The funny thing about business is that many of the people who start them don’t really know what they’re doing at first. It’s not as though entrepreneurs spring neatly from the ranks of business college graduates–far from it. So many amazing companies start from the spark of an idea from an everyday person. A teacher. A chef. A janitor.
Some people simply see a need and have the imagination to fill that need creatively. When the idea becomes a good or service, a business model is required to bring it to the consumer. But how to do this? If you’re someone whose spark has become a product and you want to expand, we’ve created a list of steps to follow when starting a business.
Step 1: Conduct Market Research
The first thing to do is find out if the general public finds your product as brilliant as you do. Market research helps you to gather information about what consumers are looking for and if there are similar businesses in your area.
You can do this by gathering information directly, or using secondary info (information that has already been gathered). You need to know your audience from the very beginning so that you can gather relevant demographics. You may choose to use any or all of the following to gather information:
- Surveys or questionnaires
- Focus groups
Step 2: Create a Business Plan
A business plan is the cornerstone of your company. It’s essentially the strategy for building your idea into a successful venture. It needs to be clear, concise, and demonstrate to your audience that your business is one worth investing in.
Take a look at the competition in your marketplace. Identify some strengths and opportunities, and decide how your own business will do things differently. What will you be marketing, and how will you market it? What is your target audience? Answer these questions before moving forward.
Create a conservative sales projection, so that you’ll have a cash reserve. Don’t go too hard at first, as you need to create brand awareness and convince existing consumers of your competitors that your product is better. This takes time, so it’s best not to overreach.
Step 3: Find the Funding
If you don’t have the capital on hand to start a business on your own (and congrats if you do!), you’ll have to find the funding. As part of your business plan, you should have decided how much money you’ll need to start your venture. Now it’s time to figure out how to get it.
You can self-fund with your own money (but be careful with this…while you have total control, you also have all of the risk). This can be done by dipping into savings, or by getting a small business loan.
You may also reach out to investors. If you are doing this, make sure that you have a really strong business plan to share. Also realize that you will very likely that any investor will want a spot on your board of directors so you’ll have to be ready to relinquish some control.
Finally, you could try crowdfunding. This is low risk as you retain control as owner, and don’t typically owe anything to the funders if you aren’t able to follow through (check the fine print of your platform to be sure). In return for their contributions, funders are offered some sort of gift. This could be a copy of the product itself or perks like a name credit or a special item not available to the typical buyer.
Step 4: Decide on a Location
Nowadays, the big choice here is whether you’ll have a brick-and-mortar shop, or run your business completely online. There are pros and cons to each, so take some thought to decide which best suits your product or service.
The choices you make here can affect your revenue, as well as taxes and legal requirements.
Step 5: Find a Memorable (and Original) Name
This may seem like a simple step, but the truth of the matter is it may take a little more time than you’d think. First, you want it to really capture your vibe and brand. Then you have to make sure that the name you want is not already being used anywhere else. A really catchy name can be the start of a business empire.
Step 6: The Legal Stuff
You want to register your business to protect your new company name. In most cases for small businesses this is a simple process where you simply register the name with state and local governments.
Next, take care of the tax stuff. You’ll need to get an employer identification number (EIN) so that you can open a business bank account and pay your taxes. Think of the EIN as a social security number for your business. Depending on your state, you may also have to apply for a tax ID.
Finally, let’s make sure that your company is legally compliant by applying for any and all required licenses and permits. Which ones you’ll need depend upon various factors such as state, location, industry, etc.
Step 7: Open a Business Bank Account
Now it’s time to open a business bank account. These accounts are helpful to small business owners, as they are able to better help you with taxes, legal things, and the day-to-day of running a company, not too mention they make your accounting and bookkeeping much easier. Many also offer business credit lines as a perk of signing up.
The Final Word
Creating a business is something that requires a lot of focus and drive, but almost anybody can do it if they have a product or service to sell. All it takes is careful consideration of all the steps outlined here. Just be sure that you move slowly and carefully, and that you don’t overreach. Remember that there are competitors out there and that you have to take the time to carve out your own niche.
To take a deeper diver into the regulatory and administrative tasks that need to be undertaken when starting a new business, we have a great blog post that provides a detailed step by step guide on what you need to do. Or, if you prefer videos take a look at our YouTube piece on the same topic, or just watch the content below. (The first video is the full guide and the second is an abridged guide.)
That’s it for now. We hope that our article on how to start a business was helpful for you. My OC Bookkeeper has extensive experience in helping individuals set up businesses from scratch and are always ready to help you. Make sure to contact us here for more information.