Do you have the ambition of starting a new business?
It’s an exciting idea, running your own business, but people often find it tricky to navigate the steps from business idea to business reality.
Building a strong foundation is critical when you’re starting out. It makes a big difference in terms of developing a successful business. In fact, according to the Small Business Administration, about two-thirds of businesses with employees survive at least two years, while about half survive to five years. There are all sorts of reasons for business failures, but having a thorough and regularly-revised business plan can help to mitigate the chances of it happening to you.
In this article, we’re breaking down step-by-step how to start a business. Yes, there are a lot of critical steps, but if you follow them, you’ll find yourself better-prepared to tackle the world of business ownership.
#1. What do you need to get out of your business?
First of all, have you given thought to what you actually need to get out of your business? This helps you to narrow down the type of business that you should go for.
As an example, many business owners refer to the fact that they’ve “never worked so hard in their lives” or that they’ve been too busy or tied up to take any vacations. If this sort of scenario sounds like a nightmare to you, then you need to plan carefully to avoid it.
You might have goals to be the next global giant, but it’s also okay to have relatively modest goals for a business. Some common ambitions include:
- Wanting to make a bit of extra money (perhaps achieved through a side-hustle)
- Wanting more freedom and autonomy with work
- Wanting to free up more time for family or other things you’d like to be doing
- Wanting to build something you can use to give back for philanthropic purposes
- Wanting to be a market or industry leader
- Wanting to build something in the hopes of acquisition in a few years
- Wanting to diversify your income stream.
You also need to consider your personal preferences. Does it suit you to turn up to a bricks-and-mortar location for set business hours? Or, do you prefer to be less tied-down? Perhaps the flexibility of an online-only business works for you over any sort of physical location.
Consider where your skills and passions lie too. No one wants to work on something that they don’t find stimulating. You might be interested in doing work that is a stretch for your current skills, but if you identify this early, you can work on ways to build up the skills you need.
Finally, think about the lifestyle you would like to lead. Would you like to be checking in every day with your business? Or, would you like to build something that keeps ticking along, even if you’re in the middle of a mountain range for a couple of weeks? Do you have ambitions of being mega-rich? Or, would you simply like a business that pays for your basic needs, or enough to be comfortable?
Write all of this information down, as it will help to guide you through business ideas. You will notice that some options are quickly a “no” because they won’t meet your bottom-line requirements for a business.
#2. Brainstorm business ideas
We’re including this section here because many people have the idea that they’d like to own a business, but don’t yet know what that will look like. If you already have an amazing idea, that’s great! You may like to skip ahead to the next section.
There are dozens of ways in which people have come up with winning business ideas, and brainstorming is a great technique to generate a flood of ideas. The key is to try to evaluate ideas based on the business preferences you have already identified.
Where do good ideas come from? Here are a few questions that can trigger them:
- What is something that really bugs you? Many good ideas start as fixes to a problem that the business owner has encountered.
- Is there a better way of doing something that is currently a product or service? Not all business ideas are entirely new, but sometimes you can reinvent them in a way that gives a competitive advantage. For example, look at what subscription box companies have done for things like razors, make-up, snacks or pet food.
- Is there a way to harness a new or up-and-coming technology? Some great business ideas position the company as a pioneer of change in the business landscape.
- Can your current skills or hobbies be monetized? For example, you might have a passion for salsa and a secret family recipe for making it.
- What problems or concerns do other people often voice? Could managing these concerns be the start of a business?
Once you’ve brainstormed a few ideas, highlight your top two or three contenders for further investigation.
#3. Conduct market research
For a business idea to succeed, it needs to solve a problem, fulfill a need better than current solutions, or generally be something the market wants. Your next step is to run your shortlist of ideas through a validation process (pick your most likely idea first).
First of all, is there a big enough market to justify the business idea? If you’ve determined that there is, you can then get even more specific and figure out how saturated the market is and whether there is room for your idea.
You might conduct focus groups or surveys to find out exactly what people are looking for, what bothers them, or any suggestions they have. Importantly, you’ll want to analyze competitors – is anyone else doing what you want to do already? If not, could there be a good reason that they aren’t?
It’s important that you identify what makes your products or services different from competitors. What will your business strategy be and will it be viable? For example, competing on price in the highly competitive ecommerce business can be a race to the bottom. If you have large competitors, you will almost always lose because they have the resources to fund loss-leaders.
Determining a USP (unique selling proposition) helps you to define what will make you different and why customers should choose you over competitors. As part of your research, you need to understand what will appeal to your target market in terms of a USP – what makes it worth it to them?
Another part of your market validation absolutely has to be the financial side. What will it cost to get your idea going and can you charge enough to turn a profit within the time that you need to? If you need to charge more than competitors, what makes your business worth choosing for customers?
#4. Write a business plan
This is the point where you’ve narrowed down to one business idea you’d like to go ahead with. You’ve validated that there is a market for the idea and that it’s possible to make it work financially, so it’s time to write a solid business plan.
At some point in here, you’re going to have to come up with a business name – something that is easy to remember and catchy to your desired customer base. Google is a useful tool here – check that no one else is using your desired business name and that the URL you will need is available.
Your business plan should be a written description of how you plan to evolve your business from start to finish. There are many different ways to write a business plan, but we suggest finding a template that makes sense to you in terms of level of detail. A tip here is that if you’re going to require investors or a loan, then you’ll probably need to make it as comprehensive, yet clear as possible. Lenders and investors want to see that details are well thought-out.
Most business plan templates either fall under the category of “traditional” or “lean startup.” Traditional plans are hefty and detailed, beginning with an executive summary, potentially including a funding request and ending with appendix.
Lean startup business plan templates are suitable for businesses that are able to start very quickly with few required resources. For example, if you are branding yourself as a consultant and making use of your own skills and experience, you may not need a whole lot of “extras” to start up on your own.
These templates are very high-level and tend to focus on value proposition, infrastructure, customers and finances. One of the most common versions (which you can find free if you search online) is the “Business Model Canvas.” Note that if you are seeking lending or investment funds, these plans may be too lean to satisfy requirements.
No matter what type of business plan you choose, be prepared to treat it as a living document. As time goes on, your business matures or there are changes in the market or with technology – you’ll probably need to adjust your plan to account for those.
#5. Plan your business finances
Do you need to organize financing to get your business started? Or, can you self-fund, or start with very little funds?
If you do need funding to get going, there are many possible avenues you can take to get it. You need to make some calculations to work out how much you will need, as this may play a role in how you decide to get the financing. Consider what you need for startup costs to set up and get going, as well as what you might need to cover ongoing expenses before you turn a profit.
You will need to consider expenses such as:
- Licensing, permits and subscriptions
- Legal fees
- Equipment and inventory
It’s a good strategy to create a spreadsheet or similar document so that you can keep track of expenses. One of the core reasons that businesses fail comes down to finances – you don’t want to run into any surprises!
The question now is, how will you get the finances you need? Here are some of the most common avenues small businesses take:
- Small business loans
- Credit cards (a risky prospect if interest rates are high)
- Business grants (Check out Grants.gov for a searchable directory of federal grants)
- Loans from family or friends
- Crowdfunding campaigns such as through Kickstarter
- Angel investors
- Bank loan or line of credit
- Own savings
The option that is best for you will depend upon your unique circumstances, available resources and appetite for risk. Also consider how much input you’re prepared to take from others. Angel investors may expect a certain level of input in decision-making.
#6. Make your business official
A key mistake that many small businesses have made is to skip getting all of the official permits or registrations that they need. Things such as not getting insurance for the business can come back to bite, even if that’s at a later date.
One thing to consider is setting up the business in the manner in which you intend to continue. There is something to be said for the psychological shift when someone goes from being a sole proprietor to an LLC, for example. It’s a sign to yourself that you’re taking the business seriously.
There are several potential sub-steps to making your business “official,” here are a few:
- Setting up your business structure. You may want to seek advice from a qualified accountant or lawyer about this. Different business structures have different tax and legal implications. For example, sole proprietor vs. partnership vs. LLC vs. S Corporation.
- Your business name and registration. You might need to get a license to operate in your state or county as well.
- Federal and state tax ID for your business
- Any required insurance
- Any permits needed
- Setup of bank accounts
- Application for any trademarks, copyrights or patents
- Any legal agreements, such as supplier agreements, non-disclosures, or employee contracts. This may also include vendor agreements for things like shipping
- Reserving your preferred website URL.
#7. Develop your product or service
The details of how you develop your product or service will vary depending on the type of business. For example, some sell physical products while others offer digital services. Nevertheless, it’s important that you don’t skimp on the product development area. Ultimately, this is what is going to represent your company.
Here is where you iron out the details, including how you might package up your products or services. As an example, consider a “productized service” (much like we do here at One Week Website). The nature of this type of service is that you bundle services together into a package, which you then charge a rate (usually monthly) for. It’s important that these packages have clearly defined parameters in order for the business model to work. If not, you can easily end up down a rabbit hole of extra work.
For physical products, you may need to find a supplier, or a manufacturer for something that you have designed yourself. You need to finalize designs and materials and work on areas such as quality control and risk management.
An especially important part of any product or service development is consideration of the customer. You should have a clearly defined target market, as they’re the ones you hope are going to buy what you’re selling. Your development might include activities such as usability testing on people who represent your target audience, or surveying when you’re developing a service. You need to validate that your product or service is meeting the needs of customers as intended – remember that sometimes this will take a few iterations. You’ll need to consider this when you are budgeting.
Lastly, if there are any certifications or educational requirements for your chosen field, get these taken care of as early as possible. For example, some types of businesses need FDA or ISO certification – they may need to inspect your products or facility. If you’re using particular types of vehicles, you may need additional licenses.
#8. Develop your branding and messaging
How would you like your business to be perceived? What “voice” do you want to convey to the customer and what will your brand represent? These are important questions to answer early in your business setup, because it helps to ensure you present cohesive messaging.
In fact, when we build websites, one of our major tasks is to ensure we work with clients to get their messaging clear. This helps us to build a site that speaks to that target audience and emphasizes the most important things first. You only have a few short seconds to grab the attention of a new customer, so they need to “get” you very quickly.
So, how will you develop your voice and messaging? Here are a few ideas:
- Look to your competitors – what are the gaps or flaws in their messaging? What types of customers are they attracting with their messaging? Consider how your brand might differentiate. For example, you might have an edgier voice compared to a more conservative competitor.
- Describe your products main advantages and why they are so important. You could also seek this information from the voice of the customer, by asking any test users.
- Think about the values of your brand. How will these be communicated by your overall messaging? Some brands have even created manifestos to help express what they care about and why the do what they do. (See a good example from Red below).
What sets your company, your product or service apart from others?
Your brand messaging might include things like your value proposition, mission statements and manifestos. Importantly, it’s not just those specific elements, it’s an overall tone and feel that knits everything together into a cohesive unit. For example, people who see your brand on Facebook and in print media shouldn’t detect any difference in how you are presented.
#9. Set up your website and back-end systems
See what we did there? Yes, we strongly believe that it’s important to get your messaging down before leaping into creating your website. This will help you to select an appropriate design and layout.
Of course, you also need to consider website functionality and overall setup. There are so many different options you could go for, but you need to consider things like budget, expertise required and your desired level of management of the website. For example, some DIY website platforms don’t allow you to customize how you’d like or they limit functionality. They may also build everything onto their own platform so that, if they were to shut down, your website will potentially go with them.
One way to narrow down and find your desired setup is to list everything that you must have for your website. For example, you might need payment gateways, a shopping cart function, portfolio features and content sharing. You might want to integrate certain key tools, such as accounting software or CRM (customer relationship management) tools.
Besides your website, you may need any or all of these back-end systems:
- Project management software
- Accounting software
- Email management tools
- CRM software
- Payroll software
- Booking systems
- Inventory management systems
- Chat or customer support systems
Again, list your must-have features to help you narrow down your options. We also like to look for tools that integrate well together, as this tends to avoid a whole lot of manual data-handling.
#10. Promote your business
With all of the systems, products and paperwork taken care of, it’s time to promote your business. Make sure that you’ve budgeted for marketing among your startup costs! In today’s world of noise, you’re going to have to promote yourself to be found by your target market.
There are a myriad of potential ways to promote your business, so let’s look at a few that are common for startups. Some will cost you money, but others are free or quite inexpensive. Create your own marketing plan based on what your resources and needs are:
- Devise a launch strategy. Make a big deal of launching your business as a way to attract customers. For example, bricks and mortar stores often have opening parties, while online businesses might have launch deals.
- Start building an email list. Email marketing is an inexpensive route to take, but you need to have a list aimed at your target audience. You might do something like create a pre-launch landing page and invite people to sign up for opening deals or to be kept informed.
- Build a social media presence. To narrow it down, find out which channels your target audience is using and go to those places. Aim to do one or two channels very well rather than spreading yourself thinly across several.
- Use paid advertising. You might choose online methods, offline methods or a mixture of both. Again, the key is to have figured out where to find your target audience. For example, you might use paid social media or search advertising. You might take out ads in local newspapers, local directories (on or offline) or industry publications.
- Be present at relevant conferences or trade shows. Strategic booths or sponsorships can help to boost your profile.
- Join networking groups. For example, your local business association, Young Professionals groups or meetups. Have business cards available to hand out.
Whew! There are certainly many steps to take when starting a business, but don’t let that put you off the business ownership dream. Every journey is different, but the most successful businesses have almost always had a plan to get that way.
A good business always begins with a firm foundation. You need to understand your market and be clear about the need your product or service fulfills. Differentiating from competitors is important, as is coming up with clear, compelling messaging.
Stick with us as we look at the sections in this article in more detail in future posts. There’s a lot to organize, but you’ll never regret taking a thorough approach to developing a profitable business.