Internet users look on social networks for more information about a brand or product.

As your business grows, so too can your budget for building a stronger, more impactful digital marketing strategy.

15. Explore business partnerships

We’ve talked about reasons to go into partnership with others to start a business. We should also address partnering with other businesses for collective growth. There are many different ways to form a partnership, including:

  1. Referrals and revenue share

    You can work with a partner business to help them sell services on a commission or revenue share basis. Simply put, this means one business gives the other a percentage of a sale. It’s very common if you have a small sales team and want to expand your efforts without hiring more full-time employees.

    With referrals, you might offer a commission to a partner who helps introduce and assist you with closing a new deal.

    Revenue share is usually better for businesses which help a customer use your product or services. For example, software vendors have expert partners who help a mutual customer use the software in a more effective manner (and therefore spend more with the software vendor). The expert partner gets a percentage of sales based on terms agreed by both parties.

  2. Joint Ventures

    If you plan to make a movie, you might consider forming a joint venture with another business or group of businesses. Let’s say you have all the equipment and staff to film the story, but you want to add computer graphics in afterwards. That’s where a partnership with another production company with those capabilities makes sense.

  3. Cross-promotions

    If two businesses have similar target customers, it often makes sense to partner on a cross-promotion. Spend some time thinking about whether there are businesses you can work with on this basis. When approaching them:

    • Be honest and clear about what you want and what’s in it for them
    • Be patient and willing to negotiate to ensure both parties are happy with the deal
    • Be willing to walk away if you can’t negotiate a fair and mutually profitable opportunity

Just like when you’re hiring employees, place trust at a premium. You can always ask their existing or past partners whether they were happy with a recent joint venture or cross-promotional experience.

Starting a business is the first step

"Fortune favours the bold. But it also smiles upon those who are prepared."

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We’ve outlined in this post the necessary steps you must follow to launch a new business. Remember to start with your vision, research your opportunity, and record it all in a business plan or canvas.

Download the business model canvas and full checklist here.

It’s critical to understand and manage your startup costs and cash flow wisely. If you aren’t self-funded, find out which investment options make the most sense for your business. Outsourcing or hiring employees who are experts in their field will free up your time to focus on what you do best, and drive faster growth. You can also lean on business partners for support and to grow your customer base collectively.

Always remember, fortune favours the bold. But it also smiles upon those who are prepared.

Find this article about starting your own business useful? We’ve got many more related articles on the QuickBooks blog to help you start and grow your business.

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