Starting your own business can appear complicated and overwhelming to first-timers. While the administrative process of registering a company may be quick and easy, there’s a lot to think about before that stage.
For instance, have you researched your business idea in detail? Have you buttoned down your business plan? And have you considered how you’ll secure funding?
In this blog, a UK-leading company formation agent, Rapid Formations, takes you through all these essential steps to starting a business. By the end, you’ll know exactly how to develop a solid business idea and turn your venture into a success.
1 Research Your Business Idea
Passions and hobbies are excellent for fuelling exciting start-ups. For many entrepreneurs, that’s exactly how their journey starts. However, a personal interest isn’t enough to start a successful business – it’s essential to research your idea first.
Here are some of the key questions you need to answer:
- Is there a demand for your product/service, or is it something more niche?
- What is your unique selling point (USP)?
- How congested is your sector? Will it be difficult to penetrate?
- Who will be your main and indirect competitors?
- Who will be your target audience, and how will you reach them?
- Are you based in the right location?
- Will you need physical business premises, or will you operate online only?
- How will your business idea impact your personal life?
- Will you focus on your business full-time straight away, or will you try it as a side hustle first?
- How much will you need to invest initially?
- Will it be difficult to get future financing?
This first step to starting a business is crucial; it’s all about considering your idea from every possible angle to understand what it’ll realistically take to launch and build into a thriving brand.
This is also where you outline the potential challenges that might come your way, how you’ll overcome them, and how to scale your business sustainably.
2 Come Up With A Unique Business Name
Choosing the right name for your business is vital. It’s a huge part of your brand identity and, along with your logo, one of the elements that potential customers will see first.
Not only that, but they’ll also base their first impression of your business on it. That’s why it’s essential to come up with a unique name that describes what your company does and reflects your brand’s personality.
It should be accurate, relevant, and memorable—and ideally, short and snappy. This will help strengthen your advertising efforts and make your website address much easier for people to remember.
If you can’t think of a great name straight away, don’t panic. It’s always best to take your time and find the right name that represents your business. If you need a hand, why not ask your friends and family for ideas? You could also consider working with a creative agency.
Rules and restrictions on company names
If you plan to register your business as a limited company, you will also need to ensure that your business name is compliant with UK laws and regulations. As per the Companies Act 2006, the name of registered companies in the UK must meet the following criteria:
- Not be the ‘same as’ or ‘too like’ another company name on the register. This helps avoid confusion and misleading the public about the relationships between companies.
- Not include any words that insinuate a connection with the government or public authority
- Not reference a geographical location (e.g. London, UK) as this could imply a connection to an administrative body. To use such reference in your business name, you must first obtain approval from the Secretary of State at Companies House.
- Avoid sensitive or offensive words or words that could imply criminal activities.
- References to specific professions and/or functions must be approved by a relevant body.
- Certain characters, symbols, and punctuations are prohibited
- Names of private companies limited by shares must end with ‘Limited’, ‘LTD’, or the Welsh equivalent (Cyfyngedig’, ‘CYF’).
- Names of public companies must end with ‘Public Limited Company, ‘PLC’, or the Welsh equivalent (‘Cwmni Cyfyngedig Cyhoeddus’, ‘CCC’)
3 Write A Business Plan
The next step is to write a comprehensive business plan. This strategic document will help you plan out your first 24 months in business, set out your objectives and forecasts, and define the steps you need to take to achieve them. Essentially, a business plan determines whether your idea will survive.
Its secondary purpose is to describe your company. When you apply for funding or pitch your business to a potential investor, they’ll want to see what makes it unique and exciting, they’ll want to get to know you (the owner), and understand why they should support your business.
Here are the main sections to include in your business plan:
- Executive summary – This is your elevator pitch. It should provide an engaging overview of your business and its future plans that entice readers to learn more.
- Company description – Explain what your business does and what market demand it meets.
- Market research – Demonstrate that you understand your industry by conducting thorough market research. Which brands are you competing against, what makes your business stronger or different, and what is your target audience?
- Business vision – Highlight the short and long-term goals you hope to achieve and how you’ll achieve them.
- Your products/services – Go into detail about what you sell and your pricing strategy.
- Financial forecasts – A detailed overview of your cash flow and profit projections for the first 24-36 months. Calculations should be thorough, accurate, and exciting, showing the reader that your business is worth backing.
- Backup plan – Naturally, you want your business to succeed, but there’s always a chance that something might not go according to plan. Outlining a reasonable backup plan demonstrates that you’ve considered the risks.
This step will take time. If you haven’t written a business plan before, you can find detailed guidance on the Prince’s Trust website.
4 Register Your Business
This is where your business comes to life. To register your business, you’ll need to choose a structure. Here are the most popular ones in the UK.
Sole Trader
This means you are self-employed. To operate as a sole trader, you need to register with HMRC and complete an annual Self Assessment tax return to demonstrate your profits and pay Income Tax and National Insurance on your earnings.
As a sole trader, your business name isn’t legally protected by the Companies Act 2006, meaning other people are free to use and replicate it. Crucially, you’ll also be personally liable for all your company’s debts, which can be rather risky.
Limited Company
Private companies are registered at Companies House and governed by the Companies Act 2006. As such, they must adhere to certain filing and legal requirements.
They are separate legal entities, and their owners are protected by limited liability. So, unlike sole traders, limited company shareholders share the financial risk between them by agreeing on the extent of their liability upfront.
There are additional advantages to this company structure, such as credibility and tax efficiency.
Limited Liability Partnerships (LLPs)
This business structure could be suitable if you’re going into business with two or more people. Like limited companies, LLPs are separate legal entities, and partners enjoy limited liability protection.
There are also tax advantages to consider, such as LLPs not paying Corporation Tax. Instead, each partner is treated as self-employed and is taxed on their individual profits. This means you’d need to register with HMRC as well as Companies House if you choose an LLP structure.
We strongly advise researching different business structures to find the most suitable one for you. Remember, you can always change your structure if you prefer.
5 Secure Financing
By now, you should know the level of funding your business needs—not just to start it but also to thrive in its first few years. It’s common for business owners to inject some of their personal funds into their ventures, but even so, you may need to secure additional funds to get things off the ground. Here are some options to explore.
Crowdfunding
Crowdfunding is a popular way for new businesses to secure funding. It involves raising capital from a pool of investors, each normally contributing a small amount in return for equity. This method is also great for finding suitable investors who are passionate about your particular project and are excited to support it.
Business grants and loans
There are numerous business loans and non-repayable grants available for UK start-ups. They tend to be location or industry-specific, so you’ll need to find the ones most relevant to you. See all the options on the government website.
Peer-to-Peer (P2P) lending
P2P lending is similar to crowdfunding, whereby it allows you to raise funding from multiple private investors. However, unlike crowdfunding, P2P lending is loan-based, so you have to return what you borrow.
Angel investors
Angel investors have a specific interest in supporting small businesses and start-ups in return for a minority stake. In addition to funding, angel investors generally offer extensive industry experience and professional contacts that can open significant growth opportunities for your business.
6 Develop your brand
You’ve now officially started your own business. The final step is to develop a strong, successful brand that your customers, investors, and employees will trust and share your passion for.
This involves creating a tone of voice (TOV), defining your mission and values, and consistently expressing them across all your communication channels—one of the most important ones being your website.
Don’t worry if you don’t have a creative or design background; platforms like Wix, WordPress, and Squarespace have built-in templates that make building your perfect website incredibly easy. Alternatively, why not work with a freelance designer? You could find a professional that suits your budget and can offer proficient guidance.
Once your website is ready, you should establish a social media presence. This is essential for engaging with your audience, building trust, and showcasing your brand’s authenticity. Feel free to share light-hearted content, behind-the-scenes footage, and brand updates here – anything that will boost your credibility and help you connect with your audience.
Social media platforms like Facebook and Instagram are also great for elevating your customer service. Existing and potential customers will often turn to these channels to contact your business, so it’s crucial to be present and responsive here.
Next, you need to spread the word about your brand. You could try social media advertising, email marketing campaigns, or working with influencers, for example. Whichever methods you choose, remember to have a clear advertising objective and maintain a consistent TOV to maintain your desired brand image.
As your customer base grows and people are happy with their experience with your brand, not only will they be excited to return, but you may be surprised at just how powerful the traditional word-of-mouth method can be for securing new clientele.
Ready To Start A Business?
If you’ve always wanted to be your own boss but weren’t sure how to go about it, we hope this guide has filled you with the confidence and excitement to get started.
Whether you’re a creative entrepreneur who wants to turn your passion into a living, or you’ve yet to find the perfect business idea, follow these six steps to ensure you’re off to a strong start and create a successful, thriving business.
Bring your business to life with Rapid Formations, one of the UK’s best company formation agents. Get started from just £52.99 and access an experienced, professional team that will guide you through anything you need during your company’s lifetime.
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