Companies with fewer than 49 employees are classed as 'small to medium businesses or SMEs', they account for 99.3% of all businesses. These businesses are vital to the economy and provide good employment opportunities, they account for 60% of all private sector employment.
However, as one in three small businesses fail within the first year, and 50% of business don't last beyond 5 years the importance of building secure foundations cannot be underestimated. Do your research and plan your business before you launch it to avoid adding to the statistics. It takes an awful lot of hard work, research, dedication and planning to make a success of your venture: there are no shortcuts.
There’s no doubt that starting your first venture can be an exciting, albeit daunting, experience. Being your own boss has many advantages. However, it is easy to get carried away with ideas for your new product or service and forget about the basics. You must have the right processes and contracts in place to protect your idea and you must be able to finance your venture as it grows, particularly if you are going it alone.
This guide is designed to give you the basic information to get you started. Depending on the type of business you are planning to launch, you may need to look at some areas in greater detail than others (for example, finding suitable business premises might not be relevant if you’re intending to operate from home).
Researching your business idea
The first stage is to do your research. It may sound obvious but it’s a key point many people forget.
There are many elements you should research in order to ascertain if you have a viable proposition for a new business and whether you have the skills, knowledge and finance to make it happen.
The marketplace
The market you operate in will depend on the type of business you’re looking to launch. If you intend to operate from physical premises, then the location is important. If you will be operating online, you need to understand how people are operating across digital channels.
Regardless of whether you are online or off line, you must undertake market research by identifying and analysing the needs, size and future potential of your chosen market and understand the competition already operating within it.
- Carrying out market research
- How to Research Your Market
- How to do market research to make a business idea a winner
Your competition
Market research is also a key factor in maintaining your competitiveness once you are up and running. Regardless of the sector in which you’re hoping to operate, you will have competitors who are either offering the same, or a very similar, service to the same, potential customers you want to reach. It is, therefore, important that you research everything they do thoroughly and learn from their successes and mistakes.
- Research Your Competition With Social Media
- Competitor analysis in your marketplace
- Competitive Analysis for Entrepreneurs
How are you going to position yourself?
Now you know who your competitors are and the landscape of the marketplace, the next stage is to look at positioning. What are you going to do differently to make you stand out from the crowd? What will be your unique selling point (USP)?
Raising finance for your start-up
A major stumbling block for many new businesses is raising the initial capital to fund the start-up costs and then the ongoing, working capital to maintain and develop the business. Banks, the traditional route for raising money, have been much more conservative in their approach to risk since the 2008 economic crash and have been applying more stringent criteria when lending money.
However, all is not lost and there are other options available to budding entrepreneurs.
However you choose to raise funds, you must make sure that the financial elements of your business plan are well researched, complete and achievable.
- A guide to raising money as a small business
- Finance your start up business
- How can I get funding for my business?
- Funding your start-up - the ultimate guide
Self-financing
Self-funding is a popular way to finance a new venture. It stands to reason that investors will be more open to helping you grow if you have stumped up the initial finance yourself, after all, why should they risk their money if you don’t have the self-belief to risk your own?
There are many options for self-financing, for example you can rely on your savings, cash in investments or take out a personal loan to fund the capital you need to get started.
- Investing your own money into your business
- Six Tips on How to Self-Finance Your Start-up
- Use your own money to start up
Business loans
Business loans are another popular route for raising finance for a new venture. However, as noted above, banks tend to be cautious and so you will need a watertight business plan if your application is to succeed.
Crowdfunding
Launched in the late 1990’s, crowd funding is now a well established approach to raising finance. This has worked particularly well for technology start-ups where people are keen to be involved at the outset in the hope they have stumbled across the next Apple. Crowd funding involves many investors contributing (usually) small amounts to the project. As a reward for their investment, they are often given sample products pre-launch. Investors invest via a crowd funding platform (Kickstarter is one of the better known platforms) which takes a percentage of the investment fee.
- What is crowd funding? A step by step guide
- An Entrepreneur’s Top Crowdfunding Questions Answered, From A Legal Perspective
- Crowdfunding for Start-ups: 10 Kickstarter Alternatives
Venture capital
Venture capital funding is usually associated with larger, more established businesses looking to expand using a large cash injection. Fortuitously for small businesses and start-ups, venture capital firms have recently shown a keen interest in backing entrepreneurs. They offer private investment in return for an equity share in the business – think Dragon’s Den!
Bear in mind that with this approach, you will lose some control over your business as you will be giving away equity shares so will no longer be the sole owner. However, the upside is that you can benefit from the advice and input from someone with more experience than you who is willing to help you grow the business further.
- Venture Capital Funding explained
- A Guide to Private Equity (PDF)
- Partnering with a venture capitalist: What young entrepreneurs need to know
Grants
Business grants are there specifically to help people get their business ideas off the ground. However, many are put off because of the sometimes convoluted, complex application process to obtain the funding. There are a number of government grants available for start-ups and small businesses as well as enterprise grants from organisations such as the Prince’s Trust.
People
People are one of the biggest assets to your business. It is important you recruit and retain the right employees from the outset. It’s also good to know your rights and legal redress should you encounter any issues along the way.
Recruitment
There are many way to approach recruitment; as a start-up it is less expensive to recruit directly rather than use recruitment agencies. When crafting job adverts, you must avoid using words or descriptions that might imply discrimination, so only mention those attributes specifically required for the job. Match the media you use to the vacancy you have so that you tap into the largest pool of potential candidates and remember that the personality of the person and their fit with your culture and values is as important as their skills and experience.
- The guide to managing HR in a small business
- Hiring your first employee
- Recruiting Strategies: A Guide For Small Businesses
Employment law
Employing people is a big responsibility and should be treated accordingly. Employment law not only covers larger issues such redundancy or tribunals, it also covers day to day aspects such as employment contracts and employee handbooks which should include workplace policies. The latter are important; they ensure that employees know where they stand in relation to disciplinary matters and give guidelines as to appropriate conduct in the workplace.
- Contracts of employment - Key points
- How to Write an Employment Contract
- Keeping employment contracts up to date
- Employment law round-ups
- Employment tribunals - a detailed guide
- Redundancy consultations - your guide
Employers’ liability
If you employ staff you need insurance against liability for disease or injuries arising from their employment with you. This insurance protects you against any compensation claims caused on or off site. It’s worth noting you can be fined up to £2500 a day if you do not have appropriate insurance.
- Employers’ Liability (Compulsory Insurance) Act 1969 (PDF)
- What is employers liability insurance, and is my business legally required to have cover?
PAYE
‘Pay As You Earn’ is the system used by HMRC to collect employees’ tax contributions directly from their salary rather having to complete a tax return at the end of each financial year. HMRC generate a tax code for your employees and you will need a system in place to deduct contributions from your employees.
Pensions
You will have no doubt seen the “we’re in” pension auto-enrolment adverts on mainstream TV. As an employer you have certain obligations under pension law. All employers will eventually have to provide their employees with a workplace pension scheme and the starting date will depend on their size. This is automatic enrolment. Employees will qualify to join the scheme if they:
- Are between the ages of 22 and state pension retirement age
- Work in the UK
- Earn over £10,000 per annum
As an employer you must contribute to the pension scheme. If you don’t comply you will be issued with a penalty.
- Workplace pensions - employers' obligations
- Employers Automatic Enrolment
- What small businesses need to do to avoid pensions pain
Incentives
As a new employer you may want to incentivise your employees in both a tax efficient and cost effective manner. There are several options which allow you to motivate your key team members whilst maintaining the cash flow in your business. It is worth consulting your employees to find out what benefits they would value: it could be family friendly benefits such as flexible working, a bonus scheme or a company car.
There are also some unique and modern ways of incentivising a team using modern technology and apps.
Health and safety
The law states that all employees are entitled to work in a safe environment. Therefore you need to ensure that the building is properly maintained, that computers are set up correctly and proper guidance for undertaking certain tasks (such as working from height) is in place.
Premises
You may be able to run your business from a home or you may need commercial office space, a retail or distribution unit. Regardless, you need to ensure that any arrangement you make is legally compliant and does not put you at a disadvantage:
Licensing or leasing
There are usually two ways of leasing business property. In the short term, a licence is flexible, cheaper to organise and does not tie you in to a long financial contract. Alternatively, leasing gives you more legal rights, agreed rents and therefore more long term security.
- Choosing to Lease or License Your Commercial Property
- Guide to renting commercial property
- RICS Small Business Property Guide
Outsourcing
As discussed in the Commercial and Legal chapter, outsourcing is a cost-effective way to remove non-essential business tasks and allow you to focus your attention on your key business activities, for example you may choose to outsource your IT or payroll. It allows your business to utilise the skillsets of key professionals without incurring the expense and responsibility of employing someone directly.
It’s important when you’re outsourcing to have a contract to govern the relationship between you and your supplier. This should include many points including but not limited to protecting your assets (including your IP), migration of services, and confidentiality.
- The Outsourcing Handbook – A guide to outsourcing (PDF)
- Outsourcing IT - The Essential Guide
- Step by step guide to outsourcing for small businesses
Rates
Business rates apply to business premises. The responsibility for paying the rates usually lies with the business which occupies the unit rather than the owner of the building. You need to check your lease carefully and account for rates payable in your business plan.
- Calculating your business rates
- Everything you need to know about business rates, but were afraid to ask
As a small business you may be entitled to rates relief: there is a Government scheme (Small Business Rates Relief scheme (SBRR) designed to help start-ups get off the ground and avoid some initial costs. There are other relief schemes available for charities, enterprises and retail.
Insurance
As discussed in previous chapters of this guide, it’s worth considering what insurance you need to cover particular aspects of your business; in some instances it is a legal requirement. For instance, you’ll need commercial property and content insurance for your premises. You may also want to consider things like business interruption cover.
Launching your venture
Once your products and new services are in place and you’re ready to launch to the market, the next stage is promoting your product / services to your target audience.
Website
Google currently processes over 40,000 searches per second so a website for your new product or service is essential to maintaining a presence in the digital world.
There are a few key points to think about when approaching the design and development of your website, most importantly, design for your users, not you! You’ll need quality content, a website that is easy to navigate, high quality imagery and clear calls to action. It doesn’t have to cost a fortune to have a website designed; try using a freelancer rather than an agency but research their previous work and the position their websites have achieved on Google.
For Google, make sure your website is responsive; this means it adjusts to the screen size it on which it is being viewed, such as a mobile phone or tablet. As more and more people use the internet on the move this is now more important than ever. Speed is also important: both users and Google are impatient so don’t over load your pages with large images and documents or scripts that have a large file size.
We could talk for hours on how to rank your website on Google but these guides should give you a good start.
Social Media
Do not underestimate the power of social media. Whether it’s Facebook, Twitter, LinkedIn, Snapchat, Instagram, Youtube, the possibilities for your business are endless. It allows businesses to see who is following them, to target their marketing to a very specific audience and, most importantly, it allows you to communicate with customers (both actual and potential) very quickly and efficiently. If used properly it can make a huge difference.
- 10 Benefits of Social Media for Business Every Skeptic Should Know
- Small business tips: how to use social media to boost business
Marketing
Your marketing plan will depend on the product or service you are supplying and your target audience. All businesses need to be mindful of their brand reputation, especially in the digital world.
- The Marketer's Guide to Developing a Strong Corporate and Brand Identity
- Marketing your new business
- Guide to Reputation Management
Networking
Many consider business networking to be crucial when starting a small business. It can be a great way to raise awareness of your business among the local business community while making useful local contacts.
- How to work a room: 10 tips to networking success
- How to network, influence people and win new business
- The 59 Commandments of Business Networking
all images adapted from freepik.com
