Launching a small business in 2022? Here are our tips to ensure success
Launching a small business in today’s economy is no small feat. Thorough preparation and an in-depth, step-by-step plan will help you launch your small business with a greater chance of success. A small business can be a good side hustle with the potential to become a full-time gig. However, starting your own small business comes with certain risks. You should bear in mind that no small business launches without some mishaps along the way. You will need to adapt to changes in your situation.
What steps should you take to launching a small business successfully?
1. Perfect your business idea
Before you start anything, you need to make sure you have a solid business idea. You likely already have some inkling of what type of business you want to run, but you’ll need to refine it before you try and launch it.
The best business ideas combine passion and viability. Without passion, you’re more likely to run out of steam, and without knowledge or expertise in the area, you won’t be able to make your business stand out.
So, before taking your small business idea to market, ask yourself why. Why are you setting up this business? Your answer may be personal because you want to make a difference to a particular community or group of people or because you have noticed a gap in the market that you believe you can fill.
Your answers to why you are setting up your business will stand you in good stead for the rest of the preparation and launching a small business. Your answer is particularly invaluable if you are seeking funding for your company and plan to work with investors.
2. Conduct market research
Beyond the idea behind your business, you should also get to know the market at large. Ideally, you should utilise a mixture of primary and secondary research. This means sending out surveys and questionnaires to your potential customer base and looking into existing market data and information.
Thorough market research should help you find the sweet spot for launching your market. For instance, while there might be a lot of interest and customers for your idea, is the market oversaturated? Or is there a small but highly motivated or well-paying target audience associated with your market idea?
Whatever the case, market research can help you decide if your idea is market ready and help you alter or perfect your vision to better stand out to your target audience and against your competitors.
Market research can also be invaluable in helping you avoid common mistakes people make when opening a small business.
3. Craft your business plan
Your business plan should act as a guide that helps you establish and run your new small business.
While business plans are typically crafted to give outsiders a clear understanding of your business, they are also valuable tools for helping you identify potential issues and elaborate on ideas.
Here are some of the core aspects your business plan should cover:
- Your company name.
- A description of your company’s role.
- Market research and analysis.
- Business structure and organisation.
- The services or products you plan to sell.
- Target customer audience.
- Logistics plans.
- Marketing and social media strategy.
- Financial plan.
It is also highly recommended that you consider an exit strategy. While the hope is that you will not need this, the reality is that every good business plan needs backups. Therefore, you should have an exit strategy that allows you to pull out of the business in cases of financial hardship, retirement, or when you are ready to move on to other things.
4. Financing your business
Once you have completed your business plan, you should know how much capital your business startup will require. Generally, some good advice on this topic is to overestimate how much you think you will need. This strategy can help account for unforeseen expenses or changes in costs that inevitably occur when opening a new business.
Whether you plan to finance your business opening yourself or looking to take out loans to fund your business, you’ll need to complete a break-even analysis. This analysis will help you determine the profitability of your business.
Simply divide your fixed costs by the average prices minus variable costs. Your analysis will help you understand where your profits come from and what minimum performance your business needs to achieve to be profitable.
You’ll need to investigate different funding options for those whose company startup costs are more than they can afford alone.
Common funding routes include:
- Business loans – Individuals with good credit scores may be able to secure a business loan from a bank or other reputable source.
- Business grants – Grants are typically more competitive and have stricter requirements since, unlike loans, you don’t have to repay the money you receive.
- Personal investors – You can find investors in friends or family or through venture capitalists or Angel investors.
Set up a business bank account:
Separate your personal finances from your business ones as early as possible. A business bank account is useful when applying for business loans and grants, completing taxes, and protecting your personal assets.
If you are struggling to find a bank, we suggest writing down a list of your needs. This can make identifying which bank accounts work for your business a simpler task.
5. Decide your business structure
There are 4 primary business structures in the UK:
- Sole traders
This is one of the simplest to register and refers to self-employed individuals or businesses run by you. As a sole trader, you are entitled to all profits as income (after paying tax to HMRC) but are also responsible for all liabilities.
- Limited companies
A limited company is a separate legal entity with separate liabilities and finances from its owner. The company generally retains profits and is required to pay corporation tax.
Two or more individuals share a business’s profits (and potential losses) in a partnership. They share all risks and benefits of running the company.
- Limited liability partnerships
LLPs are also run by 2 or members, who can be individuals or companies. In an LLP, a partner’s liability is limited to the amount they invest in the business.
6. Register your business
Once you know the structure of your business, you will need to register it with the relevant authorities. This includes HMRC and the Companies House if your business is set up as an LLP or limited company.
7. Locate what tools you need
Various tools are involved in starting a business, from software to employees to location. What tools you need will depend on the type of business you have.
Consider hiring a team or potentially hiring part-time or freelance workers if you only require shorter-term or small amounts of work to be completed.
Also, think about whether specific tasks can be handled with software, especially at the start when funds may be tight, and profits are likely small or non-existent.
Popular software tools can help you handle:
- Marketing for email and social media.
- Project and time management.
- Website builders.
8. Think positive and grow when launching a small business
You don’t always need lots of money or tools to set up a successful business. Anything is possible if the idea is good, and you’ve done your homework.
The founder of the Plenty of Fish dating app set up his business with just $500 in 2003—that same business sold for $575 million in 2015.
Any small business start-up comes with risks. However, creating and following a step-by-step plan can help ensure you minimise these pitfalls and increase your chances of launching a small business with success.