2. Get funding

When are considering how to start a business, there’ll usually be a period when you’re investing lots of time, effort and money before you start making a profit. Before you do this, it’s important to research your market to make sure your customers will really pay for your product or service. Members can access lots of advice and information on how to do this, as well as reading resource papers that will help them with both market research and funding. Once a Member is ready, they can access our unique Funding platform exclusive to Members and connect with Investors direct on the site.

Explore a variety of sources of funding to help with the costs of starting up your business.

Government schemes

You might be able to get help from a government-backed support scheme if you need some initial funding to test and develop your business idea. Search for business finance using the finance finder tool to see which schemes you may be eligible for. There are also a number of schemes for people from certain backgrounds. Personally I don’t think there’s any such thing as positive discrimination, however, if you can use it to start your road to success, it’s probably worth considering!

Get a bank loan

Once you can show that there’s a market for your idea, one option for funding your start-up costs is getting a bank loan. You’ll need to be able to:

• give the bank realistic cash flow forecasts
• prove that you’ll be able to pay back the loan with interest

The bank might require you to provide security against your loan, like your house or car, in case you don’t repay. You should think carefully about how much risk you’re willing to take on before you get a loan or give any personal guarantees.

The big truth is that Bank loans are massively old school and really the Business Manager in the average branch knows absolutely nothing about business. They are often just someone that’s been working in the bank for a few years and gets the job in that department. This means that the person deciding on whether your business is viable, has no idea about the real ins and outs of business. Business is more than a spreadsheet.  A good friend of mine and a Member of the Business & Entrepreneur Network  was told his business was totally ridiculous, he was told it was not something they would provide a loan for. He was a police officer, in good financial standing and had a wife, also fully employed, yet the bank laughed him out. Two years later he had pioneered a unique service that had gone national and not just local, oh and if that’s not enough, he had bought a 200 acre site, to once again pioneer something the country had never had, secured himself and his young family a mansion to live in and as much as him and his wife work hard, they live an amazing life. Horses, cars, toys and most importantly, time with each other. But the bank said no.  The bank is not the be all and end all. Remember that.

Selling shares

If you need more investment, you might be able to raise money to fund your growth plan by selling shares in your business. You can do this by getting friends and family to invest. You’ll need to have developed the plan and give them a good idea in what they are investing in. It’s not free money, so how are they getting a return. Do you know the difference between A and B shares? Have you got basic terms you can enter into?  However, if you can raise enough you can look for sources of ‘equity funding’, including:

• ‘business angels’ (wealthy individuals who invest in start-up businesses)
• ‘venture capital’ from companies who invest large sums of money in businesses that they think will grow quickly (known as ‘private equity’ companies)
• ‘crowdfunding’ (where a large group of people invest money in a business idea, usually via the internet)
• alternative sources of funding like ‘peer-to-peer lending’

Any outside investors will own the company jointly with you and the other founders. They have a say in the running of the company, and are entitled to get a share of the profits, known as ‘dividends’. Find out more about this in the Members Section.

You should get legal advice before selling shares in your business.

Search for equity funding

Find out about equity funding and venture capital, and search for sources of funding from the:

• British Private Equity and Venture Capital Association (BVCA)
• UK Business Angels Association

Heard of EIS or SEIS? It can be really beneficial for Investors. You can sign up for the Seed Enterprise Investment Scheme – your investors will get certain tax reliefs, making your company more attractive to investment. This however will require set up costs, ensure you have considered the legal fees for this into any business plan.

3. Research your market

Test your business idea with potential customers to check if there’s real demand for what you’re planning to sell. This lets you find out about any problems and fix them before you’ve wasted too much time, effort and money. Do not do this with your friends and family… well you can first round one but not for round two. You need REAL feedback and friends and family are often way too kind. You need constructive criticism. You want this to work, that means you are going to have to take on a few corrections, do a few re-works and maybe scrap a few ideas entirely.

1. Identify potential customers. Talk to them and find out about their needs.
2. If you can, make a basic version of your product or service (a ‘prototype’). Work out the cheapest and quickest way of making something that lets you find out if you’re meeting a real customer need.
3. Test it with them and get feedback. Find out what they’d be willing to pay for it. Try out different prices with different customers in a consistent, realistic way to see what people will really pay. Can you make enough money for a return on your investment?
4. If there are other businesses competing for your market, think about what will make you different. Can you provide something better than what’s already available?
5. Talk to other Members in the Forum and find out what they think or even find a partner.

If you’re starting a retail business, think about testing your idea by taking a short-term lease on premises for a few weeks or months. Don’t under estimate the costs of doing this and ensure you know all the costs involved. Will you need to pay Business Rates?

4. Develop and plan

Develop and change your idea based on what you’ve found out about your customers’ needs before investing. Deal with any problems you’ve found with your product or service, including the way you’re planning to make and sell it.

Go back to your customers and test again.

Keep doing this until you’re confident that they’ll be willing to pay what you’re asking, and that you’re meeting their needs.

If there’s no real demand for your idea, think about changing it completely. Is there another product, service or market that uses your skills and resources in a different way? There’s not ONE good idea. You just need AN idea you can do well.

Write a business plan

A business plan is a good way to sum up:

• the customer need or desire you’re aiming to meet
• how your business will meet that need while making a profit

It should clearly show the results of your customer research, and that you’re able to explain how you can turn your idea into a viable business before you invest lots of time and money.

Your plan can also be a very helpful tool to convince other people of the value of your business. This includes potential partners and sources of funding.

5. Find partners, suppliers and premises

Many businesses start with just one person, known as a ‘sole trader’. If you set up as a sole trader you’ll be self-employed, which means you’ll be your own boss. But that is different from having a Limited Company. D

You’ll also be responsible for:

• managing your own time
• looking after all of your company’s admin and accounts
• taking risks with your own money, particularly if you’re leaving full-time employment

Whether you set up as a sole trader, partnership or limited company, your business is likely to involve working with more people to develop and sell your idea – including partners, suppliers and distributors so put some thought into who you want and need in your business and beyond that, how they will be remunerated.

Partners

Finding a co-founder with relevant skills and knowledge that are different to yours lets you focus on what you’re best at. How to start a business becomes a lot simpler when it’s not a one man or woman army carrying the whole task, but it does come with it’s own issues.  Finding someone different to yourself that’s also a compliment to you is a great jumping off point.

For example, you might be selling a product you invented, or a service that uses a particular skill or talent you have, but not have any hands-on experience of running a business. If so, you might want to work with someone who has business and management skills, and can look after things like financial planning and recruitment. You don’t have to be great at business to be in business, you just need someone who is!

Consider working with several partners in a team. You’ll be able to share responsibilities including risk, getting funding, expertise and sharing contacts. Need more info on how to start a business? Read on.

Suppliers

Whether you’re making a product and you need raw materials, or supplies and equipment to run your service, many businesses need to work closely with suppliers. Search online and talk to other businesses. Draw up a list of potential suppliers. Get estimates, then go and talk to them so you can:

• negotiate prices
• start to develop relationships
• get a sense of which suppliers are reliable and trustworthy

You’ll need to agree on payment terms with your suppliers, and get them in writing. This includes your ‘trade credit’ period (how many days you agree to pay invoices within), and whether they can offer you discounts for things like buying in bulk or quick payments. Initially there may be not credit extended and that’s not a bad thing. Don’t get into debt and trouble by over extending too early.

You’ll also need to find suppliers for the equipment you’ll need to run your business, including your information technology (IT) systems. There are lot’s of cheap and highly effective alterantives out there these days, so you can save money where you don’t need to be spending and spend those saving s where you do need it, for extra impact.

 

Getting your product to market

If you’re planning to expand outside of your local area, you’ll need to consider either and online shop, listing with other online shops or for instore you’ll need to work with a distributor. If you’re selling overseas, consider working with a freight forwarder who can deal with exporting your goods.

Build a website

You can also attract customers and increase awareness by setting up a website for your business. Search online for resources, as well as using the Member discounts for web design and development companies you can work with.

You may also be able to sell your product or service directly through your website.

Finding business premises

The RICS (Royal Institute of Chartered Surveyors) guides to small business property have information about buying, leasing, maintaining or extending business premises.

6. Set up your business

You’ll need to decide which legal structure is right for your business before you register for tax and start trading.

It’s important to understand the different risks and benefits before you choose – whether you set up as a sole trader, limited company or partnership affects:

• the amount of financial risk you’re taking on
• the way you’ll need to pay tax, and report to HM Revenue and Customs (HMRC), and Companies House for limited companies and some types of partnership
• how much control you have over how your business is run

Employing people

If you’ll need extra help or people with specific skills to run your business, you might decide to take on employees. Find out about your legal responsibilities as an employer, including things like pay, tax and insurance, before you start employing staff.

Other responsibilities

Even if you’re not employing people, you’ll need to get insurance for your business.

Depending on the type of activities your business is involved in, you might need to get certain licences and permits.

Working with advisers

Make sure you get an estimate from any advisers you work with, and agree in advance what they will do.

Some advisers will charge an hourly fee, and others may offer a fixed price for a piece of work. It’s always worth getting several quotes before you decide who to use, so you can compare prices and make sure you’ll be able to work well together.

Accountants

An accountant can help with things like financial advice and managing growth. You can also appoint them as an ‘agent’ to deal with your tax affairs, submit your VAT returns and deal with HM Revenue and Customs (HMRC) on your behalf.

There are people that can do your accounts and there are Chartered Accountants. Chartered accountants are fully-qualified members of a professional body. There are several UK professional accountancy bodies and you can find chartered accountants through them. Members can access Discounted Accounting Services through the site. Remember a Chartered Accountant will cost more but they are qualified to the professional standard.

Legal advisers

You should also consider getting legal advice when setting up your business. This is particularly important if you want to sell shares.

Find a solicitor on the Law Society website or use the Members Area