Got a killer business idea but not sure how to make it happen? Taking the first few steps is one of the greatest – and most rewarding – challenges of running your own business. We’ve asked start-up guru and Entrepreneur in Residence at the Department for Business, Rekha Mehr, for her top tips.
15 minutes – that's all it takes to get between Heathrow and central London on our high speed train services. It got us thinking… what else can you do in 15 minutes? This issue: start your own business.
Identify a niche
Having a unique selling point is the single most important factor in any business. Finding that niche can be as simple as solving a problem that no-one else has got to yet – or that you think you could do better! For me it was about tweaking an existing range of sweets to suit a more contemporary audience, but it could just involve introducing an existing product to a new market, or offering a better service than the current suppliers at the same price.
How will you fund?
When it comes to funding, everything comes down to two basic concepts: debt or equity.
Debt: Effectively a loan where you retain full ownership of your business, but will pay interest on the amount borrowed over a defined period of time. Low-interest (government-backed) loans are a great option for businesses with up to four partners looking to spread borrowing over a five-year period – try startuploans.co.uk. Don't overlook borrowing from friends and family (often called ‘seed funding’). It worked for Amazon founder Jeff Bezos!
Equity: You exchange an agreed sum of money for shares in your business. Sometimes that can be with just a few people - often referred to as angel investors, (or Dragons). Angels are a powerful source of funding, but I recommend finding somebody who can add valuable skills to your business as well as cash. It’s also vital that you have clearly identified a return on investment with timelines for the angel. See ukbusinessangelsassociation.org.uk for more information.
Crowdfunding is a great way of raising funds while gaining a community of ambassadors. By collecting smaller sums of money from a larger pool of people, silent shareholders can help you raise the funds you need to build your business. Visit ukcfa.org.uk for a list of providers.
The set-up: what makes sense?
Test if your business has legs by first setting up as a sole trader. It involves little more than registering with HMRC and opening a business bank account. But if you have business partners, are investing cash in the business, or you've already validated your idea and it's starting to make money, it’s worth setting up as a company – even if you are operating alone. This limits your liability as an individual and removes any personal wealth you might accumulate from potential loss. It also offers better tax benefits. Companies House has guidelines on how to incorporate.
Image: Rekha Mehr
Do you qualify for a grant?
Grants now tend to be few and far between, but there are certainly funds in place to support regional growth in under-developed areas of UK. You can contact your local borough or search 'regional growth fund' to find out more. Competitions offering a partnership of cash and mentoring are commonplace, as are incubators, which tend to offer more hands-on support in a dedicated space (usually in exchange for a small amount of equity). Here are some handy websites:
For tech: entrepreneurhandbook.co.uk/incubation-centres
For fashion: fashion-enterprise.com
For food: wearekitchenette.com
For innovation: innovateuk.org
For social enterprise: unltd.org.uk
Match funding is also available for a number of government initiatives: Growth Vouchers for business advice, Growth Accelerator for business growth and the Manufacturing Advisory Service for manufacturing and scale-up.
When do I bring others on board?
Ideally before you need them, so you don't burn out trying to do it all! However, cash flow is usually the barrier, so I strongly advise having a clear plan that identifies your goals and the team you need to deliver it. Then make sure you plan to raise enough funding to build your dream team.
Do you need a website?
It’s not essential, but chances are a website could be the best value advert you ever place – available 24 hours a day to anybody that finds you, and a great showcase for your work. Secure your domain name first (Google to find providers), seek a host (this can often be the same provider) and then publish your website. Many providers now have drag-and-drop style solutions that allow you to build it yourself, or look for a friendly freelancer.
How important is social media?
Regardless of your type of business, there is a place for social media. These days 93% of businesses use it as part of their marketing strategy. For new businesses, it can be a great way to initiate a presence and meet other businesses within a community – Twitter has been described as the new ‘garden fence’! Rather than thinking of it as a promotional tool, use social media first to find out what potential customers are talking about. This provides a really easy way to speak to them directly about your product or service, even at concept stage. Some businesses will lend themselves better to photo campaigns (food is always a winner). For others, it could be about offering part of a solution through text or video that encourages the customer to purchase the full service.
When is the right time to expand?
Scaling up is one of the hardest tasks you will face, and if you try too soon your business might fall over before it gets going. It’s important that you’re able to maintain the quality of your brand as you grow. The last thing you want is a bad customer review because you’re struggling to keep up with demand – whether it’s stock arriving damaged because it’s been packed in a rush or customers waiting too long to receive quotes for new work. For product-orientated businesses, it’s worth considering whether you will outsource the production, or keep in-house and look to start as you mean to go on.
Read More #SMART Stuff
The Business Traveller - Let's all go to Rio!
#Smart interview - the most powerful man in advertising, Sir Martin Sorrell
The Luxury Traveller - the hottest restaurants in the world right now