Have you got a great idea for a business? Ready to take the leap? Escaping the nine-to-five and venturing out on your own can be a scary prospect, but with the right planning and approach, it can be done. Building a business from scratch is an option for anybody with the right skills, experience and ideas.

The UK was home to 5.5m small companies in 2021, according to the Federation of Small Businesses. These firms employed 12.9m people, while boasting a combined turnover of £1.6trn, so small businesses have a big role to play in the economy.

Going it alone has plenty of benefits too. It allows you to follow your own routines, tap into passions and define your own work-life balance. However, you may also need to be prepared for some long hours and an irregular income as your idea gets off the ground. This is where careful research and planning come in.

If you’re aiming to set up a small business, find out where to start with NatWest. From market research to finance options, our guide looks at how to build businesses step by step.

From local construction firms to global tech giants, a unique skillset or idea is at the heart of any successful company. As a result, the very first step when building a business strategy is deciding where you fit in.

What unique selling point will your company bring to the table? Is there a gap in the market to fill or a customer need going unmet? Detailed market research can help you gauge the appetite for a product or service, plus the kind of audience to target. 

Choose the right company name

After weighing up the viability of your idea, the next step is to choose a name. An engaging brand can make all the difference when building a business from scratch.

Just remember the needs and background of your audience when brainstorming names. While creative thinking is encouraged, watch out for anything too abstract.

Think about your business structure

Next, you’ll need to consider the structure of your company. There are three common ways to set up a new firm:

1. Sole trader. The most straightforward option, where you run things yourself and keep all post-tax profits. On the flipside, you’ll be personally responsible for any business losses.
   
2. Limited company. This structure is more complex, with different management and reporting duties. However, it keeps your finances separate from the company’s accounts since it’s classed as a standalone entity.
3. Partnership. This involves owning the business and sharing responsibility with one or more people. Everyone takes a share of the profits and is responsible for debts.

Understand your capabilities and limitations

At this early stage, it’s also useful to be honest about your skillset – and whether you’ll need a bit of extra support.

For example, outsourcing certain accounting or marketing tasks will come with short-term costs. But it could save you time, fill gaps in your knowledge and ensure things are done effectively.

Once you’ve developed a clear vision, it’s time to write a formal business plan. This is a document that outlines your goals and objectives – and how you intend to meet them.

Building a business plan offers a range of benefits. It can focus your efforts and help to gain buy-in. A clear and realistic plan may also attract external investors and lenders, by demonstrating the viability of your firm.

Here are some of the key sections to include in a start-up business plan:

• Executive summary. This provides an overview of your strategy, ideas and potential. The aim is to entice readers and encourage them to delve into more detail in the following chapters.
• Company structure. Talk about the history of the business, how it’s currently set up, and the advantages of your product or service.
• Market analysis. Offer a realistic, honest summary of your wider industry. What trends and competitors will you need to be aware of?
• Financing. Sales, profits and cash-flow forecasts for the next three to five years can legitimise your business idea. Also include details of the loans or investments you may require.
• Marketing plans. Explain where your product fits into the market and how you intend to promote it. For example, what pricing strategy will you follow?

Goals are a vital ingredient when building a business strategy. The targets you set in your business plan and throughout your journey can offer a clear sense of direction. They should also keep everyone focused and motivated.
Many entrepreneurs use the ‘Smart’ model when putting goals in place. This stands for:

• Specific, ensuring objectives are tightly focused and avoiding vague language.
• Measurable, with different metrics to gauge progress.
• Achievable, so you’re not asking for the impossible.
• Realistic and relevant, ensuring each goal is within your reach.
• Timely, giving you a deadline for achieving the objective.

Clear ownership of each goal can improve your chance of success. It’s also good practice to review them regularly; after all, emerging market trends, new technologies or staff changes may force a rethink.

Like it or not, money is the lifeblood of start-up businesses. The costs come thick and fast – from equipment, vehicles and staff wages, to advertising, website hosting and new premises.

Small business owners wondering where to start with finance should think about their budget first. List all the potential costs, then add up the total and compare it with the money you have available. 

Different ways to fund a new business

Traditional loans aren’t the only way to get your business moving, so it’s worth reviewing all the options before committing. Here are some of the main financing methods:

Business loan

A business loan provides a lump sum that you repay in regular instalments. You’ll pay interest to the lender, along with the original loan amount.

A loan allows you to stay in control of your business, while offering a clear repayment plan. But it’s important to consider how you’ll afford any loans you take out.

Explore business loans with NatWest.

Security/ A personal, director or member’s guarantee may be required. Product fees may apply. Over 18s only. Subject to status, business use only.

Credit cards and overdrafts

A business credit card lets you borrow money as you go, up to a certain limit. You’ll pay interest on what you’ve spent – unless there’s an interest-free period or you make full repayments each month. Some cards offer rewards and perks but look out for charges and annual fees too.

An overdraft is a way of borrowing money through a business bank account. It helps you pay for things when there’s no money left in your account – up to a set limit. 

Overdrafts and credit cards both provide a safety net if you need money urgently. But they’re usually designed for short-term or day-to-day borrowing. As a result, they’re unlikely to cover more significant expenses.

Learn more about business credit cards

Discover our business overdraft

Crowdfunding and peer-to-peer lending

Crowdfunding is a way of raising money from lots of different investors – potentially hundreds or even thousands.

Peer-to-peer (P2P) lending works similarly, matching individuals with companies who need funding. You register a profile with a P2P platform and submit a request for a certain loan amount. If you’re approved, one or more individuals will then lend you the money, with specific loan terms and interest rates applying.

Direct access to investors and lenders is the main benefit of crowdfunding and P2P. You don’t have to go through a bank and can set your own agenda.

Asset finance

With an asset finance agreement, a third-party company leases essential equipment, machinery or vehicles to your business. In exchange, you make a series of fixed payments over a set period. Once the contract ends, you may have the opportunity to buy the assets outright.

Find out more about asset finance.

Business grants

A grant is a sum of money that you don’t have to pay back. That sets it apart from a business loan or external investment. A range of grants are available from government agencies, usually with a specific purpose or sector in mind. 

To qualify, companies generally need to meet strict eligibility criteria. For example, some grants are only available to firms based in certain regions – or of a particular size.

Grow your business and make the most of new opportunities with the free NatWest Accelerator programme. Benefit from our one-to-one coaching, thought leadership, co-working spaces and more.

Explore NatWest Accelerator

The NatWest Accelerator is open to all business owners, not just NatWest customers. Registration is required.