The inspiration to start a business can come at any time: in the pub, in the shower, in the supermarket, walking the dog.
How many times has someone you know announced they’ve had a great business idea? And how many of those eureka moments ended up as no more than a few notes on a napkin?
Why was this? Too much hard work involved? Concerns over starting a business being too risky? Worries about it needing too much commitment?
But those aren’t barriers to every business idea taking off; some ideas do make it from conceptualisation to conclusion. The difference? Dedication and passion. And perhaps necessity.
In the current economic climate it’s evident the lack of employment opportunities is making working for yourself a way of staying in work, or even getting into work.
The rules are no different – the world does not make a company successful just because it’s a good cause and business survival is in no way guaranteed.
Every business has to have a product or service which it can sell at a profit and in sufficient numbers and frequency to provide a sustainable income. That’s true whether you need to “earn” £500 per week or whether the income generated is needed to fund exponential growth so that this time next year you’re a millionaire.
So, whatever your business idea is, here are 5 things you need to do before you make the leap and start your own business;
1. Market research
You may have a terrific business idea, but does the product or service you’re planning have a viable commercial market? Are there enough potential customers? How easy are they to reach?
Doing some market research before you start up can save you a lot of time, money and anguish. What your research reveals will help you shape your business and boost your chances of success.
2. Take a look in the mirror
Do you have the experience and knowledge required to get your product or service to market? Or are you going to need help?
Think about the experience and/or professional training you have, and decide if what you bring to the table is in fact relevant to starting, running, growing and – crucially – profitably exiting a business.
You need to be brutally honest to identify any gaps in your skills and knowledge. And then you need to work out how those gaps are filled.
3. Seek professional advice
It’s obvious that after identifying gaps in your knowledge and skills you should seek out people who know what you don’t know, but remember that you won’t always actually know what you don’t know.
It’s a huge mistake to rely too heavily on your own judgement about this. Even if your business will see you working out of a garage or a spare bedroom, seek some advice from the likes of a successful business mentor, business coach, or a knowledgeable accountant and perhaps a trustworthy lawyer too.
4. Find out the best set-up for your business
Sole Trader status can be set up quickly and without too much formality, but is that the best format to take you where you want to be, to achieve what you’re aiming for?
There are implications to being a Sole Trader that you need to consider: implications regarding the taxes sole traders must pay; implications on the ability to borrow funds for the business; and implications on you (as an individual) being inseparable from your business.
For instance: how much, if any, tax relief are you able to claim for using part of your home as an office?
It could be that the best legal entity for you is a Limited Liability Partnership. Perhaps a Limited Company is best. Or it could be that you should look at setting up a charity or a social enterprise?
5. Things to consider if you are going into business with someone else
Starting a business with someone else requires careful thought, and this goes beyond being sure you’re going to work well as a team.
It may be that the plan is to go into business with a friend: how do you structure that arrangement correctly? Are you to be equal partners?
Have you thought about drawing up a partnership agreement (or a shareholder’s agreement if you are setting up a limited company) detailing what will happen given possible, and definite, circumstances in the future?
For example, what do you do if one of you wants to leave the business, or one of you becomes ill and can no longer work for the business. These things do happen, so it’s best to plan for them in advance.
Decisions about these things need to be considered while you are still friends, still alive, and still in a position to discuss issues properly without emotion. Many enemies used to be the best of friends, and when business gets tough, personal relationships can start to get in the way.
You may find yourselves wanting to take different paths and then finding out that the decisions you took at the start of the venture leave you disadvantaged.
All these steps are crucial as the decisions you make at this stage are the foundations for what you build going forward.
Of course, you then need to focus on the operational aspects of getting a business started: the funding, the website, marketing your new business, your networking, your business plan, and all the myriad activities that will become your daily focus of attention in the time ahead. But the importance of these pre-startup considerations cannot be over-emphasised.
Then, once you’ve identified the need for the product or service, the price, volume/frequency needed and the route to market, and you’re confident that you have the commitment, the stamina, the resources, the commercial knowledge and the support (family, friends and the right business team) to see the idea through, then it’s all systems go.
While there are no rules about what turns ideas into successful businesses, with the right planning, you make it more likely that your napkin notes lead to a winning idea.
This guide has been written exclusively for ByteStart by Daryl Woodhouse, co-author of Creating Business Advantage: Setting Up and Running a Successful Business’ and CEO of Advantage Business Partnership.
Last updated - 10th January, 2020