10 effective steps to start your business in the UK
The UK is a booming market for start-ups, with approximately 660,000 new companies registered every year.
But while registering is an important part of getting started, it’s no guarantee of success. Only 40% of businesses make it beyond the three-year mark. Why? Because starting a successful business requires resolute planning and preparation.
Before you launch, you need to build a strong foundation that details your idea and unique value proposition (UVP), how you will structure and market your business and how you will set up your business finances.
In this guide, we outline a detailed step-by-step process that teaches you how to start a business from scratch and set yourself up for the best possible chance of achieving immediate and long-term success.
Table of contents
- Test your start-up idea
- Create branding for your business
- Write a business plan
- Choose a structure for your business
- Educate yourself on business laws and regulations
- Work out costs and source funding
- Secure a licence or permit
- Decide where you will work
- Market your business
- Find the right business support
1. Test your start-up idea
Your business idea should solve a problem for people, fill a gap in the market and provide long-term value.
To identify whether your idea is viable, start by running SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
Try to answer the following questions about your business idea:
- Strengths: What makes your business better than the competition? Do you have a better product? Can you compete on price? Do you have greater expertise or industry experience?
- Weaknesses: What might hold you back? Are there things the competition does better? Do you lack in certain areas?
- Opportunities: Why is now the right time for your idea? What problems do consumers have that you can solve? Are there fewer competitors in this area? Are market trends shifting in your favour?
- Threats: What is your business likely to come up against? Are there emerging competitors? Is there a risk of the market changing? Could regulation changes cause problems?
You’ll likely know the answers to some of these questions already. Answers to others can be found by carrying out primary and secondary research.
Primary research involves testing your idea on potential customers by undertaking questionnaires, focus groups, interviews and product or service trials to understand:
- Who will buy your product or service
- How much people are willing to pay for your product or service
- What people think of your competitors
- What potential problems your business faces
Secondary research involves looking at existing data, such as:
- Government data
- Recent surveys and studies
- Newspaper reports
- Recent company data
For example, if your idea is to launch a project management software and you have tons of industry experience, your SWOT analysis may look like this:
- Strengths: Easy to understand, limited functions, does one or two things really well, making it better than the competition in those focused areas. Decades of industry experience meaning the expertise is most likely greater. The idea is to offer premium features for cheaper than our competitor’s charge for their premium plans.
- Weaknesses: There are already dozens of successful project management software platforms out there with huge followings. That’s why this product hones in on only a few features so that it’s better than the comprehensive offerings out there. But, this means our audience is more niche, which can be both good and bad.
- Opportunities: Big opportunity to grab an audience who craves aesthetically simpler, but functionally more complex, project management software. Many existing PM software customers complain that the products are too clunky and try to do too much, therefore failing at doing one thing really well. I believe the market trends are shifting in favour of products that help fill specific needs that broad products can’t truly solve.
- Threats: We’ll come up against tons of competition that’s constantly enhancing their products. There’s not a big risk of the market changing, but there is a risk that our big competitors could update their products to match our offerings. Still, our industry experience is most likely greater. Regulation won’t change or cause any problems.
Completing a comprehensive SWOT analysis will give you a clear picture of where you’re currently at and whether your idea is worth moving forward with.
Don’t be put off by the negative aspects of SWOT analysis. Instead, look at how your weaknesses can be turned into strengths and opportunities.
2. Create branding for your business
You’ll know from your market research how competitors are presenting themselves. Use this knowledge to create a brand that stands out.
At this early stage in the process, you need to focus on the two key identifiers: your business name and logo. Other aspects of branding, such as a website and marketing collateral, can come further down the line.
Your business name and logo are the things that bring your idea to life. They’re also the first impression people have of your business, so it’s important to get them right.
Coming up with a business name
Your business name should be memorable and related to your product or service and values.
When scribbling down ideas, ask yourself:
- Does the company name create a positive first impression?
- Is it easy to read and say?
- Is it easy to understand?
- Is it offensive in any way, including in other languages?
- Is it memorable?
Even though business names are short, coming up with the right one is far from trivial. It requires a comprehensive effort and may take some time. Think of it as the foundation of a building—if you rush it, the final structure won’t be stable.
Your business name should be:
- Original: You want your business to stand out from the crowd. You can certainly glean inspiration from other companies, but avoid coming up with a name that sounds too similar to anything else. Not only will this help your brand thrive, but it will save you from potential copyright or trademark infringement issues down the line.
- Focused: Avoid putting tags like “Global” or “Enterprise” directly in your business name. Your customers want to know what makes you unique, niche and special and broad tags like that suggest a fully realised operation. You can always add to or change your name down the line, but for now, start small and stay relevant to your target audience. On the flip side, avoid using location-specific tags which could limit your growth potential.
- Energetic: Your name should embody your overall vibe. Choose a name that mirrors your industry’s energy levels. Going with the Product Management Software example from above, the industry energy may be viewed as “full of life”, “supportive”, “multi-faceted”, “driven” and “well rounded”. This is apparent in existing PM software tool names, such as Asana, which is a yoga term that represents a sitting meditation pose. And Trello, which was originally named Trellis, representing a tool that supports the growth of trees or plants. Both of those names represent well-grounded, supportive concepts and tie directly into what the product does.
- Simple: Think outside of the box, but make sure your name is easily understood and exudes professionalism. You don’t want to create something so out there that customers struggle to spell it or pronounce it. Strive for simple, memorable and catchy.
When you have a name in mind, make sure that it isn’t already taken by searching on Google and the Companies House Availability Checker.
Consider what top-level domain (TLD) you want to use as TLDs serve various purposes. For example, .com is the most popular and gives you a better foundation for global growth, while .co.uk is strictly UK specific. You can also choose .io for tech sites and even something highly specific like .pizza for online pizza stores.
Creating a business logo
Like your business name, your logo should be memorable. According to Smashing Magazine, it should also be simple, timeless, versatile and appropriate.
- Memorable: People should see your logo and instantly pair it with your brand, even if they’re not entirely sure what your brand does. Good examples of memorable logos are McDonald’s and the London Underground.
- Simple: A simple logo like Nike’s swoosh or Apple’s apple are instantly recognisable and distinctive because of their simplicity. Follow the KISS Principle of design: Keep It Stupid Simple.
- Timeless: Your logo should steer clear of trends. As designer David Airey says, “Leave trends to the fashion industry. Trends come and go, and when you’re talking about changing a pair of jeans or buying a new dress, that’s fine, but where your brand identity is concerned, longevity is key. Don’t follow the pack. Stand out.”
- Versatile: Your logo should work anywhere and everywhere—online and in print—in a range of different sizes
- Appropriate: The design and colour of your logo should fit with your audience. For example, the LEGO logo works great for kids, but it wouldn’t give the right impression featured on the outside of a law firm office. Use a colour psychology chart to help find the appropriate colours for your logo.
If possible, it’s worth working with a designer on the creation of your logo. There are tons of sites where you can source freelance designers to build your brand assets.
The most popular sites are Fiverr, Dribbble, Upwork and LinkedIn Profinder, though there are many more to choose from. If you can’t find the right designer for the right price, sites such as LogoMakr and Canva are simple tools that let you design logos for free.
Any original artwork created by you is automatically copyright protected. However, to secure the rights to your brand name, logo and any slogan you’ve created, you should consider applying to register a trademark through GOV.UK.
3. Write a business plan
A business plan is a road map that outlines what you’re going to do and how you’re going to do it.
It serves two purposes:
- To help you focus on the path your business needs to take to achieve its goals
- To convince others that your business is a solid bet (this is important if you’re looking to position your business to gain investment).
Your business plan should include:
- Business summary: An overview of your business and what you plan to achieve
- Business idea: A brief description of what you plan to offer, why and who to, along with why your idea will be a success
- Marketing and sales strategy: Details on your customers, competitors, pricing, distribution and marketing tactics
- Management structure: Details on your professional credentials, those of your team and people you plan to employ
- Business operations: Details on business location and premises, production and IT systems
- Financial projections: Details on cash flow forecasts, accounts and balance sheets. This section should cover income and revenue sources, amount of capital needed, how you plan to repay borrowings and what security you can offer lenders.
Your business plan doesn’t need to be incredibly long but it does need to be comprehensive. The appropriate length will be dictated by how much space you need to prove that you truly understand the market, your execution and financial/funding strategy. It should also include both short- and long-term objectives so that potential stakeholders feel confident that your business will not only succeed in the short-term but thrive over time.
Always keep your business plan updated, adapting the facts and figures to match where you’re at on your business journey.
4. Choose a structure for your business
For your business to be official, you need to register with HMRC or an approved formation agent of Companies House, like we are. You can easily register your business with Tide for free and benefit from opening a separate business current account at the same time.
A business current account is key because it separates your business and personal finances, an action that makes you look more professional and helps you keep organised.
Registering your business means choosing a legal structure from one of the following options:
- Sole trader: A self-employed person who owns and runs their own business individually. Registration is free and you keep all of the business profits after tax. Self-employment is the most common business structure for people who work solo, like hairdressers, photographers and freelancers).
- Limited Liability Company (LTD): A company with a legal identity, separate from owners and directors, where the company (rather than you), enters into contracts and acquires business debts. This means that money earned belongs to the company and must be withdrawn as a salary and/or dividends and you aren’t required to sell personal assets to pay off debt. Registration is more complicated than setting up as a sole trader and taxation is more in-depth. However, tax can be more efficient and there are greater opportunities for investment.
- Partnership: Similar to a sole-trader set up but the partnership, as well as the individuals, must be registered for self-assessment. A partnership must dissolve if one partner leaves.
- Limited Liability Partnership (LLP): Similar to a private limited company in terms of registration and accounting, but responsibility is shared between partners.
Each structure comes with its own set of legal requirements and tax and accounting obligations, and there are pros and cons to each.
We’ve covered each structure in-depth, along with the registration process, fees and tax requirements in our guide on how to register a business in the UK.
When you are ready – register your business with Tide for FREE
Registering your business with Tide is incredibly fast, easy and free. You not only get to officially start your company, but you get a free business current account at the same time, which is the best way to ensure you’re keeping your finances in order from day one. Be your own boss and register your company with Tide!
5. Educate yourself on business laws and regulations
According to GOV.UK, 43% of small-to-medium enterprises (SMEs) cite red tape as a barrier to success.
But it doesn’t have to be.
While there is a lot of red tape to adhere to, the information you need to overcome these obstacles can all be found for free online.
GOV.UK’s business section contains detailed information on everything you need to know. Not all of it will be relevant to your business, but a lot of it will be.
For example, under the “Set up a business” section on the GOV.UK site, you immediately learn that:
“There are also rules you must follow if you: sell goods online, buy goods from abroad or sell goods abroad, store or use personal information.”
Each point has a subsequent link where you can learn more. If we click on “sell goods online” we see a vast list of information that a seller must provide to a buyer before an order is placed. Understanding this information before you make a sale is crucial, not only to help you succeed but to avoid a fine or more serious punishment.
Some of the potential roadblock areas worth educating yourself on include:
- Business tax: Tax returns, tax compliance, accounting periods, VAT, Corporation tax and reporting changes to your business model
- Debt and insolvency: Liquidating a company, County Court Judgements (CCJs), recovering debt, making claims and restoring a dissolved company
- Employee expenses and benefits: PAYE, calculating tax, Capital Gains tax, employee loans and reporting expenses
- Employment regulations: Wage regulations, health and safety regulations, disciplinary procedures, parental and compassionate leave, and holiday leave
- Imports and exports: UK Trade Tariff, classifying imports and exports, shipping goods, duty relief, export agents and the Excise Movement and Control System (EMCS)
- Copyright patents and trademarks: How to apply for a patent, defending your intellectual property (IP), using someone else’s IP, registering a trademark and licensing
- Data protection: GDPR, responding to data protection requests and the Privacy and Electronic Communications Act
- Waste and environmental impact: Environmental taxes, reliefs and schemes, dealing with commercial waste and vehicle fuel and emissions
6. Work out costs and source funding
You’ll cover the costs associated with starting and running your business in your business plan. However, it’s worth going a step further and breaking down these costs into categories to see exactly how much you’ll need to spend where.
Initial costs to take into account include:
- Premises and business rates
- Licenses and insurance
- Marketing materials
- Legal and financial advice
- Tax and National Insurance
The funds to cover these costs can be sought in several ways:
- Bank loan: Business loans from high street banks aren’t as easy to come by as they once were, but several of the major banks do offer unsecured loans of up to £250,000, over 1 to 15 years.
- Start Up Loan: The government-backed Start Up Loan is an unsecured personal loan of £500 to £250,000, with a fixed interest rate of 6% per year. The loan can be repaid over 1 to 5 years and there is no application fee or early repayment fee. If your application is successful, you’ll also get up to 12 months of free mentoring.
- Start-up grant: There are several government- and EU-backed initiatives offering business grants including British Small Business Grants, InnovateUK and Horizon2020. Grants are issued on a case-by-case basis and there’s no guarantee you’ll be eligible or get the full amount you need. But if you are successful, money doesn’t have to be paid back. Like the Start Up Loan, grants often come with business support.
- Angel investment: Angel investors are investors who give new business owners capital in exchange for equity. They tend to be successful entrepreneurs who can lend their experience to help you get ahead in the market. However, their investment means they become a stakeholder and you’ll need to hand over some control to them. The UK Business Angels Association (UKBAA) is the best place to find information on angel investors and investments.
- Crowdfunding: Crowdfunding is an increasingly popular way of financing a new business. Around 5.5bn USD is raised globally from crowdfunding every year and by 2025, the global market is predicted to be worth 28.8bn USD. It involves a large number of people pooling small amounts of capital to finance a business venture. If you’re launching an innovative new product, platforms like Kickstarter and Indiegogo are designed to help you capture public attention and secure investment. But there’s the traditional way of crowdfunding too—asking friends and family to invest in return for equity or a reward. The best part is, you don’t have to give up any of your equity, though you do still have to deliver rewards to your backers. As a word of caution, protect your idea with a patent, copyright or trademark in case somebody tries to steal or copy it.
Quick Tip: If you haven’t got access to any funding or capital, read our guide on how to start a business without capital.
7. Secure a licence or permit
To operate legally in the UK, you may need to obtain a licence or permit. This will certainly be the case if your business falls under any of the following categories:
- Alcohol or tobacco retail
- Food preparation
- Food retail
- Sports coaching
- Child care
- Import and export
- Waste management
The first step is to find out what kind of licence you need. You can do this using GOV.UK’s Licence Finder. This tool will also help you find the correct point of contact within your local authority.
The cost of your licence will depend on the type you’re applying for and any additional fees. For example, a licence to sell alcohol is subject to an application fee based on the rateable value of your premises.The rateable value of your premises is decided by the Valuation Office Agency and is based on your annual market rent, size and usage.
You may also need to show an accredited qualification to be granted a licence or permit. For example, an alcohol licensing qualification is required to sell alcohol in the UK.
8. Decide where you will work
Business premises are a big expense, so think about starting out by working from home if at all possible. This can help you save on commercial rent and business rates. You’ll also be able to include a percentage of household costs such as electricity, heating, lighting, broadband and council tax on your tax return.
If you plan on using your property to advertise your business or are selling goods from home, you should contact your mortgage provider or landlord and local council to seek permission first.
If you can’t work from home, you may be able to keep costs down by using a co-workspace or shared business hub. This involves renting a desk or small office space within a larger building at a reasonable price. Many local authorities offer dedicated low-cost space for start-up businesses, with low fees and short-term contracts.
Visit your local council’s website to see where space is available. Or, search a coworking marketplace like Coworker.com to find a coworking space near you.
Choosing commercial premises
If you need to rent a commercial property, there are a few things to consider:
- Cost: How will rent, business rates and utility bills impact your costs?
- Location: Is the premises easy to get to for customers and employees?
- Flexibility: Can the property grow with your business?
- Terms: Does the lease fit in with your plans? Are short-term and long-term leases offered? Is there an option to extend your lease? Can you bring your lease to an early end if you need to?
- Repairs: Is property maintenance the landlord’s responsibility or yours?
COVID-19 has halted work on physical premises for now, but it won’t last forever. It’s still worthwhile to do the research necessary to ensure you rent the best commercial property for your business. If you can, launch from home and move to your new property when possible.
Insuring your business
To ensure a safe and covered working environment, you’ll need business insurance. The type of insurance policy you’ll need depends on your business operations, but it’s likely you’ll require one or more of the following:
- Contents insurance: Covering all stock and materials in the event of damage, theft, fire or natural disaster. This is required even if you work from home and have home contents insurance.
- Commercial property insurance: Covering your business premises in the event of damage, theft, fire or natural disaster.
- Professional indemnity insurance: Protecting you from claims made by unhappy clients. For example, if a client pays you for a service and they’re not happy with that service, they can be reimbursed through your insurance, rather than out of your own pocket.
- Public liability insurance: Protecting you against claims from members of the public who have been injured or suffered property damage due to carelessness.
- Employers’ liability insurance: The same as public liability insurance, but for employees.
- Vehicle insurance: Covering any vehicles used for business purposes.
9. Market your business
Everything to this point has involved putting the foundations in place to set yourself up for the highest chance of success. Now, it’s time to get your brand out there and draw customers to you.
If you already have a following from generating pre-launch content, that’s great. It’s always a good idea to validate your UVP before you spend a dime on building or servicing it. That way, you know your target audience is interested in what you have to offer and will buy it once you launch.
If you don’t have a following yet, that’s perfectly OK. Now is the time to build one.
There are all kinds of different ways to market your business: telling friends and family, attending networking events, advertising your product or service in the local press and/or online, and many more. The most likely place to see consistent results is through digital marketing. This is where marketing leaders will spend 75% of their total marketing budget by 2021.
Get a website
A website is a must. Even if they plan to buy in-store, 87% of shoppers begin product searches on digital channels. Your website is your online shopfront and the place to send customers to find out more about you and your products or services.
A website doesn’t have to be big or flashy, but it does have to make a good first impression and provide visitors with the information they seek.
It takes just 50 milliseconds for a user to form an opinion about your website, so a clean, fast-loading site is important. Especially as, according to a report by Forrester, a well-designed interface and smooth UX design can boost conversion rates by 200% and 400%, respectively.
There are eight guidelines that every website should follow:
- Simplicity: A website should make it easy for users to find and do what they want to do
- Visual hierarchy: Website elements should be organised so that visitors see your most important messages first
- Navigability: Moving from point A to point B should be pain-free
- Consistency: The overall look of a website should be consistent across all pages
- Accessibility: A website should work seamlessly on all devices and operating systems
- Conventionality: The design should stick to what users are familiar with (e.g. navigation at the top or left side of the page, logo in the top left or centre of a page)
- Credibility: Information should be upfront and transparent
- User-centricity: Feedback should be gathered from users to tweak and improve performance
If you can, it’s a good idea to work with a web designer to create a website that meets these guidelines. There are plenty of freelance sites where you can find and hire developers to help build your site. Sites like Toptal, Hired, GetACoder, StackOverflow are all developer-specific freelance sites. Alternatively, hire a family member or friend who has developer experience and is willing to help you out.
If you struggle to find a budget-friendly developer, platforms such as WordPress, Squarespace and Wix let you use templates to build user-friendly websites from scratch without design experience and without breaking the bank.
Develop a digital marketing strategy
A digital marketing strategy is a plan designed to win customers by taking into account business objectives, SWOT analysis, target audience and brand position.
This plan can then be used across the five main marketing channels—social media marketing, content marketing, search engine optimisation (SEO), paid media and email marketing—to take customers on a journey from noticing your brand to purchasing to recommending you to others.
You can learn how to create and implement your marketing plan in our beginners guide to digital marketing strategy.
To help you get new customers and build your business without spending a penny, we’ve also developed a free small business guide to marketing on a budget.
10. Find the right business support
While running a business is exhilarating, the day-to-day can certainly be taxing. According to a small business survey carried out by the Department for Business, Energy & Industrial Strategy, 34% of business owners say they sought out advice and information related to the daily running of the business. And 40% of business owners seek strategic advice to help with growth.
Getting the right help can be vital in overcoming challenges and avoiding potentially costly mistakes. Fortunately, professional advice and business support is plentiful and, in most cases, free.
- Our small business tips resource contains a wealth of information on how to grow a successful business, covering everything from finance to HR to mental health.
- GOV.UK has a Business Support Helpline providing free advice. Its website also gives details on government-backed schemes across the UK.
- Business Gateway is a publicly funded service providing free support to business owners in Scotland. Business Wales and Invest Northern Ireland provide similar services for businesses in Wales and Northern Ireland.
- Across England, there are 38 Local Enterprise Partnership (LEP) led local Growth Hubs offering business support and guidance.
- The Federation of Small Businesses (FSB) offers not-for-profit small business advice, financial expertise and support to all small business owners.
- Mentorsme puts business owners in touch with free and paid mentors who can help you grow by sharing their expertise, experience and contacts. And their influence can be huge. According to a study by Kabbage, 92% of small business owners say mentors have a major impact on growth.
If you’ve never handled business accounts before, you might also want to call on the services of an accountant.
An accountant can help with everything from tax returns to penalties to ensure you’re compliant with HMRC and Companies House. To help you find an accountant that meets your needs, check out our post on how to choose an accountant for your small business.
Let’s recap the steps you need to take to build a successful business from scratch:
- Business idea: Spend time analysing your idea to ensure it’s viable
- Branding: Come up with a name and logo that are memorable, appropriate and timeless
- Business plan: Created a detailed plan that covers your idea, finances and structure
- Structure: Choose a legal structure that suits your business set-up
- Red tape: Learn about the laws and regulations that are relevant to your business
- Funding: Calculate your start-up costs and decide whether you need a loan or investment
- Licence or permit: Find out if you require a licence or permit to operate
- Location: Decide on the best place to work for your business and its customers or clients
- Marketing: Get a website and create a digital marketing strategy to market your business online
- Support: Find advice and mentorship to help your business grow
Starting a business from scratch requires you to be methodical in your approach. With each step in this post, we’ve posed questions and provided links to additional resources. Take your time to study them. Do your research and use the support available to guide you on your journey.
Did you know, you can register your business with Tide for FREE?
Registering your business with Tide is incredibly fast, easy and free. We’ll pay the £12 incorporation fee on your behalf. What’s more, you’ll get a free business current account at the same time, which is the best way to ensure you’re keeping your finances in order from day one. Be your own boss and start your company registration process today!
Learn all about starting your business in our whole business startup series:
1.1 How to start a business in the UK: 10 steps to build from scratch
1.2 How to find the perfect name for your small business
1.3 How to register a business? A simple guide
1.4 How to start a business without capital
1.5 10 ways to fund your business
1.6 How to create a business plan: 9 things to consider when starting
Photo by Christina @ wocintechchat.com, published on Unsplash