Do you have a brilliant idea you are eager to bring to life? Perhaps you are tired of working under others and ready to be your own boss. Whatever the case, starting a business is not for the faint-hearted. A lot of time, money, and determination are required to bring your vision to fruition.
Even then, it’s not guaranteed you will succeed. About 50% of small businesses fail within their first five years.
Thus, to ensure the odds are in your favor, you must make the right decisions and have a plan in place. That’s why we’re giving you a step-by-step guide on how to start a business. If you follow these steps on starting a business, you’ll be well on your way to a successful venture.
1. Conduct Market Research
First and foremost, it is important to know how your market. Become familiar with your competition (competitive analysis), taking note of what they are doing right and what they can improve upon.
In addition, get to know your target audience. Depending on your business industry, your target audience could be very narrow (men or women, children or elderly, etc.) or extensive (all ages, all genders, etc.).
Other things to consider include:
- Market size
- Location of business vs. customers
- Market saturation: how many businesses are doing what you are doing?
- Pricing: what is the average price for your service/product?
Once you have a feel for your market, you will better plan out a strategy to penetrate it.
2. Write Your Business Plan
Your business plan is the foundation of your business. It is what you keep going back to every time you feel you are losing your way or need to reevaluate a certain part of your business structure.
A formal business plan includes the following:
- Executive summary: What is your company about and what makes it successful?
- Company description: What problem does your business solve?
- Market analysis: Who are your competitors and consumers?
- Organization and management: How will your company be structured internally?
- Service or product: Go into detail over what you have to offer consumers.
- Marketing: What is your brand look and feel? How will you promote your business?
- Sales: What are the selling points and how will you bring in customers?
- Funding request: If you are asking for funding, make a case for your business.
- Financial projections: How will your business fare in 5 years? Talk numbers.
- Appendix: Any supporting documents (references, resumes, pictures, permits, etc.)
Having a strong business plan contributes to organization and structure in a crucial stage of your business as it is just beginning to grow. It also helps attract investors and business partners.
3. Fund Your Business
Now let’s talk dollar signs. You’ve determined just about how much money you need to invest in your business to get the ball rolling and your projected revenue. How will you go about funding it? You have several options.
Self-funding is something several entrepreneurs do when they first start a business. Otherwise known as bootstrapping, self-funding means tapping into your savings and producing the necessary amount. The pro of this is that you maintain control of your business. The con is that it may be very costly and hurt your wallet. There is a high risk of bootstrapping.
Another way to fund your business is to secure an investor. Venture capital investments are offered in exchange for some control over the company. This is in the form of equity, which is different from a loan. Be sure to use your best judgment if you find someone interested in investing in your business. You want to ensure you are retaining sufficient control over your business while securing adequate funds.
4. Select Your Business Location and Name
Deciding on your business location and name are two of the most important decisions you will make when starting your business. Both can easily make or break your company and have a direct effect on success.
Therefore, be strategic. You want your business to be located somewhere where there is a strong demand in the market and where you can easily capture your target audience. Whether this is in the online space or a brick-and-mortar location, you must consider the regulations your business will be subject to.
When determining a name, try to develop a few ideas and go with what feels right. Your business name should embody your business, appeal to your audience, and fit nicely on the tongue.
Once you have the above steps in place, the fastest and easiest way to start a business is to register it as an LLC. A Limited Liability Company (LLC) is a type of business entity aimed at startups and small- to medium-sized businesses. An LLC has few restrictions, is inexpensive, fast to set up, and protects you in lawsuits and debts.
Look into how to register an LLC in your state to get started.