Advice Guide for New Business Start Ups in the UK

Posted on August 1, 2014 by Prime Office Space

Man writing brainstorm notesThe first step for a business start up is to develop a realistic idea, which can turn into a profitable product or service. In the UK, there are four different support groups, for England, Northern Ireland, Scotland and the Wales, which provide help with developing new business ideas. Additionally, you need to protect your intellectual property and register your business as a sole trader, limited company or business partnership.

The following are steps to follow for a new business start up in the UK.

Targeting the right audience

For a business idea to turn into a profitable venture, you need research your target audience and identify your customers. Ask people what they need. The goal is to meet a special need, not just to develop an idea. In doing so, you will make sure that your customers will pay for your product or service. Prepare a basic version of your product or service and test it with your customers to get a feedback on how it works and how they feel about it. Try different prices with different people to understand what customers would pay for your prototype. If necessary, adjust your product or service to their needs. If there are competitors in the market, think of ways to differentiate your product in a way that will guarantee a competitive edge.

Funding your start-up

Perhaps the most difficult part of the process is to get funding. There are many different sources of business financing to leverage the costs of a business start up, but the point is to choose the one that fits into your financial schedule and meets your requirements.
a) Bank Loans
Getting a bank loan for a business start up requires a well-structured loan application. Bankers do not lend money to unprofessional entrepreneurs, who seem unaware of the risks of starting a new business. Present accurate and realistic cash flow forecasts along with a risk anticipation and management plan to show that you know your financial situation and your banker will be convinced of your efficiency to use the money, once your business loan is approved. You may also be required to put your house or car as a collateral in case you default on your loan.

b) Government schemes
In the UK, there are several government schemes for new businesses that you may be eligible for. Although the grant amount depends on the size of the business, its location and the project under investigation, the following government schemes are available:

• The Grant for Business Development (GBI) and Selective Finance for Investment (SFI) are two government-backed support schemes that offer employment grants to entrepreneurs to help them acquire assets.
• The National DTI Grant for Research and Development scheme offers grants for research and development in order to assist entrepreneurs in the promotion of innovative products.
• Small and medium businesses (SMEs) are eligible for the European Regional Development Fund (ERDF), which was launched by the Mayor of London and grants a GBP300m funding scheme for the operational costs.
• For the startups that engage in exports, the Export Credits Guarantee Department (ECGD) offers grants to facilitate involvement in exhibitions abroad.

c) Equity Funding
Equity funding includes the money of wealthy investors, who trust your start-up (business angels), the money of company people, who believe your start-up has a potential for growth (venture capitalists), and the money of people who are willing to invest in your idea over the Internet (crowdfunding). You may also borrow money from friends and relatives or search for alternative sources of funding in the British Private Equity and Venture Capital Association (BVCA) and the UK Business Angels Association.

Find the best suppliers

Getting the best suppliers is fundamental to the success of your start-up. Make a list of potential suppliers that could provide you with the raw materials or the product itself and contact them to get an estimate. After you narrow down your list, negotiate the final prices with the most reliable suppliers and get an agreement on payment terms, including discounts, and credit policies, in writing. This will allow you to establish business relationships with your suppliers.

Bottom Line

The UK has become a welcoming place for start ups. There’s a lot more early-stage capital available for start-ups now than there ever has been. And there are more options, more early-stage investment firms than there were two years ago or even a year ago. Eileen Burbidge, Venture Capitalist at Passion Capital says. Once you develop your business idea and you register your intellectual property, funding your start-up will be an easy process.