How to Startup a Business
A.K.A. How to Startup a Startup
Introduction: Why Start a Business?
Like many others, you want to learn how to start up a business. We’ve outlined 12 steps to help you do it right.
The reasons for starting a business can vary from person to person. For some, the motivation may be to make enough money to live on. Others may want freedom from their current situation. Still, others may prefer the freedom of being their own boss, or the opportunity for more creative expression in what they do.
No matter what your reason for wanting to start a business is, there are many benefits that come with starting your own company. Making your own decisions about how much money you make, working when you want to work, and doing something you love are just some of the advantages of becoming an entrepreneur
A friend of mine who we’ll call Kevin (real story, but not his real name) worked at a large well-known corporation. He consistently received the usual accolades for his hard work. Due to his unusually high level of efficiency, he was able to take on a much heavier workload than any of his coworkers.
Because of this, his co-workers and even managers felt threatened that he could one day take over their positions. It didn’t take long for them to turn against him, making his work environment unusually toxic. Kevin tried transferring to other departments, but because of the hostility of his management, those efforts were blocked, making leaving the company the only option. Having had similar experiences in previous big corporate jobs as well, he knew that the only real option for him at that time in his career was to start his own company.
Whether you think you can, or think you can’t–you’re right.
Henry Ford, founder of Ford Motor Company
The risk of Starting Your Own Business
While being an entrepreneur certainly does have its rewards, it’s not for the faint of heart. You will have a lot of decisions to make. In addition to the immense satisfaction, you can have, it can come with some significant stresses. The fact of the matter is that being an entrepreneur isn’t for everyone. Statistics show that out of the roughly 305 million startups are created annually, only about 25% will succeed (see Investopedia for details).
The obvious question one would ask is with odds like that why would anyone want to start a business? While there are likely many factors people could point to, each of those factors usually boils down to drive and determination. Are you motivated, driven, and determined, then you just may have what it takes to be part of the 10% that succeed. If that’s you, then welcome to the club.
By reading this article, you’re already well on your way to being part of that successful 10%. That’s because you’re doing your research to make sure you get it right.
So, let’s get to the point. Below you’ll find the 12 steps needed to start up a business.
1. How to Startup a Business & What will You Need?
Now that you’ve decided that you want to start up a business, the obvious next question is, what will you need and how to startup a business. Whether you’re wondering how to startup a business in India, the United States, or in the UK, the fundamentals of the process are going to be quite similar.
You’ll need to figure out what you’re going to sell. Will it be a product or a service? If it’s a product, are you making it, or are you purchasing it from a manufacturer or wholesaler? Is it a product or service that people are willing to buy?
How do you know if people are willing to buy a product? The easy way to tell is by looking at your competition; are people currently buying their similar competitive products? If so, you need to honestly ask yourself what is it that people like or dislike about the product, can you improve on it, can you sell the same product for less, and so on. The goal with this line of questioning is to determine if people are interested in the type of product or service that you want to sell. If they are, then the next question that needs to be solved is why would they switch over and buy from you versus buying from your competition like they currently are.
2. Identifying a Business Opportunity
While a great business opportunity sometimes lands in your lap, finding the right business opportunity usually takes planning.
The first step is typically called the Ideation phase. This is where you explore and list out all the potential ideas. Once you have a good list of business ideas, you need to go through that list and narrow it down. This is where you’ll need to take into consideration the following:
- How difficult will it be to replicate your product or service for your customers?
- How many sales can you realistically expect? Is it enough to make the business sustainable?
- Identify your expenses. This should include your inventory, marketing, operations, distribution, taxes, process costs, etc. Basically, the cost of every step needed to get the product or service delivered to the customer.
- If you’re making the product or providing a service, can you replicate it within a reasonable period of time and at a sufficiently low cost. This is where you figure out if you can charge the customer an appropriate rate or fee and still make a decent profit.
- Will you be selling a product that is made by someone else, will you dropship, or carry an inventory and distribute to the customer from your location? You’ll need to identify what that process looks like.
- How will you distribute your product or service to your customers?
- How much money will it take to run this business until you have sufficient sales to make it self-sustaining? Do you have that money, or will you need to get capital from a second party?
3. Define Your Goals and Objectives
It is important for business owners to examine the goals and objectives they want their company to achieve. It can be difficult to set goals without knowing what is important to you as a business owner. Because there are so many different types of goals and objectives that can be set, we will not try to name them all here. Some of those however, can include financial, customer service, and even social responsibility.
The first step in setting these goals is by determining what your values are. Are you looking for profit or growth? Are you looking to satisfy your customers or improve society? By examining your values, it will be easier to set specific objectives for your company that supports those values.
4. What is a Business Plan and How to do a Business Plan
Your business plan is a road map of your company’s future. It includes your company’s goals, the strategies you’ll use to meet those goals, and how you’ll measure success.
A business plan is more than just a document that will collect dust on the shelf of your office. A good business plan will help you bring your company to fruition by helping you ask the right questions, make smart decisions, and take action.
The ideal application of a business plan is to continually revise it, making it a living document that grows and changes along with the development of your company. This way you have a written plan you can refer to at any time. More importantly, as you create and continue to develop the various sections of your business plan, you are forced in a very natural way to consider and plan out every aspect of your business, and not just assume it will work out.
The things you will learn about your business in this stage of planning can be invaluable down the road when you’re in the thick of things operationally and don’t have time to take a step back and think through processes and relationships.
I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.
Jeff Bezos, founder and CEO of Amazon
5. Building the Foundation of Your Marketing Strategy
Marketing is the most important business strategy for every business. A marketing strategy is a company’s plan for how to create, deliver, and capture value from customers and markets. It includes the decisions about the type of product or service to offer, pricing, promotion plans, and distribution channels to use.
A good marketing strategy outline should provide you with a framework to define your goals and objectives. It should help you make better decisions on what to do and how to focus your resources.
You should refer to your marketing strategy outline like a map. It will provide answers to questions like who is your audience? What are their needs and wants? What are their pain points? Once you have these answers, you can craft an informed marketing message that will resonate with your audience.
6. Research Your Market and Competition
This is where you learn about your competition. Such as what the price is for their similar products or services. And how many prospective customers you will be able to sell your products or services to.
For example, if you’re an industrial electrician, it’s unrealistic to expect sales from other states or countries. That is unless your skill set is highly specialized and in high demand. To determine your market, you would need to:
- Determine how big of an area is realistic for you to travel to for a job.
- Research to find out how many other industrial electricians are currently operating in, or provide service to your same area.
- Figure out how many potential customers, service calls, or contracts are there in that area per month?
- Estimate how many, if any, customers, service calls, or contracts would you be able to realistically pull away from those other industrial electricians currently serving that area?
It is important that you research your market and your competition. An entrepreneur should be perfectly clear on the current market and competition before starting a business. Market research is where an entrepreneur researches and analyzes the market, including customers, competitors, suppliers, and more. This is done to ensure they understand customer needs and the current status of their target industry. Competition analysis is when an entrepreneur researches their competitors in order to better understand how their new product or service will fit into the market.
The depth and extent of this market and competition research and analysis will depend on what kind of product or service you plan to offer.
It is a capital mistake to theorize before one has data.
Arthur Conan Doyle (writing as Sherlock Holmes)
7. How to Name a Company!
Choosing a name for your company is a big decision. The name you choose can have a serious impact on the success of your company. It’s not just the appearance of the name that matters. It’s also what kind of message your company name and brand sends to consumers.
The best way to pick a name for your company is by understanding your business and the audience you want to reach the most. Therefore, when choosing a name for your company it’s usually important to choose one that has meaning behind it. This is so people can connect to what you’re offering by association.
It’s generally a good idea to stay away from names that will make people cringe. This includes names that may be offensive, too silly, too descriptive, too obscure, or may have unwanted meanings. The secret is to find that middle ground that people will be able to figure out what you do through word association while keeping it relatively short.
Using the previous example of the industrial electrician, we would recommend avoiding names like Captain Shocks-a-Lot, or The Best Industrial Electrician in the Downtown Phoenix Area. The first name is both silly and can have a negative connotation. The second is too descriptive, neither of these names, or types of names would be recommended.
Other things to consider when picking a name for your business includes making sure that the name hasn’t already been used and registered by someone else. In the United States, you can find out what names are already used by going to the Secretary of State website for your respective state. Most states offer an online company name search. If you plan to set up a website, you should also check to see what domain names are available, or not available.
8. Choosing the Right Form of Business
There are several different forms of businesses to choose from depending on where you live. In the United States, some examples of different business forms include:
- Sole proprietor,
- Partnership,
- Corporation,
- LLC (Limited Liability Company),
- S-Corporation, and
- C-Corporation
It’s important that you research and understand the available forms of businesses in your area. As well as what the pros and cons are to each. There have been volumes of information written on this subject alone so we will not attempt to include that information here.
Spend time upfront to invest in systems and processes to make long-term growth sustainable.
JEFF PLATT
9. Register With the Government or Register Your Company Name?
In order to legally operate your business, you will need to register your company and the company name with your various government entities. In the United States, this typically means you will need to register with both the state and the IRS at minimum. You will have to register the name and form of business with the State. Then you’ll need to register with the IRS to get a Taxpayer Identification Number (TIN). This enables you to legally do sales, collect and report the necessary taxes.
Depending on the type of product or service you plan to sell, you may also have to register with the federal government, your county, and even your city. While this can be a very complicated process, most of the information for doing this is available online. However, if you’re uncertain about how to do it correctly, we recommended seeking counsel from a Tax Advisor (or CPA), and a corporate attorney. Preferably one that understands the different forms of business and their respective benefits.
10. Establish your Brand & Your message
Your company brand is a combination of the image, colors, logo, and the message that your company conveys to the public. Each of these elements works together. Combined, they deliver a message to the customer to encourage them to ultimately purchase your products or services. Keep in mind that when customers are searching for a company to do business with, they typically will choose the one that appears to be the most professional. Your brand typically has less than three seconds to give that impression and secure the sale.
Some people are naturally gifted at creating such branding, but honestly, those people are far and few between. If you want people to take your business seriously and you want to look professional and polished, the best way is to hire someone to help you create effective branding.
Branding is perhaps one of the most overlooked aspects of developing a new business. The results of this oversight are:
- a logo that looks like it was randomly selected,
- customer confusion about what it is that the company is really about.
- Company colors that don’t work well together and are offensive to the human eye.
Skipping on professional help at this stage can potentially be insuring the death of your company. We recognize that it costs money and it’s not always an option with the budget of a startup. If that is the case with your startup, you should plan to get professional branding help as soon as the budget allows.
11. Building Your Team and Mentor Network
Having the right team to help you build and grow the company is one of the most important components of a startup. The right people can help you build a product, market it, and reach success faster. It’s important that they work together as a team and are properly empowered to function in their respective roles.
Mentors are important when building your team and your company. They can be extremely helpful in guiding you through the startup process by providing perspective and valuable advice on how to effectively manage your business, deal with problems, and more.
You don’t build a business, you build people, then people build the business.
Zig Ziglar
12. How to get Funding for Startup
Depending on what your product or service is, you may need to obtain additional funding beyond your personal savings.
There are different ways to obtain funding for your startup. Some available sources of money for entrepreneurs include personal savings, grants, private investors, venture capital, crowdfunding (online), friends and family loans, and angel investors.
It’s important that you research each of these options to fully understand how they could help your startup and what it will cost. For example, getting an investor will require you to give up a portion of the equity of your company. Getting a loan, will require you to make payments sooner than you may be ready and to also pay interest. Additionally, different banks provide loans to different types of businesses and have different requirements. The same goes for investors.
You will need to do a lot of research on these sources of capital to know which is best for your company and your specific situation.
The value of an idea lies in the using of it.
Thomas Edison, co-founder of General Electric
Conclusion: The Importance of Taking Action
While each of these stages of business development listed above is critically important to the success of your business, the undisputed most important step for an entrepreneur is simply to take action. If you don’t take action on each and every one of these steps you are essentially assuring your business will be part of the 90% that fail.
Being an entrepreneur means that you will wear many different hats, of which perhaps the most important will be that of a decision-maker. There is nothing worse for a company than to not take action when action is needed and to not make a decision when a decision is needed. I’ve watched many companies simply fade away because the leadership couldn’t make up their mind. It’s far better to make a wrong decision than to make no decision at all. Once you make a wrong decision and recognize it, you can quickly make the necessary corrections to get on track. If you make no decision at all, you will never get there.
As we mentioned in the beginning of this article, being an entrepreneur can be challenging in every way. But at the same time, it can be wonderfully rewarding. There’s nothing quite like it when you see that first sale, when you hire your first employee, or when you hit those milestones of success. It’s times like these that make all that stress and headache well worth it.
If you’ve continued all the way to the end of this article, you’re well on your way to becoming part of the 10% of startups that succeed. Now that you’ve read this and know the steps you need to take, the most important thing you can do is to take action.
