Ideas for businesses come and go all the time but finding or creating one that works for you can seem to be a more daunting task but it doesn’t have to be that way. If you want to learn how to start a business but can’t think of the next Google or Amazon then going with something that is already being sold is a safer and quicker bet.
If you see a few companies within a specific niche all doing something well but not necessarily doing everything great, then taking those pieces from each business that is working and putting them together into your business is a fantastic start.
For example, if company A has wonderful customer service, company B has fantastic marketing, and company C has a killer product or service then take each of those pieces to create your business.
Figure out why you are doing this
From the very beginning, you should have a good understanding of why you are starting this business. Whether it is for a personal need or an industry need this is going to help you stay on your path to a successful business.
What’s the difference between a personal need and an industry need?
Personal needs are things like a second income or more free time. Industry needs are things that consumers have a want or need for but there are no options for it. If your “why” happens to be a mix of both then you are already in a great starting position. There will be days where your personal need may not seem worth it but then looking at the industry need will help you to fight through your reservations on continuing.
You can also take a look at opening up a franchise. All the leg work of trying to get it off the ground has been taken care of because the brand and business model has already been established. The only things you will need is the capital to start and a great location.
Choosing the right name
Unless you go with opening up a franchise, then you will need to figure out the right name that suits the business. Right off the bat stay away from names that are long, confusing to pronounce or hard to spell/remember. Names that are either short or unique but easy to spell are going to be your best bet.
If you have a good idea of the name of the business start thinking about simplistic logo designs and color schemes. If you’re not much of a creative in this way, you can always find a freelancer that will help you get something created. When it comes to choosing the right colors for your name and logo make sure it fits the general vibe or niche you are entering. If you’re thinking about starting a brand for baby clothes you would want to stay away from dark colors. There are plenty of resources that you can find to help you get ideas.
Who is your target market?
If you want to start your business but don’t know who you are going to market it to and why, then you need to really figure this part out. Look at it this way, if you want to start a sunglasses company but are not going to do anything different than your competitors then why would anyone buy from you versus someone who already has an established brand? Having a solid game plan for your target market will help you stay on track with delivering a great product or service.
You can be less expensive, have different products or services, have better customer service pretty much any of these types of options are going to put you in a better position to succeed. The more different you are than your competitors the easier it will be for consumers to determine who they want to go with.
Your goal as an owner is to be the best in every aspect of the business as possible. It more than likely will not happen right away but the faster you can get better the faster your growth will be.
Create a business plan
Making a business plan will give you a great outlook on where to start and how to keep moving forward. Start with the basics like what is the purpose, who are you going to be selling to, how much will this cost to get off the ground and what is your end goal?
People make mistakes by jumping in too quickly without figuring out the answers to these questions. Sure, you can figure it out as you go along but that will take more time in the long run. If you get to a point where you figured you should have done it a different way than the actual way you did it, well, now you have to circle back and do it again. Whether you do this now or later you will end up doing it if you plan on succeeding. Having drive and passion will get you very far but taking the time at the start will save you tons of headaches.
Do market research
Performing market research is an integral part of your business plan. Knowing exactly your target demographic will help you immensely pinpoint who you need to sell to and why are they buying.
For example, if you are trying to start a service business like a home cleaning service business you will want to figure out who is most likely to buy that service. Going more in depth on that, finding a general audience or clientele that purchases any time of services can be a good start but you will end up losing money by trying to target customers who may not necessarily buy a home cleaning but instead are buying pool cleaning or car detailing services.
Finding that general audience is a great start but you must take it a step further. Break down that audience into categories like age, income, region they reside and more. The more you can narrow down the group the more likely you will have far greater results. How can you do this? Join local Facebook groups and post surveys or you can find some of this data through public data. If you have a good amount of money to start, you can do this with Facebook ads or Google ads, it will save you time. On the other hand try to save that money so that once you have your narrowed down audience you can maximize your returns on ads.
Market research is not only for your potential clients but your competition as well. Figure out who the best in your area/niche are and see what products or services they are offering and at what price points. If you are offering less and charging more you have to make sure that the quality is outstanding to justify your pricing. Differentiating your company from the others will help customers see what they will get from you versus the others.
Consider an exit strategy
You may be wondering why you need to think of an exit before you even start. The reason for this is that it forces you to look into the future and know where you want to end up at. If you set a desired goal of hitting $1 million in revenue per year within your first 5 years this will help you stay on track as well as force you to make changes to get to that goal quicker.
Everyone has experienced a time in their life where they learned about exiting a situation before ever getting started. If you’ve ever flown on a plane the flight attendants explain on where all the exits are and how to get off. Same thing goes with being at the movies, they tell you where the emergency exits are. You can argue that this is for safety reasons but at the same time shouldn’t that be considered for your business as well? Knowing when to get off the journey that you built should be just as important as knowing how and where to start.
Knowing your finances
Any business in the world has startup costs so you need to know what those costs are and how you will fund them. There are so many business ideas that can be done with $1,000 you just need to do more leg work. If you already have that money saved up you can start figuring out what you absolutely need to put that money towards and what can wait until you have more capital.
Most startup businesses fail because they did not properly do their fundamental research on the minimum cost amount needed and they ended up running out of money before reaching a profit. You rather overestimate how much is needed rather than underestimate as you can fall on that safety net if your business takes longer than expected to bring in a steady revenue.
Perform a break-even analysis
One way you can determine how much money you need is to perform a break-even analysis. This is an essential element of financial planning that helps business owners determine when their company, product or service will be profitable.
- Fixed Costs ÷ (Average Price – Variable Costs) = Break-Even Point
Every entrepreneur should use this formula as a tool because it informs you about the minimum performance your business must achieve to avoid losing money. Furthermore, it helps you understand exactly where your profits come from, so you can set production goals accordingly.
Here are the three most common reasons to conduct a break-even analysis:
- Determine profitability: This is generally every business owner’s highest interest. Ask yourself: How much revenue do I need to generate to cover all my expenses? Which products or services turn a profit, and which ones are sold at a loss?
- Price a product or service: When most people think about pricing, they consider how much their product costs to create and how competitors are pricing their products. Ask yourself: What are the fixed rates, what are the variable costs, and what is the total cost? What is the cost of any physical goods? What is the cost of labor?
- Analyze the data: What volumes of goods or services do you have to sell to be profitable? Ask yourself: How can I reduce my overall fixed costs? How can I reduce the variable costs per unit? How can I improve sales?
Track your expenses
The biggest concept every business owner needs to understand is to never overspend, especially when just starting out. Knowing what is vital to pay for versus what is a want is crucial. Marketing is one area that can quickly drain your initial capital.
One major factor is hiring a marketing company to do the work instead of learning and doing it on your own. You don’t need to do everything all in the beginning. Figure out if SEO (search engine optimization) or ads, whether Facebook, Google or any others are going to be your main focus. Then go to YouTube and watch as many videos on how to do this yourself.
Yes, it is going to take time to learn and implement but it will not only save you cost at the start but you will also know what to look for in the future when you are ready to pass the duty to an employee or a marketing team you want to hire.
Consider your funding options
Saving up the money to start your business will be your best option because it doesn’t put you in debt. If saving up for your business is very difficult then there are other ways to go about securing the capital to fund your new venture. Depending on your personal finances as well as your business idea there are various ways to acquire startup capital.
- Business loans: Going to your local bank to try and secure a commercial loan can be a good start but they are oftentimes hard to get.If you cannot secure a bank loan, you can apply for a small business loan through the U.S. Small Business Administration (SBA) or a similar lender.
- Business grants: These are just like loans except for one major difference, they don’t have to be paid back. The drawbacks to obtaining a grant are that they are usually highly competitive and there are usually guidelines that the business must meet and follow to be considered. There is no maximum amount of grants you can apply for but to better help your chances try to find ones that are specific to the business you are trying to start.
- Investors: If your idea for a business requires a lot of startup capital and a loan combined with grants still is not enough then you may want to consider bringing on an investor(s). Investors are great not only due to the fact they have the access to the capital you need but they more than likely have guidance in what to do and what to avoid.
- Crowdfunding: This is a newer type of funding option but it has proven to be quite successful. Crowdfunding campaigns allow you to raise more money from dozens if not hundreds of people who like your idea and want to see it succeed.
Determine your legal business structure
Knowing how to register your business is vital. You need to know the differences between a sole proprietorship, limited liability company (LLC) and corporation. Knowing the differences will help you choose the right one you need to register your business as. This is important for taxes as well as if anything ever happened and you were sued you need to know how to be protected.
- Sole proprietorship: This is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole trader does not necessarily work alone and may employ other people.
- Partnership: When you and someone else start doing business with the intent of making a profit, you have a partnership, sometimes referred to as a general partnership. The partnership might begin with signing an agreement to work together, or you could have an informal relationship based on a conversation and a handshake. Your partner could be an individual or a business, and you can have an unlimited number of partners. As with sole proprietorships, you do not file anything with the state to form a partnership.
- Corporation: A corporation is a legal entity that is separate and distinct from its owners. Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.
- Limited liability company: One of the most common structures for small businesses is the limited liability company (LLC). This hybrid structure has the legal protections of a corporation while allowing for the tax benefits of a partnership.
This is up to you to figure out and decide which route is best for your specific situation and goals. Always staying onto of the legal aspects of a business is a must and if this is something that you’re struggling with then it would not be a bad idea to speak with a professional legal advisor.
There are numerous licenses you will need to get before you can legally start your business. While there are instances where you can wait on this, you still need to have this done in the early stages of you business. Why would you wait? If you are testing out selling a product or service online you can see if you have potential customers who are willing to purchase. If you test it for a month and not a single buyer has come forward then you saved time and money. If you see fairly quickly that you have a viable product or service with buyers then you will want to get this done as soon as possible so that you protect yourself and your assets. There are several documents you must prepare before registering.
Articles of incorporation and operating agreements
To become an officially recognized business entity, you must register with the government. Corporations need an “articles of incorporation” document, which includes your business name, business purpose, corporate structure, stock details and other information about your company. Similarly, some LLCs will need to create an operating agreement.
Doing business as (DBA)
If you don’t have articles of incorporation or an operating agreement, you will need to register your business name, which can be your legal name, a fictitious DBA name (if you are the sole proprietor), or the name you’ve come up with for your company. You may also want to take steps to trademark your business name for extra legal protection. Almost all states in the US require a DBA but if you reside in another country you will need to look up the local laws to see the proper paperwork needed.
EIN or “Employer identification number”
Once you register the business you will want to get an EIN number from the IRS. If you are registering as a sole proprietorship with no employees you can consider getting one so that you can keep personal and business taxes separate. The IRS has provided a checklist to determine whether you will require an EIN to run your business. If you do need an EIN, you can register online for free.
Income tax forms
These are specific forms needed to be filled out and submitted so that the government can tax you properly on a state and federal level. These will vary state to state but overall the federal one will be the same if not very similar.
“You might be tempted to wing it with a PayPal account and social media platform, but if you start with a proper foundation, your business will have fewer hiccups to worry about in the long run,” said Natalie Pierre-Louis, licensed attorney and owner of NPL Consulting.
Licenses and permits
This is less common but still something that should be looked into. Licenses and permits should not be overlooked as not having one can get your business shut down very fast and put you on hold until you have it acquired on top of any fees they give you for not having it in the first place.
There are certain trades that require licenses like plumbers and electricians so keeping up to date with this is another must. If you plan to run a business that hires independent contractors in a field that requires these may allow you to not need it but on the other hand you will need to keep track of the licenses of those that you employ.
You should also check with your city and state to find out if you need a seller’s permit that authorizes your business to collect sales tax from your customers. A seller’s permit goes by numerous names, including resale permit, resell permit, permit license, reseller permit, resale ID, state tax ID number, reseller number, reseller license permit or certificate of authority.
It’s important to note that these requirements and names vary from state to state. You can register for a seller’s permit through the state government website of the state(s) you’re doing business in.
We all have mixed feelings about insurance but overall the concept is to protect you. Safeguarding yourself from any potential lawsuit is something that you need to be mindful about. Service based businesses should see this as a must have before taking on any work. It protects you from accidents to property damage, theft and many other cases.
Business insurance goes from basic to very extensive. Basic insurance would be that of workers compensation and unemployment. Insurance can seem tricky and if you’re not sure with the type you need then getting a general liability insurance should be your starting point. General liability covers property, bodily injury, and personal injury to you and any other third party involved.
If your business provides a service, you may also want to consider professional liability insurance. It covers you if you do something wrong or neglect to do something you should have done while operating your business.
Building your dream team
If you plan on being the only employee throughout the course of the business then you can skip this. Having a team with you will help things go along much faster and smoother that is however, if you hire the right ones. Knowing a persons mindset is crucial to hiring. There are also other factors to look at when hiring like distance needed to travel, transportation, and other commitments whether family or otherwise. These are not a make or break for all potential hires but it will help you cut out risk of dealing with issues.
For example, if you have a service based business with independent contractors and you have two potential candidates you’re looking to hire those factors can help you decide. Lets look at two potential cadidates.
Candidate A lives 5 miles away from the service location, has their own car and does not have another job.
Candidate B lives 40 miles away, shares the car with a family member and has a part time job with another company.
Based off of that information alone, candidate A is a much better fit than B. There can also be mitigating circumstances that may make B the better choice than A but you will only find out through trial and error.
Hiring in bulk/groups and having these potential new hires go through a trial period will help you narrow down your best prospects and relieve you of headaches of hiring one at a time.
Choose your vendors
Operating a business is not an easy task especially when starting out. Finding softwares and solutions to help automate is going to be a lifesaver. Doing things from a spreadsheet and your personal phone number can work but it can be hard to track. Creating everything separate from your personal life and your business is something that we cannot overstate.
What is the best way to find these solutions? Google. All you need to type in is “The best software companies for XYZ.” This is going to give you a list of the best ranked on reviews. It will be in your best interest to go through each of them and find what fits your needs and budget. When you’re just starting you won’t need a phone line that is capable of having 100 customer service agents answering because you won’t have that many calls to begin with and this will be much more expensive than just having one line for 2-3 people.
You will also want to find the ones that are most reputable because you will be handling tons of sensitive information and you do not want to have that fall into the wrong hands.
Not every business will need the same type of vendors, but there are common products and services that almost every business will need. Consider the following functions that are a necessity for any type of business.
Taking payments from customers
Money makes the world go round. You will want to give your clients/customers several options to be able to pay for your products or service. If you’re running an online business we highly recommend not giving a cash option as this will be a nuisance to track for tax purposes. The more options you give the easier it will be for your potential customer to pull the trigger on a purchase.
Again, do your research and find the best options with the best processing rates for your situation.
In the early stages of your business, you can most likely handle the accounting on your own. If that is not something you even want to think about or already are seeing growth then finding and hiring a reputable accountant or software is the best and only alternatives. If you have a software that helps you run your business and saves all the reports of sales then you can create a QuickBooks account and upload all your documents there.
Branding and advertising
You won’t have a massive following when starting out but advertising your business without any followers or reviews on social media will make it that much harder for you to get customers.
Nobody wants to be the guinea pig for a company when they are going to pay their hard earned money for something they don’t know is going to be fulfilled. Having your family and friends give you a follow on social media will show that there is already interest. You can tell your friends and family that in exchange for a review you will give them a free service or product to try out and give them your honest feedback. If its not positive feedback then you at least have something to work with and make changes. Once you make those changes and they use it again, they can then leave you a review which will help show others that you are legitimate.
In todays day and age these are the most crucial aspects to running any sort of business.
- Business website: Having an online reputation is going to make fielding calls a lot easier and less time consuming. You can put all important information pertaining to your business and its product or services there.
- Social media: Everyone has a social media account but if you are someone who doesn’t, know that your business will need its own. You can post promotions, reviews, new products or services offered as well as so much more. If you don’t create one right away and think about getting it down the line you may run into the issue of the name already being taken.
- CRM: The best CRM software solutions allow you to store customer data to to improve how you market to them. A well-thought-out email marketing campaign can do wonders for reaching customers and communicating with your audience. To be successful, you will want to strategically build your email marketing contact list.
- Logo: Create a logo that can help people easily identify your brand, and be consistent in using it across all of your platforms. Having a logo that standout will make you that much easier for customers to remember. Places your logo as your profile image on all social media platforms will help in making them remember you.
With your website and social channels you must remember one key thing. Always have up to date and relevant content posted. This does not mean that you have to post daily or multiple times per day but setting something up for once a week will show that you are still operating and gives customers peace of mind.
Your marketing plan is going to be just as important as your initial setup. Always work on having the best possible marketing strategy for your specific business. That again does not mean that you must be doing every type of marketing on the planet because there will be strategies that will cost you money and provide no return. Start by choosing 2-3 avenues at first and testing them out for several weeks before making any changes. If you want to go door-to-door and drop flyers and business cards then try it but knowing when to give up on that strategy is key.
You don’t want to go and stick with something just because it costs little to no money because what you don’t realize is that it is in fact costing you time which then costs you money.
Never become complacent when it comes to your small business. Launching your company and having some sales does not mean you will continue to do well or grow. Profit and growth take time and need your focus as well as your attention. Experts say it takes about 10,000 hours to be considered a professional in a given field. While this may not be the number you need to live by what you should live by is thinking you are never going to know everything.
You must be open and willing to take criticism and learn from mistakes so that you can keep taking yourself and your business to the next level. There are always new opportunities for growth it is up to you to find them and maximize your potential for them.
Collaborating with more established brands in your industry is a great way to achieve growth. Reach out to other companies and ask for some promotion in exchange for a free product sample or service. Partner with a charity organization, and volunteer some of your time or products to get your name out there.
While these tips will help launch your business and get you set to grow, there’s never a perfect plan. You want to make sure you prepare thoroughly for starting a business, but things will almost certainly go off track. To run a successful business, you must adapt to changing situations.
Take every call, sale, email or review with the mindset that they are going to teach you something new. Whether it is about learning about what clients you want, a new way to promote your business, or simply a new product or service you can offer is going to take you much further than the owners who ignore and think they already have it figured out. You want to be the business that has the potential to last 100 years versus one that has a great 6 months and dies out. You will get out of your business what you put into it.