A Practical Guide on How to Start A Business
Starting a business is an exciting endeavor. You may have already thought about a name for your business or even purchased the domain name for your website. However, before you start spending money on marketing materials, web design and office space, you should take a step back and consider all the aspects of starting a new company.
While there are several key steps to follow, every business has its own unique needs and may require additional steps along the way. If you’re planning to start your own business, here are some simple and practical steps that you can follow:
1. Decide what kind of business you want to start.
Before you can start a business, you need to decide what kind of business you want to build. There are many different business structures to choose from including: sole proprietorship, partnership, limited liability company (LLC), and corporation. Each business structure has its own pros and cons. Explore a brief overview of each business structure below:
Advantages of a sole proprietorship include ease of formation, ownership, and control. In addition, operating costs are minimal, and all profits go to the owner. A sole proprietor also has complete control over all decisions. However, the owner is personally liable for all financial obligations and debts of the business.
A partnership is similar to a sole proprietorship except that there are multiple owners involved in the business. Like a sole proprietor, the partners have complete control over the company and share in the profits and losses of the business. The personal assets of each partner are at risk if the company cannot pay its debts or other obligations.
Limited Liability Company (LLC)
An LLC combines aspects of partnership and corporate structures. It protects entrepreneurs from personal liability for business debts or claims while allowing them freedom in structuring internal ownership and management. Members may include individuals, partnerships, corporations or other LLCs.
Corporations are similar to sole proprietorships as they have many of the same rights and responsibilities. Corporations have limited liability where the shareholders are not personally responsible for any money that the company may owe. In addition, a corporation can be created by one individual or a group of individuals with common or uncommon interests. Most large companies operate under a corporation structure to protect assets and minimize potential damages.
2. Conduct market research on your chosen industry or product line.
Market research is a critical part of any business model. You need to know who your target audience is and what they want from you. It's also crucial to understand the competitive landscape, including how similar products and services are priced.
So how do you conduct market research? Here are some tips:
Identify your competitors. Look at who's selling similar products and services in your area, as well as online. What are their strengths and weaknesses? Can you offer something better than what they're providing? A great tip is to go to your competitor’s Google or Yelp reviews. What are their customers disputing? Why aren’t they happy? Take their feedback and use it to your advantage by working on exceling where they don’t.
Examine pricing trends. How much does it cost to provide the product or service you're interested in offering? What are other businesses charging for similar items? Is there room for a lower-priced option that will still be profitable, or should you aim high and try to offer a premium product? Pricing is an important differentiator in a market. You can even consider offering other pricing models such as subscriptions, bundles or trials. Whatever you choose for your business, keep your ideal customer in mind.
Talk to potential customers. Get out there and talk with people about what they want from businesses like yours. You can often take polls and conduct research by being direct and straight to the source. Customers love providing feedback and feeling heard. Take their suggestions into consideration by working their opinions into your business structure.
3. Write a business plan and secure funding for your venture.
A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a marketing, financial and operational viewpoint. Sometimes, a business plan is prepared for an established business that is moving in a new direction.
A well-written business plan can help convince investors or lenders to finance your business. In fact, it’s the most common "pitch" document used by entrepreneurs to convince investors to fund their businesses. This document clearly shows how you will repay borrowed money to make investors feel more secure about handing their money over to you.
A business plan is also the 'yardstick' by which a business owner measures success in meeting stated goals and objectives. Business plans have a variety of uses, but it's main purpose is that it can be used as an operating guide because it describes the details of the company's products or services, marketing plans and management team.
So what’s in a business plan anyway? Typically a business plan is made up of 6 critical components:
Products and/or Services
4. Register your business with the appropriate government agencies and comply with all requirements for running your type of business structure, such as corporation, partnership or sole proprietorship.
Business registration is essential for the structure of your company, customer relations and legal protection. You can obtain a Federal Employer Identification Number from the IRS by filing Form SS-4. This is required for tax purposes, even if you don't have employees. You will also need to register with your state's department of revenue and tax commission to report income taxes, sales taxes and payroll taxes.
You may need to obtain special inspections or permits depending on which industry your business falls into. For example, construction companies, food service establishments and some retail businesses are subject to inspections or permits. Your local small business development center may be able to help you determine what registrations are needed in your area.
While some businesses are required to display licenses or certificates in a prominent location, other businesses do not need to display their licenses at all. Make sure you know what applies to your business type — and ask your local small business development center if you have questions about specific requirements.
5. Prepare your marketing strategy and materials - including website, social media accounts and other branding materials - to promote your product or service offering to potential customers.
Marketing is the process of communicating the value of a product or service to customers. Marketing can also be defined as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large."
Marketing is about understanding your customers. However big or small your business is, if you want to grow you need to market it. A marketing plan will help you find and keep customers (and hopefully grow their number). This will also help you see how they fit into your business strategy.
It's important to remember that marketing isn't just about advertising or promotion. It's about creating a brand and developing a long-term relationship with your target market. This involves understanding what your customer wants and needs at each stage of their life cycle - in other words, what products and services they need from you now and what they might want in the future.
The more you understand about your target market - who they are, what they do and when they buy products - the more likely it is that you will succeed in selling them something.
Starting a business is hard work, but it can also be incredibly rewarding. As you’re able to share your passion with others, pay the bills, and achieve your own version of success, you’ll feel both pride and a sense of accomplishment. And if you persevere despite the challenges, you may find that you have the opportunity to have the life you’ve always dreamt of. So what are you waiting for? Go out there and start your own business!
Need help opening a new business as a startup? Don't worry, we can help.
Related Article: Tips for Opening a New Local Small Business