How to start a business in 9 steps

So you’re thinking of starting a business? Here are the essential steps you need to get started – whether you’re building a business from scratch or want to make sure you’re doing everything by the book. 

From writing a business plan to understanding tax, benefits, and legal structures as a new business owner, our nine-step guide explains how to start a small business in the UK:

Setting up a small business – ideas and inspiration

The first thing you need to do is choose your business idea. It should be something you’re passionate about so you’re happy putting your time, money, and energy into making it a success.

Start by checking if a product or service is viable by looking at Google Trends, conducting market research, or even building a blog or social media channel to test if there’s interest.

You’ll need to find a niche so you can stand out to customers. Is there a gap in the market? Can you make use of specific skills and experience you have already? Do you have a unique perspective that will shake up your industry?

And if you’re not interested in a retail business, and want to start a man and van or a cleaning business, for example – the process of getting your business off the ground is similar. 

How to start a business with no money

While starting a business inevitably comes with costs, there are some ideas that can be cheaper to get started than others.

The amount of money you need to start your business will vary depending on the nature of it. Some businesses will naturally have more overheads than others. 

You could set up a YouTube channel or start making money on TikTok, which can be relatively low cost depending on the equipment you choose. Or something like a dog walking or grooming business can often be started with lower start up costs. 

You just need to be aware of the risks, clearly define your niche, and look for free ways to get your brand out there.

What do I need to start a business?

Aside from a great idea that you’re passionate about, you’ll also need:

• courses and training – depending on your business, you might need specific training or want to complete a general business qualification, City & Guilds offer a range of vocational courses
• licences – check the government website to see if you need a business licence to sell food, play music, or trade on the street
• specialist equipment – make sure you budget for any equipment or tools
• products – if you’re setting up a shop or selling your own creations, you’ll need to get your stock together

How to start a business in the UK 

Follow our checklist below for how to start a small business in the UK.

1. Register business name

Coming up with a name for your business is an important step as it shows the personality of your brand and helps you stand out. Your name should be unique and appeal to your target audience – and it’s your chance to be creative.

Our 2024 winner of Britain’s Best Small Business Name is the perfect example of how important your business’s name can be.   

It’s also worth understanding:

• how to define your brand so you can stand out from your competitors
• what you need to do to protect your intellectual property, including any patents and trademarks

2. Choose a legal structure

Next, you’ll need to choose a legal structure for your business:

• sole trader – the simplest business structure, but with no legal distinction between you and your business
• partnership – if you’re starting a business with a business partner or partners
• limited company – a complex structure with plenty of admin, but your business is legally distinct from you as an individual

If you’re not sure, this guide explains the difference between a sole trader and a limited company.

3. Write a business plan

A business plan is an important document for a business of any size. It helps you to get an idea of your strategic goals, financials, market research, and potential obstacles.

And as part of any new business strategy, you’ll need to create a budget. The cost to start a business can vary widely – it depends on things like whether you need to buy specialist equipment, rent a business premises, or if you’re running your business from home.

Our guide on how to write a business plan has a complete overview of writing your plan – plus a free downloadable business plan template too.

4. Secure funding and finance

How much money do you need to start a business? It’ll vary depending on your product or service – but you’ll need to think about this question before getting your new venture started.

You might not need much initial investment if you’re starting small.

But if you’ve identified a number of costs in your budget, you should know how you’re going to fund your project. Will you use savings? Or will you ask for help with starting up a new business (for example, loans from friends, family, or a bank)?

Keep in mind you might be able to find grants for new businesses to help lighten the financial burden. The benefit of a small business grant rather than a loan is that you don’t usually have to pay the money back.

And there’s also the option of taking out a small business loan. We compared seven small business loans from different lenders to see the pros and cons for small business owners. 

5. Plan your advertising strategy

Now you’ve sorted your finances, it’s time to think about how you’re going to attract customers and grow your business.

When it comes to advertising a new business, you’ll need to consider marketing, branding, and how you’ll balance online and offline promotion.

6. Buy your new business insurance

The type of business insurance you’ll need depends on your business. Whether you have an online shop or deliver a service, you can tailor your cover and protect yourself from the costs of everyday risks like accidents, damage, and legal fees. You can also add specific covers if you need to protect stock or tools.

You can select from a range of covers:

• public liability insurance – this is important if customers visit your premises or you carry out work on client sites
• professional indemnity insurance – covers you if a client loses money because you provide negligent advice, services, or designs
• employers’ liability insurance – this is a legal requirement if you have employees
• legal expenses insurance – covers business legal expenses or prosecution fees
• small business health insurance – affordable healthcare cover for you and your employees

7. Understand your tax obligations

Running a business comes with legal and accounting responsibilities, so it’s important you’re clear on what’s involved. There’s a £1,000 tax free allowance, but after that you’re legally required to register with HMRC or Companies House.

Sole traders need to:

• register with HMRC
• submit an annual Self Assessment tax return
  

Limited companies need to:

• register with Companies House
• pay corporation tax on the profits you make from your business
• file a company tax return
• pay VAT
• as a self-employed person, you’ll also need to send a Self Assessment

One of the benefits of registering as self-employed is you can claim back some of your expenses and reduce your tax bill. Our guide on self-employed tax deductible expenses goes into more detail on the expenses you can subtract from your business turnover when working out how much tax you need to pay.

And a good way to test your business venture without as much financial risk is to start a business alongside full-time employment – but make sure you understand everything about paying tax when you have a side hustle first.

You may also be able to recoup some of the tax you pay with new business tax relief, such as business rates relief and VAT relief.

Finally, be sure to keep up with all the self-employed tax changes that are introduced in April each year.

8. Create a system for keeping business records

After you’ve worked out what you need to do for tax, it’s important to stay organised so you can meet your tax obligations at various points throughout the tax year.

If you don’t have a record-keeping system, you’ll spend a lot of time sorting paperwork when you have to do your Self Assessment – valuable time that could be spent running your business, or on relaxing and recharging. Read more bookkeeping tips here.

Firstly, it’s a good idea to keep your business and personal finances separate. That’s because allowances like tax-deductible expenses can only be for business purposes – it’s much harder to separate money coming in and out when you’re using one account.

Many of the major providers offer a business bank account – here are some of the best.

What’s more, there’s lots of software available that can make record-keeping much easier. Software can do tasks like create and send invoices automatically, and monitor your income and outgoings:

• best accounting software for UK businesses
• best invoice apps for small businesses
  

Finally, you’re required to keep business records for a number of years. If HMRC asks for them, accurate and organised business records can help keep you out of trouble in the event of a tax investigation. Read more about how long to keep tax records.

9. Maintain your business with support guides and templates

For more resources on running your business, from conducting a business health check to hiring employees, explore the support guides and templates below.

• get a strategic understanding of your business in terms of strengths, weaknesses, opportunities, and threats with our free SWOT analysis template
• selling goods or services means you’ll need to send clients an invoice to get paid – read our guide on how to write an invoice and download your free template
• IR35 support and guides for contractors
• how to calculate turnover for your business
• Self Assessment and tax resources
• when you’re ready to hire your first employee, download our free contract of employment template. As your business grows, an organisation chart can help you to keep track of your company’s hierarchy and structure

Level up your business skills

The list of business skills for entrepreneurs is endless. Beyond being an expert in your trade, you’ll also need to be a whiz at marketing, selling, and know your way around a spreadsheet.

Here’s an idea of some key skills you could upskill to prepare for being a small business owner:

Project management

From launching a website to developing a new product, all your business projects need to be managed effectively. That means keeping in budget and finishing on time.

Bookkeeping and accountancy

Tax, cash flow, and sales all need to be carefully tracked. Having basic bookkeeping skills will help you when it comes to filing your tax return and understanding the health of your business.

Pitching and presenting

At some point while starting up your business, you’ll almost certainly have to give a presentation. That could be a pitch to potential investors, a presentation to new clients, or an update to staff.

Sales and marketing

Keep on top of trends, observe changing customer behaviour, and make sure your sales and marketing plan is bringing you business. 

You can find a whole range of business courses online. Start by browsing Reed courses to upskill in any area of business, from presenting and project management to finance and HR. 

FutureLearn and Open University are also useful resources for building your business skills. It’s worth remembering that you’ll want to keep your skills up to date as part of your continuing professional development too.

Expert tips from successful business owners

Mark Mciver, CEO and founder of London barbershop SliderCuts, shares his three tips to being a successful entrepreneur:

But it’s important not to focus too much on what other people are trying to tell you – you know your business better than anyone.

Lucy Hitchcock is owner of Partner in Wine and Sassy Digital. And as the founder of two small businesses, Lucy has this to say to people just starting out: “Lots of people are going to have lots of advice for you when you are first self-employed, and my advice would be not to take it all.

“It’s your career. And it’s your job to do your own research, listen to your gut, and work out what’s best for your journey, your business, and ultimately the path you want to take.”

Are you starting your own business? Let us know what else you’d like to know in the comments.