Have you ever had a business idea that was so groundbreaking, so profound, that you knew it could change your life and impact markets on a local or global scale? We’ve all had those “eureka” moments when it comes to thinking of business ideas. Maybe it was you and a friend coming up with some ideas of products you wish existed or maybe you were on your own. In this article will help guide you on how to start a business.
The big question is, “have you turned that million-dollar idea into a working business yet? Have you even started to look at what it would take?” If so, great. If not, why not? Turning thoughts into action is one of the hardest parts of starting any business. There is risk, uncertainty, financial pressures, a huge personal time & energy requirement, and more.
Let’s look at some winning foundational tactics to utilize if you’re serious about starting a business.
Step by Step Guide on How to Start a Business
There is a seemingly endless number of hurdles that discourage most people from doing what is necessary to start a business, even when they are young. But, these are not “dead ends” and are simply challenges to meet head-on and overcome.
The global economy isn’t currently making things any easier either for budding businesses. Many people have a lot of debt, have day jobs, have families, and have a lower threshold for risk due to these factors and market uncertainty. That doesn’t even consider the huge players like Amazon and Walmart which make getting into certain types of businesses seem impossible.
Beyond all the outside factors, the most common thing which prevents people from starting a business is the actual lack of starting itself.
When you look at only the big picture or the product, it can be a bit daunting or seem like an impossible task. By going about things in a piece by piece fashion you take away some of this burden. So, when you start writing up your “to-do list” to get the business going have it be detailed with small tasks that you can accomplish towards an end goal.
“Rome wasn’t built in a day” and the same goes for your business. No great business idea can be accomplished in a single working day and there is no copy and paste template to be found when learning how to start a business either.
Take these 10 steps for what they are. The order may not matter to you so don’t think of these as strict.
1. Your Business Idea
Coming up with a good business idea can mean paying attention to a need or missing product to solve a problem when you have one. It can be something for the tech sphere, a phone app, a sporting item, a teaching item; or anything else. If you don’t have a business idea yet look at your own life, have you ever been left feeling something was missing? Or maybe you already have a business idea that you’re working on.
The point is to get it written down. When you start a business it’s important to write things down. When you write something down it becomes more real in your mind and this is an important step when it comes to developing your business idea. As you work through the idea, think about some key questions. “Do you have personal experience or knowledge about this area? Is the idea doable? Would people buy it? What do your friends think if the idea? What do your parents or other family members think of it?
Asking yourself these key questions and getting a few 2nd opinions on your idea can prove that your idea is something that can work. Or it can prove it was not such a great idea. Ask a friend or family member who you know will not sugar coat things for you. You want a serious answer, not a cushy one.
When you start a business, there can be more to come up with a good business name than you may think. Because the name of the business will be what people see first it’s incredibly important. We see lots of two-word combinations used here in the United States (Ameritrade, Esurance, etc.). Your business name should illustrate a feeling of your business’s culture and perception.
If you’re planning an improved active dog collar company, avoid boring names like “Improved Dog Collars Inc.” Also don’t pull too closely from the competition. Your name should be unique but paint a picture. Something along the lines of “Rover Holder” or “Lasting Leash” can seem quirky but work. “Lasting Leash” paints a picture of the last leash you’ll ever need. *Maybe this example seems foolish, but you get the idea*
2. When You Start a Business, Do Market Research
When you’ve gotten some good feedback and answered some of the key questions from step one, it’s time to start doing market research. The better your research the better you’ll be prepared to create a thorough business plan.
Now is the time to answer the hard questions: Can it be done? Is there a demand? Is there too much supply? Who will buy the product or service? What is the going rate? Are there companies selling something similar? How are they doing? Who is the target audience? If it is a physical product, where are they being made? For how much? How are they being delivered? What are people willing to spend?
You may find that there is a similar product or service already out there, but that should NOT discourage you. If there is another business or business making money at this that means it is a working idea. Yes, there is a competition but by there being competition you get the green light that the idea is a viable one.
There are also free tools available to conduct thorough market research:
- USA Federal Government: There are various government agencies that provide economic information for free to the public such as income, locations, spending, demographics, credit, and more. Department of Labor Statistics for one.
- Alibaba.com (wholesale) and Aliexpress.com (single sale): a Chinese e-commerce retail space that is great for market research but also for finding products as well. If you’re ready for bulk orders, then Alibaba is the place to go. If you want to start small and do some one-off drop shipping, Aliexpress is the place to go.
- Amazon: a physical product comparison can easily be done via an Amazon search. You can find how many people are selling a certain type of item, what it goes for, and even what people are saying about it in the reviews. A great tool for some thorough product-based market research. Search for any product and see all the competitors.
3. Business Plan
Some business owners will say a formal business plan isn’t necessary for success. That may be so for them, but most of us will have to rely on more than luck to get a business plan working. Having a game plan can make a huge difference at every step of the business building stage.
A business plan is important for looking at where you are now, where you need to get, and what needs to get done along the way. This is a MUST if you will be needing to look for investors and funding for your business. Coming to an investor with an idea is not good enough today. They need to see the nuts and bolts of what the idea is, how it will be implemented if it’s profitable, and what is in it for them if they invest.
You should have at least a general understanding of what your startup costs will be. If you’re planning a small local craft business for weekend trade shows you may not need investor capital at all, but many other business ideas will take money to get going.
What will the startup costs be? What about insurance? How long will it take until you are turning a profit? What could be major roadblocks? What are the projected profit margins? How far will a set amount of money take the project?
It can also be a mistake to look only at the dollar signs and decimal points. Create a larger picture of the business plan and cover these major points:
- The What? Explain the service or product in detail and who is the desired clientele. Note the price, demographics, and the main competitors.
- The Who? Who is in charge? Are you working alone or are their cofounders? What about managers? Illustrate who you are and your team if you have one, highlighting skill sets, expertise, and knowledge base.
- The Red Tape? cover things that are out of your control like laws, taxes, banking, regulations, and more, which could be potential roadblocks.
- The Why? Do your best to show what the risks and rewards are for undertaking this endeavor. What is the potential upside of the business? What are the potential financial risks? It may be impossible to predict market trends, but you can use numbers to paint a picture of what is likely to be the case.
These are some basic guidelines for writing up a business plan. You want to be as detailed as you can, especially when presenting this to any potential investors. They should be palatable to a few key people: lending banks, investors, business partners, and you.
If your business will solely be on the web, then you don’t need to think too much of the location as even a home business can reach an international audience online. But there are some real considerations to consider a physical location. Every state has a different way of doing business as well. This means different taxes, credits/incentives, fees, minimum wage levels, and more. This doesn’t even take into account the wide-ranging scope of commercial real estate costs from the state to state, county to county, and town to town.
As a rule, the location should suit the business variety. Think of places like Silicon Valley which did their best to attract all manner of technology start-up companies with tax incentives during that time period. There is also the size of the city to consider.
If it is a brick and mortar business, you should be looking at all these factors. It’s smart to compare places that have a few key similarities:
- Low cost of living
- High income for self-employed individuals
- Affordable real estate
- Low poverty rates
- High median income
- Good public infrastructure
- And more
Don’t forget about yourself either. Is the location you’re considering a place you think you can succeed both professionally and personally? If a location has nothing to offer you as an individual it may not make a great fit even if it fits the business. So be sure to vet several locations.
Depending on the variety of businesses you are creating you may or may not need investment funding. People go about doing this all different ways. Some recruit friends and family for startup capital while others fund their businesses themselves or look for investors.
Turning to investors will require a few different things, like that business plan we were discussing earlier. When you can show an investor you’re serious, have done your homework, have a game plan, and the will to grind it out; you’ll greatly improve your chances of getting investor capital.
Starting a Business with No Money
Not everyone has a huge bank account, inheritance, stock holdings, or real estate to get their business started with. Turning to a bank or other investor is likely where you’ll find yourself when getting a business started.
Banks these days are far less willing to provide startup capital to a business that is not yet proven to be a success. This means your business with no track record will unlikely be a candidate for bank investment capital. But the bank does have a potential option through a personal loan that you then use for your business. The loan will be smaller than a traditional business loan and your credit rating will affect how much you can get and at what rate, but it is an option.
There are a few ways you can get startup capital on your own as well:
- Government Grants: these can be tricky to qualify for but that doesn’t mean impossible. The federal government often provides grants to a certain demographic of people (for instance minority-owned businesses or women-owned businesses) or for businesses going into a certain market sector.
- Angel Investors: these are firms or individual investors who focus solely on startup funding. It is more common to get Angel investor funding for physical products as opposed to services, but it is an option for both.
- Crowdfunding (GoFundMe.com and others): this could be a route if you can get other people to back it for you. This works well for businesses and stories that people can resonate with and feel passionate about. It is a way to potentially reach millions of people through.
There are lots of different business structures to consider and the nature of the business will also have an impact on what structure you go with. This will be important for taxes, insurance, financial reporting, accounting and more. Look at two key factors:
- Which structure thoroughly protects me and the business?
- Which structure has the greatest financial benefits?
The business structures which offer the greatest legal protection include limited liability companies (LLC) and corporation varieties (B, C, and S). These will protect the owner’s or owners’ financial assets from problems that arise with the business. Should something go wrong, these offer liability protection where if it were a sole proprietorship you could be required to pay a legal suit or business debt from personal assets (home, car, bank accounts, etc.).
There are also simpler structures like sole proprietorship (one person only), partnerships (more than one person), cooperatives, non-profit corporations, and more. Every business will have different needs when it comes to banking, taxation, and overall structure. An accountant can help you determine what is the best structure for your business or through sites like LegalZoom.com
7. File & Register
You have your business idea, your plan, and your funding ready to go; and you know what structure you’ll be using. Now file with the IRS and get a proper Tax ID (EIN) number so you can open a business bank account. Open the account and file with any local or state governments that require it. An EIN number is very important when you start a business.
This could be as easy as going to the bank and opening the account (they handled the filing) or you may have to send some documentation to the Secretary of State’s office in your state. If you have patents or trademarks you will also want to file them now as well.
Different industries have different legal requirements for doing business as well. If you are a startup brewery, you’ll need licenses to brew and sell beer. Same goes for food, alcohol, firearms, transportation, energy, media, agriculture, chemicals, and more. You can apply for your tax ID (EIN) number directly through the IRS website here: Get Federal Tax ID (EIN). Some states require separate state Tax ID numbers as well.
This can be a daunting bit of work to do with all the required paperwork and if you’re new to it you should get some help.
8. Website & Social Media is important when you start a business
When your idea is ready, you have investment, accounts have been opened, and you are ready to start doing business; you’ll need a website and social media accounts. Creating a website is a must in today’s modern world but so to is setting up social media accounts at places. Considering that almost 8 in 10 Americans use social media it’s an important avenue to take advantage of.
You have your business name already so do your best to get your website name and social media handles as close to it as you can. Many website URL’s may be taken so try to keep it close and the same goes for social media.
You can get a domain name (www.yourbusiness.com) from various websites like Godaddy.com for a low yearly cost. This is just the name of the site though and it’s up to you to get the site built. Depending on your business model this could be a big undertaking or small. If you’ll be selling from the website directly there will be more web design requirements than if it’s strictly for information so be sure to bring in a web designer if things get complicated.
Verdict: Your Business is Possible
Coming up with a business idea and seeing it through isn’t for everyone. It can be exciting, unstable, fun, miserable, profitable, and not profitable. Don’t get caught up going for perfection, you can always tweak and refine details later. But using this basic list above you can start to see what it takes step-by-step to start a business.