“The secret to getting ahead is getting started.”
― Mark Twain
Whether you want to change the world, contribute to the country’s economy or just to be your own boss, this article has the info you need.
Study shows that about half of all working adults want to start their own business, that’s if they don’t have one already. But starting a business isn’t easy. There are lots of steps involved, from coming up with a solid money-making idea to raising money, creating a brand, advertising, and lots more. The study found that a third of prospective business owners said they are held back because they need more education or training, or because they don’t know enough about running a business. So in this article, I’ll break down all the steps involved in setting up a business, from the initial idea through to the business launch. By the end, you’ll have a much clearer idea of what’s involved in setting up a business and how you can get started.
Of course, every business is different. Depending on the type of company you are starting, you may be able to skip some of these steps (for example, if it’s an online, home-based business, you won’t need to find a location and may not need to hire employees). You may also decide to complete some of the steps in a different order. Think of this as a general template for starting a business, and feel free to tweak it to match your own requirements. So if you’re ready to learn how to start your own business, let’s get started!
1. Come Up With an Idea
The first thing you need when starting a business is a good idea. Even if you have something in mind already, don’t skip this section: you don’t need just an idea, but a good idea. After all, research shows that about half of all new businesses fail in the first five years. There are many reasons for that, but one important one is that many founders just didn’t hit on the right idea. So what constitutes a good idea? Well, it doesn’t have to be something completely new (although it’s great if it is!). What it does have to be is somehow better than what’s already out there. For example, let’s say you want to open a café in your local town. There’s nothing new about that, but it could still be a decent business idea if you refine it a little to find a new angle. Think about it: If there are already five cafes in town and you open another one, why would people become your customers? For it to work, your café would need to offer something different from the others. Maybe it will have a quirky concept, an innovative design, a great location, or will offer food or drinks that people can’t get anywhere else. You also need to consider whether you’re the right person for the job. Do you have some particular skill that others don’t have? Maybe you make the best mango smoothies—or maybe you have the savvy approach to hire the best mango smoothie maker in town. And do you have the necessary passion for this idea? Does it excite you so much that you’ll be willing to work 27 hours a day to make it a success? This article on generating startup ideas offers a good framework for coming up with a solid business idea: STARTUPS How to Come Up with Startup Ideas Worth Pursuing Eddie Earnest
It will help you to answer questions like: What are you passionate about? Where is the pain? How is this pain currently being eased? Can it be done better, faster, or cheaper? Can you do it better, faster, or cheaper?
Take your time at this stage, thinking it through carefully. You don’t have to know everything yet—we’ll do more research in the next step—but you need to have a basic idea of what you want to do and why it’s worth doing. Once you’ve got something that ticks all the boxes, move on to the next section.
2. Identify Your Target Market
A business needs customer like the body needs food. From the very beginning, you need to understand who those customers are likely to be and where they’re going to come from. Otherwise your business will soon starve. So the next step is to identify your “target market”—the customers your business will serve—and to figure out what they want and how you can give it to them. For example, let’s say you’re starting a web design studio. Who is your ideal customer? A large corporation, maybe? A small local business? Or maybe you’re interested in designing websites for individual freelancers. Perhaps there’s a field you want to specialize in—designing portfolio sites for artists and photographers, for instance. In each case, your entire approach to winning and retaining customers will be very different. So, you need to get clear about who your ideal client is. Try to be as specific as possible—maybe even give your ideal client a fictional name, and describe that person or company in detail, so that you really understand what they want, the problems they have, and how you can be of service to them. In order to understand your target market, you may need to do some extra research. Have a look at this article that covers identifying and selling to target clients: FREELANCE How to Find Out Exactly What Your Target Clients Want—Then Sell It to Them Celine Roque
It gives tips on how to conduct online surveys of your target clients, and what questions to ask. You’ll also want to research your competitors to see how they are currently serving your target market and how you could do it better.
3. Create a Business Plan
The next step is to take the research you’ve done so far and use it to create a business plan. This plan will give you clarity about where your business is going and where the customers and money will come from, and will also be useful if you need to raise money or attract investors (we’ll cover that later on). You’ll find some articles suggesting that, particularly in the fast-moving world of tech startups, you don’t need a business plan. The main argument seems to be that things change so quickly that it’s more important to innovate and experiment, rather than tying yourself down to a fixed plan. Call me old-fashioned but starting a business without a plan strikes me as a recipe for disaster. Yes, of course things will change, and reality probably won’t match your plan, whether you’re in the world of cloud computing or mango smoothies. But a business plan has never been intended as a fixed set of commitments to which you are tied for all time. It’s a fluid, living document as discussed in this article Kickstarting Your Online Microbusiness series: ENTREPRENEURSHIP A Fluid Business Plan Template for Your Microbusiness Skellie
So rather than not planning at all, it seems more sensible to make a plan, and then update it frequently. How do you write a business plan? You can use a business plan template if you want, and just fill in the details. Or you can create one from scratch, using your own format and making it as informal as you want. The content can vary, but here are the seven essential sections to include: Executive summary Company description Products/services Market analysis Strategy and implementation Organization and management team Financial plan and projections
The first four sections should flow from the research you’ve already done: they’re essentially about describing your idea, how the business will look, and what products or services you will offer to which clients. You may not be entirely clear about your strategy yet, but don’t worry—as I mentioned, this is a living document. Write in what you have right now and update it as you progress and get more clarity. Similarly, with the organization and management team, it’s OK if it’s just you for now, or if you don’t know who else you’ll need to hire. Treat the business plan as a draft that you are constantly updating as you get more information. And as for the financial plan, we’ll look at that in the next section.
4. Create a Financial Model
As you just saw, a financial model is part of the business plan, but I decided to break it out into a separate step for a couple of reasons. First, having a financial model is a vital step. According to that University of Phoenix study I mentioned earlier, “lack of adequate finances” is the top barrier to business ownership, cited by 67% of respondents. A good financial model can help you make the transition from your day job into business ownership. It can show you how much you’ll need to invest and when you can expect to break even. And second, I know that many people will skip writing a business plan, so I didn’t want them to skip the financial model too. If you do nothing else by way of planning, please do at least create a financial model—at least a basic one. There are articles online which breaks down all the necessary steps for creating a financial model.
Basically, what it boils down to is this: Use the information from your business plan to make some assumptions about how much revenue you can earn. List all the things you’ll need to invest in, and add it all up to calculate your startup costs. Use a simple formula to calculate the break-even point. As with the business plan, the financial model is unlikely to be 100% accurate: you’re an entrepreneur, not a fortune-teller. So make the best assumptions you can at this stage, get an idea of where you’re heading, and keep refining and updating it as you continue. And if you don’t have enough money to start up right now, don’t despair, there are also articles that helps on to start from nothing or very less capital including cloud funding options.
5. Choose a Name
Everything we’ve been doing up to this point has been preliminary. We’ve essentially been refining the business idea and making sure that it passes at least the basic tests: you’re providing a service or product that people want, and you can see at least a theoretical way of making money from it. If you’ve hit any red flags so far, go back and either refine the idea or come up with a new one. But if you’re good to go, we’re now going to start putting flesh on the bones of our idea. The first step is to come up with a name. This may seem simple, but there’s a lot to consider, from how the name sounds to how well it works online and how it reflects the image you want to convey.
6. Create a Brand
You may be surprised to see this step come so early. Many people confuse branding with marketing and think that it’s about getting the word out. Others think it’s just about your logo design, well it’s not. Your brand is simply the promise you make to your customers. It’s the values you’ll operate by, the type of experience you’ll give people, and the reputation you want to have. Julia Melymbrose, co-founder of creative studio Chocolate & Caviar, wrote an article about creating a profitable freelance business brand, in which she recommends defining your brand based on three key elements: proposition, personality, and purpose. She also provides a free branding worksheet. FREELANCE How to Create a Profitable Brand for Your Freelancing Business Julia Melymbrose
A brand also has a visual component, which helps to reinforce the image you’ve decided on. Particular choices of colour, typeface and graphics can help create the image and brand personality you want: fun and quirky, responsible and reliable, or anything else. For more details, see brand consultant Grace Fussell’s tutorial on creating your own brand guidelines. You may also want to get some business cards and other branded stationery printed at this stage, but only if you’re sure about your branding. If you think it might change, feel free to hold off on this part for a while!
7. Build a Website
Now that you’ve created your brand identity, it’s time to announce it to the world. Even if you’re starting a bricks-and-mortar business, customers will expect you to have a website these days—and so will suppliers, potential business partners, investors and anyone else you may have to deal with. There are several different approaches you could take, and which one you use depends on your budget, the stage you’re at with your business development and branding, and your level of technical and design expertise. If you have some technical skills you can buy and install your own affordable website theme based on the functionality you want your site to have, such as transnational capability, email list building or social media integration. Browsing options is a great way to fire the imagination around what’s possible. Or get started right away with this collection of bestselling WordPress themes. If you’re after a helping hand or a more tailored approach, you can hire with a designer or developer to customize your digital calling card. If you need to get your website up as quickly as possible, and are unlikely to have many bespoke components, you may also want to use a more basic web builder site (like those recommended in the below article): FREELANCE Best Resources for Launching Your Freelance Website Today Tara Hornor
If you already have a solid idea of your company’s branding and the functionality you want from the website, then hiring a professional web designer is a good option. Or, if you’re comfortable with the do-it-yourself approach, you can set up a site using WordPress or a similar CMS, either designing it from scratch or picking a WordPress theme that matches the type of site you want.
8. Handle the Red Tape
Starting a business can be a lot of fun, but I must admit that this step is not the fun part. When you start a business, you need to be aware of any laws and regulations that apply. You may need to register as a business with governmental agencies, you may need to get certain licenses or permits, and there may be more paperwork you need to fill in. The Small Business Administration has information on other business laws and regulations that may apply, as well as federal or state licenses and permits you may need. On top of that, you should also think about the legal structure that’s right for your business, and what kind of business insurance you need.
9. Raise Funds
OK, back to the fun stuff. Let’s talk about raising money! Back in section 4 we created a financial model for our new company. But what if that exercise revealed that you don’t have enough money to start the business? Don’t worry—it’s not uncommon. People start new businesses all the time and they don’t all have access to large pots of gold. There are several strategies you can use if there’s a gap between how much money you have and how much you think you’ll need. One option that’s particularly popular with online, service-based businesses is “bootstrapping”, which means keeping costs very low and building a viable business quickly and with minimal investment.
But even if
you want to start a more traditional company that requires investment in
equipment, premises, raw materials and other things, you still have several
options for raising funds.
10. Build and Test Your First Product or Service
Before you go live and start selling your products and services to the world, it’s a good idea to test them on a small scale. Doing it this way can help you identify any problems and fix them early on, before you’ve spent a lot of money producing on a large scale, and before you risk damaging your broader reputation.
You can apply the same principles to service-based businesses as well. If you’re setting up a photography studio, for example, hand out free photo shoots to a limited number of people in exchange for honest feedback. Even if you’re confident in your skills, there may be something in the process of completing a professional assignment that you need to iron out. The key to the success of this process is learning and adapting. Keep the mantra “Build, Measure, Learn” in mind, and be sure that you’re giving your products or services a thorough test, and that you’re open to changing them as necessary before unleashing them on the wider world.
11. Find a Location
If you’re starting on online business, this step may not apply to you. But many businesses do need a physical location and finding the right one is an important step. What’s right for you depends on the type of business you’re starting. If it’s a retail business that relies heavily on spur-of-the-moment purchases, a prime location can make a huge difference to sales. In that case, it may be worth paying more to rent a space with lots of passing foot traffic and little direct competition. If, on the other hand, you just need an office or a space to produce and store products that you sell online or through other channels, then perhaps you can forgo the trendy location and save money by renting in an older building or a more out-of-the-way setting. In both cases, there are lots of other factors to consider, including whether you have space for future growth, whether you’ll be able to attract employees to work there, how close you are to suppliers, what local taxes and regulations are like, and so on.
12. Hire Employees if Necessary
This is another step that won’t apply to all businesses. If you’re happy to set up as a one-person operation at first, feel free to skip this one. But if you will need to hire employees, it’s likely to be quite a daunting step. For example, there are lots of rules you have to comply with when you become an employer, such as having the right insurance, getting properly set up for payroll taxes, and providing a safe workplace. There are rules about what you can ask in interviews too. Read the articles on hiring employees from the department of labour to find out more about these topics, and to get some tips on finding the right people, interviewing them, and putting together your offer.
13. Set Up Your Accounts
Keeping accurate financial records is a basic requirement of doing business. Failing to do so can get you in trouble with the tax authorities, and in any case it’s just bad business practice—if you don’t have a clear, accurate picture of how much money is flowing in and out of your company, you won’t be able to make the right decisions for its health and growth. Fortunately, this is not a difficult step. There’s a plethora of accounting apps and software systems out there, such as QuickBooks, FreshBooks, NetSuite and Xero, to name just a few. Many of them offer free trials, so take them for a spin and see which one works best for you.
Any business needs customers for that business to make money, otherwise it will be pointless to start the business. Well, this is the point where we start to bring those customers in. Having a good idea, a great brand, a website and a solid first product is a wonderful start, but in order to start making sales, you need to tell people about all those things. Luckily, you’ve got several options: Building an email list is an excellent first step—read this series on email marketing for a comprehensive guide to why email marketing is important, how you can build an email list, and how you can make the best use of it by sending effective emails that entice people to open them and take action. You could also use paid advertising, either through a service like Google Adwords or through social media, e.g. Facebook. For more information, see this article on writing a click-grabbing Adwords ad, or this one on location-based online marketing. And there’s also a video series on marketing your new online business. Don’t forget more traditional methods either, such as face-to-face networking, partnering with other local firms, getting listed in directories, writing for local publications and more.
Finally, one of the best ways of generating buzz is to have someone else do it for you. People are surrounded by advertising and self-promotion and are naturally suspicious of it, but an honest mention by a trusted newspaper, blog, celebrate or other media outlet will give your fledgling business newfound credibility.
The final step, of course, is to launch. This is a perfect opportunity to generate some buzz around your new company with an event or promotion. Keep in mind that although the launch of your business is important to you, it will not be of huge interest to many other people, so to get people interested you’ll probably have to give it a twist. Consider running an eye-catching giveaway, or offering your products/services at a huge discount on launch day. Think about what would make you bookmark a page or tweet about it or share it via email. What can you offer people that will get them as excited as you are about the launch? A launch event can be a great way to meet people, attract potential customers, and grab attention too. It can be something cheap and cheerful in your shop or a local venue, or you can try to make a big splash by launching at an industry conference or other large event and trying to grab some of their audience.
Hope the article comes in handy for you, all the best with that money-making idea.