While starting a business is no easy task, it's not as difficult as many entrepreneurs would think. Instead of obsessing over every minor detail or second guessing yourself, if you follow these seven steps, you can be on your way to launching your very own business today.
1. Don't Brainstorm, Brainwrite Ideas
Let's say that you're an avid snowboarder, but you recently moved to Key West and want to start your own business. Despite your knowledge and love for snowboarding it wouldn't make sense to launch a business based on snowboarding in Key West. That's when you start brainstorming ideas for your business based on information like your target audience and what products or services you could offer to enhance their lives, right where you live.
The problem with brainstorming, according to Leigh Thompson, a management professor at the Kellogg School in Fast Company, "with people popping like champagne with ideas, what actually happens is when one person is talking you're not thinking of your own ideas." Loran Nordgren, also a professor at Kellogg adds, "Early ideas tend to have disproportionate influence over the rest of the conversation."
Thompson and Nordgren suggest that instead of brainstorming you try 'brainwriting.' In short, brainwriting is when write down your ideas first and then discuss them with others. This technique encourages creativity and gives everyone a chance to share their ideas without being influenced by anyone and everyone else.
2. Know and Analyze Your Industry
After you've settled on a potential business idea, it's time to know who exactly will be purchasing your products or services. You also need to know who your competitors are and how much money it's going to take to get started.
Candice Landau writes for Bplans that, "There are a number of ways you can do this, including performing general Google searches, going out and speaking to people already working in that industry, reading books by people from the industry, researching key people, reading relevant news sites and industry magazines and taking a class or two (if this is possible)."
Landau also suggests that if you don't have the time to thoroughly conduct research on your own you can turn to government departments and your local SBDC.
3. Write Your Business Plan
SBA.gov states that a "business plan is an essential roadmap for business success. This living document generally projects 3-5 years ahead and outlines the route a company intends to take to grow revenues."
When writing your business plan, make sure that it includes the following components;
- Executive Summary - This a profile of your company, as well as the goals you want to accomplish.
- Company Description - This describes what your company does and how it stands out.
- Market Analysis - This is the research you gathered on your industry, market, and competitors.
- Organization & Management - This describes how your business is structured.
- Service or Product Line - This explains what you're selling and how it benefits your customers.
- Marketing & Sales - This focuses on how you plan to market your business and your sales strategy.
- Funding Request - If you need funding this will detail the financial requirements needed to launch the business.
- Financial Projections - If you require funding, you'll need to include financial projections to prove that your business will be profitable.
4. Get Everything in Order
Writing a business plan may take you several days or weeks, depending on how comprehensive you want your plan to be, but you can actually set up your business in a just a couple of hours. Jeff Haden says that this is possible on Inc.com by;
- Not wasting time on the perfect name. Just pick a name to get started. You can always change your name later.
- If you plan on having employees or forming a partnership, LLC, or corporation you'll need to get a Employer Identification Number (EIN).
- Register your trade name.
- Get your business license.
- If necessary, complete a business personal-property tax form.
- Find if your locality requires permits.
- Determine if you need a certificate of resale, or seller's permit.
- Open a business bank account so that you can separate personal and business finances.
- Get familiar with bookkeeping basics, such as an accounting spreadsheet.
5. Make it Legal
This action has been mentioned a couple of times before, and this is because it's one of the most important steps in not only making your a business a reality, but also determining the legal and tax implications that you'll have to comply with and be accountable for. I would personally recommend talking with a tax person or attorney what would be the best for your business as each formation can have huge legal ramifications.
In most cases, your business formation will fall under one of the following;
- Sole Proprietorship - This is the most basic type of business to establish when you alone own the business.
- Partnership - This is when two or more people own the company.
- Limited Liability Company - SBA.gov defines a LLC as "a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership."
- Corporation - This is an independent legal entity that is owned by shareholders.
- S Corporation - This is similar to a corporation except that you're taxed on a personal level. - this is what I personally setup for my company based on legal advice.
- Cooperative - This "is a business or organization owned by and operated for the benefit of those using its services."
Because making your business legal is such an important area for you to familiarize yourself with, you should also review "The Complete Guide to Registering Your Business Name."
6. Secure Financing
Unless you've been saving enough money to launch a business with your own funds, you're most likely going to have to borrow money to get started. Traditionally, this has been achieved through Venture Capitalists, Angels, commercial banks, credit cards, the SBA, or your friends and family.
You can, however, look for alternative financing options like;
- Factoring where accounts receivable go to a third party.
- Borrowing against your IRA or 401(k)
- Government grants
- Peer to peer lending
- Microfinancing where you take a small loan.
- Financing through suppliers or wholesalers.
- Joining business competitions or contests.
- Joining an incubator.
- Bartering with other businesses.
Here are a guide to getting funding that I put together that explains every step you'll need to take to get funding for your startup or small business.
7. Gain Traction
Finally you want to start gaining buzz for your business so that when you launch there's already a built-in customer base. That may sound tricky, but if you take the advice from these experts, you can start gaining traction almost immediately.
- Build something innovative.
- Become an industry thought leader.
- Build a strong brand.
- Create videos.
- Reach out to reporters and influencers.
- Create an awesome customer experience.
What other tips would you recommend to starting a business?