Starting a Business in 7 simple steps. Alex Ritchie
you spotted a gap in the market? Maybe there’s no one else providing these goods or servicing your potential marketplace. A word of caution here: the gap may be there for a good reason. Maybe it’s not a financially profitable offering because the marketplace for these goods or services is just too small, or the manufacturing or shipping costs are very high. Research the need for your business and check out whether it has been tried before and if so, why those businesses failed or moved out of the market.
You’ve chosen the idea – what’s next?
Vision
You should create a vision for your business. Your vision is what you describe to people when explaining your idea, and it should be easily understood by those you want to sell to. It can be big and aspirational or it can be succinct and to the point. It should be your inspiration for the future of the company. It’s worth reading about the vision your competitors have or the vision behind brands that you really like; this will give you an understanding of what might work for your business. For example, when Bill Gates first started Microsoft, he envisioned a personal computer in every home and business.
Aims
The aims of your business are more practical and operational than your vision. They’ll change over time as your business grows. Your aims will usually be two or three things that you hope your business will do. An aim might be something like ‘sell 3,000 cupcakes in the first year’ or ‘supply my goods to a leading manufacturer in my industry by a specific date’. Having aims keeps you focused on what success looks like in a more manageable way than a vision, which might take years to fulfil.
Choosing a name
You’ve managed the hard part. You’ve come up with an idea that fulfils your passion and is potentially profitable. You’ve got a vision and aims. Now you need to think about a name. This helps to make your idea real so you can start sharing it and getting feedback on your concept. There’s no science to this. You need a piece of paper, a pen and maybe a few friends, but start writing whatever comes to mind. Here are some things to consider.
Do you want a business name that says what it does on the tin?
Do you want to stand out with something less conventional or even radical?
Do you want to fit in with your competitors or is there an industry norm?
When considering the above, think about your industry sector, competitors and customers. This should help you to weigh the advantages and disadvantages of each. Once you’ve got a few names you like, ask people what they think; you can change your mind right up until the minute you register the business.
Different business types
Product- versus service-based business
Product-based businesses sell ‘things’ to their customers. They may sell to ordinary people like you and me: this is called business to consumer (B2C). On the other hand, they could sell to other businesses: this is called business to business (B2B). Popular B2C product-based businesses are retailers selling clothing, homeware, books, music, etc. In fact, the list is endless. B2B product-based businesses typically supply products that other businesses or institutions need as part of their own production process, for example, widgets, machinery, medical equipment, wholesale clothing and IT equipment.
Service-based businesses utilize your skills, time and talent. Think cleaning companies, day-care and consultancies. Service-based businesses can also be B2C or B2B.
Some businesses can sell both services and products, for example, cafés and restaurants. We see more and more of these service-based businesses acting as retailers, selling goods alongside core service. We discuss this further here.
Both types of business might require start-up capital but if you’re a product-based business, it’s likely that you’ll need to purchase goods and pay for distribution or premises, whereas many service-based businesses can be started on a shoestring.
Business to business or business to consumer
When it comes to choosing between business to business (B2B) and business to consumer (B2C), you might not have to. Both markets might be profitable and keep you busy throughout the year. Consider offering your services direct to customers and businesses. Take, for example, a café that supplies offices or offers large-scale catering services and caters for walk-in trade as well.
If you can service both markets, you’re providing yourself with a much broader target market, which could help the business to succeed in difficult times. For example, if you were setting up a florist but found that a competitor or a local branch of a supermarket had set up over the road and was beginning to undercut your prices, you might be thankful that you’d started supplying to weddings and venues and built a relationship with the local funeral directors.
Setting up an online business
These days, starting a business online can be a low risk entry point. You don’t even have to build your own website any more as third-party sites such as eBay™ and Etsy have created direct-to-market opportunities for people with products ready to ship. Starting online could be a good option if you’re selling popular consumer items such as fashion or homeware. It’s especially good if you need to test out how your market works and what people are willing to pay for, all without expensive overheads. There are a number of online business success stories, from Net-a-Porter to Notonthehighstreet.com and the global giant Amazon.
Location, location, location
Thinking about your location and business base isn’t something that should be left to the last minute as it can make all the difference to your business thriving or even getting off the ground. If your clients or the industry you’re working in are based in a different town or city to you, it’s worth considering having an address or virtual office in the same area as this helps with credibility.
Here are a few things you should also consider.
Global versus localWill your business sell its products or services internationally or more locally in your neighbourhood or community? You might do both, which will take more effort and money, so think carefully before you decide upon world domination.
Footfall on the high streetIf you’re setting up a physical shop, where’s the best location for what you do? Do you need passing trade or do you work by appointment? If empty premises catch your eye, spend a few days counting how many people pass by at different times during the day as this will be your footfall if you had that space.
CostsIf you have premises, you’ll incur a number of costs, such as business rates, and you’ll need public liability insurance (see here). Factor all of this in when planning as it adds up. Some areas have business incentive schemes; speak to the local Chamber of Commerce wherever you end up.
Networks and support
You know the old adage: ‘It’s not what you know, it’s who you know’? Well, here’s an updated version: ‘It’s not what you know, how much money you have or how brilliant