Keen to start your own business after university rather than working for someone else? Get your head round the basics with our guide below. However, there’s no need to do it alone – there’s masses of free support for would-be entrepreneurs, both via universities and local initiatives that are open to all residents in the area. Get in touch with them right at the outset – they can help you through all of these steps.
To get you started, we spoke to the following experts, who advise would-be entrepreneurs every day.
- Cath Spence, incubator lead, Oxford University Innovation
- Leah Thompson, manager, Enterprising Oxford, University of Oxford
- Dave Jarman, senior lecturer in entrepreneurship, MSc innovation and entrepreneurship, University of Bristol.
1. Have an idea
Every business starts with an idea for a product or service. Maybe you already have a specific idea in mind, or perhaps you know what field you want to enter but aren’t yet sure exactly what your business would be. For example, maybe you want to set up an organisation to help homeless people but don’t know how it would do so. If this is the case, research the area to find out what already exists and what the problems or gaps are that your business could address. You can still move on to do a lot of the activities in step 2, which will help you with this, but at some point you’ll need to crystallise your aspirations into an actual idea.
2. Assess whether your idea is a goer
Your idea might be great, but would it make a great business? Step 2 is all about objectively assessing this before throwing time and money at trying to make it work. You need to understand whether your idea solves a problem or addresses a need that actually exists, whether you can make money out of it and whether there is space in the market for it.
- Do some desk research – get online and find out about the market/sector and what products or services already exist.
- Make contact with potential customers and ask them questions to help you assess whether your idea would actually solve a problem for them. ‘If nobody has a problem the shape of the solution you have it’s really worth staying at home!’ says Cath. Leah advises asking questions such as ‘What is the problem around this area?’ and ‘How do you feel about this issue?’ rather than ‘Do you think this is a good idea?’, as you don’t want people to say ‘yes’ just because they’re trying to be nice to you.
- It’s not a good idea at this stage to splash out on an expensive protype. However, if the nature of your idea means that you could produce a few samples very cheaply or for free, you could present these to potential customers to get feedback. Cath cites a team who’re considering launching training courses for children; they decided to run a couple of free workshops and ask parents questions such as ‘If we charged you for this, would you be willing to pay?’ and ‘How does this fit in with the other things your children do?’.
- Talk to others in the relevant field too, not just potential customers. Dave comments: ‘You might find a collaborator; you might find an investor; you might find somebody with a better idea than yours. Lots of students get very hung up on the idea that the idea they’ve got needs to be protected at all costs but actually most people are too busy to just take your idea.’
- Bounce your idea about more widely. ‘Talk to anyone!’ recommends Dave. ‘We make assumptions that only certain people are going to understand the idea or meaningfully contribute to it but you’d be surprised what your Dad or your kid sister would actually offer you and you’d go “I didn’t even think of that!”.’
3. Adapt (or ditch) your idea if it needs it
Step 2 should have given you food for thought. Perhaps it’s best to ditch this particular idea, or maybe it needs adapting in the light of feedback. This might be a major rethink having discovered that your idea isn’t the best solution to your customers’ actual problems, or it could be tweaking a detail (such as colour) that is easy to change now but could have been costly further down the line. Dave suggests that you use your experiences to assess:
- Does anybody want this?
- Are there enough of them?
- Are they willing to pay enough?
- Can you make enough often enough to satisfy that demand?
- Do you enjoy doing it?
4. Create a business plan
This is a formal document setting out what your business does, what it aims to achieve, who runs it, the market it operates in and its financial forecasts. It is useful for you in terms of clarifying the above and helping you set yourself out on a clear path; it’s also very important if you are seeking external investment, as it will help potential investors to decide whether you have a credible business that is worth putting money into.
5. Register your business
This doesn’t have to be step 5 precisely, but you need to register your business so that the government knows it exists. If you seek investment to grow your business, many investors will want a legal entity to invest in, rather than handing over their cash to you personally. Likewise, if you’re going into business with a friend or family member it’s wise to get things formalised to prevent bust-ups down the line.
You could register as:
- A sole trader. This is an option if you’re just one self-employed person working by yourself. However, there’s no legal separation between your personal finances and those of your business, so if your business runs into difficulty you could lose any money or possessions you own.
- A partnership. This allows you to go into business with someone else, but depending on the type of partnership you choose, you could still be personally liable for any unpaid debts.
- A limited company. This provides legal separation between your personal finances and those of the business, and allows you to go into business with other people.
- You can set up a company ‘limited by shares’ (if you want to make a profit) or ‘limited by guarantee’ (if you’re planning a not-for-profit company).
- In both cases you need to appoint one or more directors, but these can just be you and anyone you’re going into business with.
- You’ll need to issue shares to shareholders (for a company limited by shares) or have guarantors who guarantee to back the company by a specified amount (for a company limited by guarantee). However, again, your shareholder(s)/guarantor(s) can simply be you and any co-founders, and your shares or guarantees can just be for a nominal amount, such as £1.
In the UK you’re allowed to make up to £1,000 from self employment in a tax year before you need to register or pay tax on this income, so if you’re just experimenting a bit for now – for example making a few food/gift/clothing items and seeing how they sell – you can legally do so without registering your business. However, you won’t have the protection of being a limited company.
6. Protect yourself and your business
There are various ways in which you may want or need to protect yourself and your business before you get going. Again, these may be a slightly earlier or later step depending on when exactly you start conducting business activities.
- For many businesses you will require insurance, and it’s often a good idea even if it’s not a legal necessity. For example, you may need liability insurance (in case someone is injured, becomes ill or has their property damaged as a result of something your business is responsible for) or insurance for your vehicles or business premises.
- For some businesses, it’s a good idea to seek a patent to protect any intellectual property. However, for others it will be irrelevant, unaffordable or just not the best plan. Dave comments: ‘A patent requires that you’ve got a novel way of doing something. There’s usually a process involved – a recipe or a method or a technique. And actually by taking out a patent you are making that method public; you’re just protecting it for a while. You could just keep it as a secret recipe, which might be more effective.’
- If anyone in your business will be working regularly with children or vulnerable adults, they will need a Disclosure and Barring Service (DBS) check.
- Your business will almost certainly need to hold individuals’ personal data (whether that’s employees, customers, job applicants or someone else), so make sure you and your co-founders understand the General Data Protection Regulation (GDPR).
7. Seek external funding if you need it
At this stage you may need to source external funding for your business – but not necessarily. Dave comments that many businesses grow slowly on a bootstrapping basis – that is, starting out with a small amount of money (eg your own savings), producing a small number of products/services and using any profits to begin the cycle again. ‘Investment depends on how big you need to get and how fast,’ he explains. ‘Lots of businesses don’t need to get big fast; however, if you’re doing something in a really competitive space and you’re competing with the Googles of the world then you need to move really quickly.’
If you decide to raise money to allow more rapid growth, you may go through several rounds of investment and development. Cath explains that in the first instance you’re probably looking at either a small grant (money you don’t have to pay back) or an angel investor. ‘You won’t get a bank loan easily,’ she adds. ‘They will only loan it against something they can secure it against.’ Once you’ve used this funding to move your business on and gain more evidence that it is viable, you may need to seek further investment, ‘possibly from angels, possibly from venture capital,’ says Cath. ‘Eventually you’ll get to a point where a bank loan will be feasible because you’ll have sufficient history and sufficient assets in the business to allow you to borrow.’ If you’re part of an incubator or accelerator unit it will support you through this process, though you may also find investors through the networks you’ve developed or via an online platform – for example a crowdfunding site or one designed to link entrepreneurs with angel investors.