Especially if you've never done it before, starting a business from scratch can seem like an impossible undertaking. Finding success, however, might happen considerably faster if you go step by step and follow a tried-and-true method.
Are you considering launching a business of your own? You have company. Two out of every three American adults think that becoming an entrepreneur is a smart career choice, according to data from Babson College. An increasing number of people are taking matters into their own hands and launching their own enterprises as a result of the growing discontent in corporate America. A recent Nielsen poll revealed that more than half of people between the ages of 15 and 21 desire to launch their own business, suggesting that this trend is only likely to continue with the younger generation.
However, as noted by Johnston Community College, more than 90% of business owners have never attended an official business school. Of course, launching a business involves more than just book smarts, but if you want it to succeed, you'll need a plan. A comprehensive how-to guide for launching your own business may be found below.
1) Coming Up with Your Idea
Many entrepreneurs just take their current pastime and develop it into a side business that eventually becomes their full-time job. Others discover that they have to start over.
Simon Sinek highlights in his best-selling book Start with Why is it important for entrepreneurs to comprehend the driving forces behind their companies? He writes, "People don't buy what you do." They understand your motivation. And your actions just serve to validate your beliefs.
Identifying your "why" could require some thought. Do you need assistance getting started? Take out a whiteboard or a piece of paper. Draw a line through the centre. Consider the needs of the world around you in one column. Pay attention to inquiries such as:
- What needs do I perceive in today's world?
- Exist any current issues that require attention?
- Which industries are popular right now, and why?
Jot down personal details about yourself on the reverse side of your brainstorming sheet, such as:
- What inspires me with passion?
- What special combination of abilities and expertise do I have?
- How do I want to change the world or my community?
Jot down as many thoughts as possible. Consult your social group for advice. Recall that there are no poor ideas, so don't evaluate somebody based on their reaction just yet.
After you've completed both columns, make links between your "skill" and "need" sides. Which issue do you want to concentrate on? How can you fulfil that need in a way that is unique?
For example, there may not be enough of a certain kind of restaurant or construction contractor in your community. You may be able to build a profitable company if you can meet these demands.
2) Validate Your Idea
One of the most crucial phases in launching a business is coming up with a concept (if you need some inspiration, check out this list of business ideas). It is crucial to validate your idea before printing your business cards. In essence, you want to determine if your proposed company venture will succeed.
You probably don't have a large budget for market research, which makes sense. Firstly, you could conduct basic research such as:
- perusing virtual trade publications to learn about the market or sector
- the Small Business Administration's research on consumer demographics
- being more knowledgeable about current companies in your sector
- Bringing up your company concept with potential clients or even family members
- Try out a limited number of clients for your product or service
Ideally, you'll find that not only is your idea workable, but it also specifically addresses the demands of your intended audience.
Sometimes you'll find that, despite having a great idea, there is fierce competition from other companies. If so, you will need to further hone your business concept. What distinguishes your prospective business?
If you don't receive a lot of support from your potential clientele, don't give up. Go back to step 1 and utilise feedback from others to identify a particular need that your company can meet.
3) Create a Business Plan
Writing your business plan should be your next step. Don't omit this action. You may maintain focus on your particular business goals with the aid of a well-written business plan.
Additionally, you can use it to share business information with audiences outside of your company. You'll probably be requested to submit your business plan, whether you're speaking with possible investors or if you're just attempting to get a small business loan.
The following will be included in a conventional business plan:
- a condensed version of the document that highlights the most important ideas
- An explanation of your company, together with your mission statement
- An overview of the goods and services you offer
- A market study demonstrating the potential market for your business
- A marketing strategy outlining your approach to reaching your target market
- Your finances should demonstrate how much you will require to start your firm.
- financial forecasts with growth and earnings potential milestones included
- Further market and industry statistics are in the appendix
Another option is to use what's referred to as the "lean startup option," which will include the following components:
- The value proposition of your business
- An inventory of your offerings
- principal undertakings
- main sources
- Business routes
- Target clients and clientele groups
- Needs for funds and the cost structure
- Sources of income and projected financial figures
Visit the Small Business Association website to get more information and download some example business plans if you need some inspiration.
Examining company strategies for particular industries, such as the following, may also be helpful:
Although you'll probably make changes to your business plan later on, having a written version of your ideas gives you a handy place to start.
4) Build an MVP (Minimum Viable Product) or Service Offering
Making a "minimum viable product," or MVP, ought to be your top goal after finishing your company plan.
Consider your MVP as a kind of prototype, created merely to gauge how effectively your finished good or service meets the requirements that you determined in the earlier stages.
Of course, this will vary based on the specifics of your company. Launching a product quickly should be your top objective. What features must my product or service have at the very least to appeal to my target market? You may always refine your basic design later, so ignore the specifics now.
It's time to launch your MVP after it has been designed. Once more, it only needs to be functional—not "pretty." Take note of what your clients have to say:
- Were the needs of your customers met by your product or service?
- What steps could you take to enhance the client experience or user interface?
- Are there any issues with the design that need to be fixed?
- In comparison to other goods or services, how does your MVP stack up?
You might want to look into a few sites if you're unsure about this stage, such as:
- A web company provides a comprehensive manual for creating an MVP
- A web-based estimator to ascertain your MVP's expenses
- A software developer's catalogue of MVPs from leading businesses
The process of creating an MVP is fascinating since it lets you witness the evolution of your business. Furthermore, it offers an additional chance to gain knowledge and improve your enterprise prior to your formal debut.
5) Legal Steps
You must abide by current business regulations in order to conduct business. To find out exactly what you need, you'll need to conduct some research, as several of these standards differ from state to state.
Find the Requirements for Your State
You can find materials on the Small Business Administration website to ascertain your state-specific legal requirements. Certain criteria may also be contingent upon the legal form of your organisation. These rules are meant to make sure you pay taxes appropriately and to comply with industry and safety laws.
Typical specifications consist of:
- Operating agreements or articles of incorporation
- Accounts Payable
- Workers' compensation insurance, payroll taxes, etc.
- Permits and licences (pertaining to certain industries)
You will have to abide by licence and permit regulations if you run a business in an industry that requires them, like alcohol or guns. Further details are available on the SBA website, where these specifications are broken down by state and industry.
Apply for an EIN/Federal Tax ID
The nine-digit number known as an Employer Identification Number, or EIN, is used to identify your company for tax reporting purposes. It serves as your company's equivalent of a Social Security number and is also referred to as your federal tax identification number. One is available for free via the IRS website.
Don't wait around. Applying for small company loans typically requires an EIN, and hiring staff will also require one.
6) Financial and Accounting Steps
You now have a number of choices to choose about the financial management of your business. Although it may seem difficult at first, if you follow these procedures right away, things will go much more smoothly for you in the long run.
Choose Your Tax Entity
You must first choose the business structure that best suits the requirements of your enterprise. The following are the top five categories of business structures:
- Sole proprietorships
- Partnerships
- Limited liability companies (LLCs)
- Corporations
- S corporations
If any of these terms seem alien to you, check out this informative Indeed.com article. Your daily operations and the level of risk you assume when beginning your own firm will be impacted by the structure you select.
Separate Your Business and Personal Finances
It is not unusual for entrepreneurs to invest their own money in their businesses, particularly in the early stages. However, combining your personal and corporate assets can put your personal assets at risk in the event that your firm fails or is sued, as well as cause uncertainty during tax season.
Because of this overlap, you must open a company bank account right now. When it comes to selecting a bank for your business account, there are several comparison websites available, such as Nerdwallet or Bankrate, which can assist you in reducing your selections.
For example, several financial institutions provide special capabilities just for eCommerce businesses, while others provide solutions that can be useful for merchants.
Furthermore, even though online banking is an option, some business owners might find that a local brick-and-mortar bank is more convenient, particularly if they need to make frequent deposits.
Choose Your Accounting System
How are you going to organise your books? Basically, you have three choices:
- Using accounting software to manage your accounts on your own
- Engaging a bookkeeper or accountant
- giving your bookkeeping to an outside accounting company
Every option has advantages and disadvantages.While keeping your own books makes sense in the early stages of your firm, you may discover that these administrative requirements take up too much of your time and prevent you from concentrating on expanding it. Occasionally, using third-party companies can be less expensive than working with a real bookkeeper or CPA.
Consider Finding Financing
You may want to think about getting a business line of credit (LOC) or a small company loan to finance your venture. A line of credit is frequently useful for continuing requirements, but loans are useful for one-time expenses, equipment and inventory purchases, and startup fees.
Your bank can be able to assist you in navigating the criteria of an SBA loan programme and may already have some possibilities available.
7) Get Insured, if Necessary
Is company insurance truly necessary? It may be mandatory for you to obtain business insurance in your state if you have employees. In addition, it is fairly unusual for landlords to demand insurance coverage from tenants leasing retail space.
Likewise, certain producers of equipment could favour doing business with organisations that are covered by insurance. A lawsuit, vandalism, or a natural calamity can all be avoided with business insurance.
Business insurance comes in six popular varieties:
- Product liability
- General liability
- Professional liability
- Business owner’s policy
- Home-based business insurance
- Commercial property insurance
The SBA website offers a summary of each coverage type's benefits in further detail. The primary inquiry is whether the level of risk in your company justifies a policy. Buying insurance coverage is ideal when:
- You’re hiring employees
- You are employed in a hazardous field (e.g., construction)
- Customers come into your store location.
- You depend on expensive-to-replace resources, inventories, or equipment.
Similar to any other kind of insurance, you could find that having it rather than needing it is preferable.
8) Explore HR Needs
Depending on your company, you may decide to bring on a whole crew or just an extra pair of hands. The job website Indeed.com and the SBA both have some great resources for hiring staff.
The topics on this list usually won't affect you if your company is just getting started and you are working alone, but it's a good idea to keep them in mind in case things get busy and you need to hire more staff.
A few items to think about when managing your demands related to human resources (HR) are as follows:
Offers and Management of Benefits
Unless all of your employees work part-time, you will need to offer benefits of some kind. This includes health insurance at the very least, but in order to draw and keep top people, many businesses also provide retirement benefits and other financial incentives.
Legal Notifications
Laws pertaining to labour are always changing. Employers are required to maintain compliance in part by posting legal notices in their places of business.
The Department of Labour website has more details regarding these posters and warnings. It will be your duty as the business's owner to keep up with any changes to laws and other compliance-related matters that may affect your staff.
Withholding Tax
Employers are required by the Federal Insurance Contributions Act (FICA) to deduct the following taxes from their workers' gross pay:
- The Social Security tax is 6.2%.
- The Medicare tax (the "regular" Medicare tax) is 1.45%.
- 0.9% Medicare surtax if an employee's income exceeds $200,000.
Additionally, FICA mandates that you cover the employee's share of the following costs:
- The Social Security tax is 6.2%.
- 1.45% Medicare levy
Penalties and legal repercussions may follow noncompliance with these regulations.
SOGs and SOPs
Standard operating procedures (SOPs) and standard operating guidelines (SOGs) pertaining to worker conduct, job requirements, and workplace safety must also be created by employers.
HR options
Similar to your accounting requirements, you can handle HR in three simple ways:
- Taking care of HR on your own
- Employing a manager of human resources
- Contracting with an HR company
It can be challenging to keep up with new requirements as your firm expands, so you may want to think about employing an HR manager or outsourcing your needs to a third party.
9) Identifying Your Initial Clientele
It was a mistake made in that old Kevin Costner film to assume that customers will come just because you create anything. While some businesses can profit from sending direct mail to locals, in order to market your company successfully, you'll probably need to build a strong online presence. Pay attention to the following:
A User-Friendly Website
Create a cutting-edge, user-friendly website first. Verify that it appears well on both desktop and mobile computers.
Your website should include essential details about your company, like its address and the goods and services it offers. While some e-commerce companies use their websites to generate leads, others may use contact forms to establish a connection with prospective customers.
Social Media Existence
You can reach a larger audience by making a page or profile on Facebook, Instagram, or other social media platforms.
You can pay to make a post become an advertisement if you have a particular post that you would like to get more attention for, such as an announcement of a grand opening. You might assign these duties to a worker who can handle your social media accounts as your company expands.
Email Marketing
Create an email list of your regular clients at last. To foster greater customer loyalty and advertise your company, you might provide them with coupons, extra information, and other exclusive deals.
In summary, identify your passions
It's true that this sounds like a lot of work. There aren't many things more satisfying than putting money into a project you genuinely believe in. Thus, your company endeavour provides you with more than just a wage. It provides you with the chance to make a lasting impression around the globe.
