A reader asks:

How do I start a small business?

There is no one way to start a business. If you ask a dozen entrepreneurs for advice on how to start a business you’ll get a dozen different sets of advice on starting  a business and they’ll all be equally valid. So don’t feel that you must go about starting a business exactly as someone else says you should. That said here’s how, based on my experience, I would go about things if I were to start a new business these days.

How To Start A Small Business

I would start by writing a business plan which answers the following basic questions:

• Why are you starting the business?
• What are you selling?
• Who will you be selling it to?
• How will they know to buy from you?
• Why will they choose to buy from you?
• How much will you charge for your product?

Answering these questions will help you decide it the business is worth pursuing and if so, which areas you need to research further. For more on business plans, see my post How To Write A Simple Business Plan.

Once I had a basic business plan, I would set about testing the validity of my business idea. While a lot of would be entrepreneurs do this, I believe they make a fundamental mistake. They ask friends and family (and sometimes strangers) for feedback on the idea – there’s two potential problems with this:

1. People will often tell you what they believe you want to hear, rather than the truth.
2. The would be entrepreneurs tend to ignore the negative feedback.

To get around the first point, I suggest you test the idea by actually trailing it. If your business idea is Internet based then get a simple website built including everything right up to the credit card handling (instead have a page stating the system is down and asking them to leave their contact email address/phone number so you can contact them when it is live again). Then start advertising it via Pay-Per-Click and record how many visitors the site gets, how many visitors add an item to your shopping cart and how many of those visitors try to pay.

If your business idea isn’t Internet based then hit the streets/phones and start asking people to become customers (they only count as a customer if they pay you), in this case you’ll actually have to deliver the product. If you find no one buys then your idea is flawed, tweak it and try again, if you still can’t get any customers it’s a bad idea. Use the results of these tests to refine your business idea/business plan so that when you launch properly you’ll have:

1. some prospects/existing customers;
2. an idea of who your customers are and how to sell to them;
3. an idea of your margins;
4. proof that the idea is worth investing in.

You’re now in a position to take your business plan to an accountant who can help you determine the right legal structure for your business and how to register the business with HMRC. You’ll then be a in good position to approach business angels and other potential investors (but you might need to develop a more formal business plan first).

Once you’ve got the legal structure sorted and you’ve secured the capital you need (if this is your first business then you should be providing the capital) to get started get out there and get trading – just do it! 

Once you’re up and trading be sure to continually review and refine. Accept that you’ll make mistakes, so be constantly monitoring the business and be prepared to review your actions and refine your business plan as you learn how best to run your business.

If you’ve got any advice or questions about how to start up a new business, please add them to the comments below.

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