How to start a business
What this post is about!
If you ever wanted to start a business but never knew where to start? This guide will provide step-by-step instructions on how to start any kind of business.
How will this post benefit me?
This post provides in-depth knowledge of not only how to start a business, but also how to conduct proper market research. Do you know your purpose? Have you ever completed a SWOT analysis on yourself or the business you are running? Have you conducted market research using primary or secondary resources? Do you know the difference between the two? These are just some topics addressed in this article.
If you’re ready, let’s dig in!
In this modern digital age, it’s easy to start a business. To achieve success in a business, you don’t need a college degree, a loan from the bank, or to invest your own hard-earned money. All you need is a will to learn, discipline, creativity, and long hours to fulfill your dream of becoming an entrepreneur or a small business owner.
Here are some of the things to consider to help you reach your dream of starting a business.
The Purpose
What is your purpose? Why do you want to start a business? Are you solving a problem? Are you providing a solution for a specific industry? You don’t need to reinvent the wheel; find something that already exists and make it a better experience for the consumer. For example, the iPhone was released on June 29th, 2007 by Apple, Inc., and revolutionized the wireless industry. Other examples are Google, Amazon, Uber, Airbnb, Facebook, and many more.
So, what is your purpose?
Self Evaluation
Evaluate yourself to see what your core skills are. Complete a personal SWOT analysis.
Strengths: All strengths over others, including resources, etc.
Weakness: Write down all your weaknesses, flaws, faults, and be honest with yourself.
Opportunities: What opportunities are available to you, which might help you succeed.
Threats: What are some of your threats? Remember, we’re talking about personal analysis, not your business. So, what are some threats that can prevent you from achieving your goal?
Click here to download the SWOT Chart in PDF.
Business Ideas
There are multiple ways to start a business, such as Franchise, Brick and Mortar, E-Commerce (Website, Amazon, eBay, Etsy), Digital Product (E-Book, Online Courses), or Services based (Consulting). One can select a turn-key business or start a new company based on finances, abilities, knowledge, availability, expertise, and affordability.
Let’s dig a little deeper into each one of these!
Franchise
The franchise is owned and operated by an individual (Franchisee) who operates the business based on the proven business model and systems placed by the Franchisor. Most franchises are brick and mortar.
Brick and Mortar
Brick and Mortar is a physical location like a coffee shop, a restaurant, or any other business that has physical locations (i.e. Walmart).
E-Commerce
When speaking of e-commerce, we’re talking about purchasing goods or services by use of the internet. There are over four different types of e-commerce categories.
- Digital Products – Digital products are something intangible, a product you cannot touch or smell. Some examples are websites building, podcasts, online radio, online articles or blogs, software development, and e-books (which can turn into a physical product if printed).
- Service-Based – A service-based business is when a company provides a service for a fee. The service could be anything where time is traded for money. Here are some examples: SaaS (Software as a Service) with a monthly recurring fee, event management, consulting, social media, entertainment, and many more.
- Physical Product – Physical products are tangible, something we can touch, feel, taste, or smell—a product we can purchase to satisfy our internal desire. For example, you buy a bottle of water from a supermarket to satisfy your thirst.
- Affiliates – Affiliates product is where the affiliate directs visitors, leads, promotes, or sells other companies’ products to earn a commission on all sales.
What is your target market?
B2C – Business-to-Consumer – This is the most common type of e-commerce. A business sells products or services to the end-users (consumer).
B2B – Business-to-Business – This is the 2nd most common type of e-commerce. A business (Producer/Mfg) sells its products or services to other businesses (Wholesaler or Retailer), like clothing companies selling their clothes to Walmart or other retail stores.
C2C – Consumer-to-Consumer – These transactions are completed between two individuals on various online platforms, i.e. eBay, Facebook marketplace, Craigslist, Etsy, etc.
C2B – Consumer-to-Business – This relationship is between a freelancer and a business. For example, a company hires a DJ for a party or hires a freelance graphic designer to develop a logo.
Market research
Market research is as vital as having an idea or funding for your business. You cannot start a business without a product or service or without any money. Market research is the same; you cannot start a new business without doing market research. The research will provide you with information about your target market, potential customers, and current competition. It should also give you an in-depth knowledge of how your customers may use that particular product or service, whether customers are moving away from such a product or service, or if the product is trending.
There are two types of market research that you can conduct, Primary Research and Secondary Research.
- Primary research is research you conduct by going directly to the source. This usually involves going directly to the customers or prospective customers to ask questions. You can achieve this by organizing various focus groups, creating online surveys, and/or arranging face-to-face pr telephone interviews.
- Secondary research is research that has already been conducted by others and is available to the public. This research may include studies done by government agencies or other businesses, which can provide marketing trends, industry statistics, and more. This information can also be useful for analyzing your competitors.
When conducting marketing research, always avoid doing the following:
- Only using the Secondary Research – This research was conducted by someone else. It may be good, but might not be entirely fitting to your business.
- Do not ask family and friends about your business or product. Your family and friends will never be straightforward or impartial with you. It’s always a good idea to go to prospective customers or existing customers.
- Do not rely only on free, online resources. There are plenty of companies that provide paid market research reports.
Data Analytics
Analyze all the data you have gathered regarding market trends, competitors, and any other existing products, and examine the feedback you received from your prospective and existing customers.
Some of the questions you might want to contemplate are
- What is the current market trend?
- How competitive is the market?
- How much are the buyers willing to pay for my product or service?
- What pain points will my product or service solve?
- Will my product or service be better than my competitor?
- What resources will I need to start my business?
- Where can I find such resources?
Legal Requirements
To officially start any business, you need to complete some legal requirements. These requirements might be different based on your demographics and local municipal or federal government laws.
- Business Structure – This will be the legal name of your business, the name on all official documents. There are four common structures in the U.S.
- Sole Proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation (C-Corp / S-Corp)
Seek advice from a CPA or an attorney on which business structure is best for you. If you want to check if the name you have selected is available, you can go to the Secretary of State’s website
- Federal Tax ID / Employer ID Number (EIN) – This is like the social security number for your business. The Federal Tax ID is required to open a business bank account and to file annual tax returns. You can easily apply from the official IRS website.
- Registered Business Name – Register DBA (Doing business as) with the local municipal government to get your business license. You will conduct business under this name and use it on business cards, promo material, etc.
- Permits
- Seller’s Permit (Sales Tax) – If you’re going to collect sales tax from your customer (B2C), you will need a Seller’s permit to report the amassed sales tax. Check local or state laws to see if wholesale businesses (B2B) require a Seller’s permit in your state.
- You might need other permits based on your industry.
- Bank Accounts – All banks require certain business documents to open business accounts. These requirements are based on your business structure. Check with your local bank to make sure you have all the required documents.
- Below are some good practices to adopt when obtaining a business account:
- Open separate accounts for payroll, sales tax, marketing, profit, savings, etc. Then set up auto-transfer of a fixed amount daily or weekly to the respective accounts. This practice can help you save money and ensure that you have money set aside for payroll, sales tax, or large purchases.
- Below are some good practices to adopt when obtaining a business account:
Business Plan
- What is a business plan?
- A good business plan will guide you through each stage of starting, managing, and exiting your business. A Business plan is required by financial institutions when applying for a loan or bringing on an investor.
- What is the structure of a business plan?
- Executive Summary – Executive summary includes information about your company, your purpose, product(s) or service(s) you offer, information about you, your team, location (if any), your financial information, and growth plan.
- Business Description – Here, provide detailed information about your business. Go into detail about what problems you are solving, list who is your target market, whether you are serving B2C, B2B, or both markets. Explain why you will be successful over your competitor(s), your expertise in this matter, and your strengths. Provide as many details as possible.
- Market analysis – The goal of market analysis is to make sure you understand the market you are about to serve. If you conducted the market research, this should be easy. What do you know about your competitors? Did you complete the market research? If not, refer back to the Market Research section above.
- Organization and management – In this section, describe the legal structure of your business. Refer to the Legal Requirements section for a more in-depth review of the structure. Also, include an organizational chart that outlines team leaders, their roles, and experiences.
- Service or product line – Here, list your product or services. How will your product or service benefit your customers? Who will develop it and how? What is the cost and time frame to develop? What is the projected life cycle? Etc.
- Marketing and sales – In this section, describe your marketing strategy. How will you reach your target market? What are the different leads and sales funnels? Who will handle the sales leads? Etc.
- Financial – Here, discuss where the funding is coming from (a loan from a bank, borrowing money for a relative, savings, etc). Also, include projections for at least two years.
For each question, try to give as much detail as you can. Remember, your business plan should evolve as your business matures.
Deploy
This will vary based on the type of business. If you want to open a coffee shop or a restaurant, you cannot develop a prototype or MVP (Minimum Viable Product) to test the market. However, if you’re going to launch a digital product or invent a product, then you might need an MVP or a prototype.
- Brick and Mortar – Things to look for when looking for a physical site. The location where your business is located will make a significant impact on the success of your business.
- Establish a relationship with commercial real estate agents.
- Depending on your business, location can be everything, so choose wisely. Just because a site has low rent, that does not mean it’s the best site. The same is true for high traffic, high rent does not imply a great location.
- Do your research before narrowing down to a single location.
- Issue LOI (Letter of Intent). Include your requirements, and rent you’re willing to pay, TI (Tenant Improvement) money, terms, options to extend after the first term, etc. Your commercial real estate agent will help you complete the LOI, guide you based on the current market trends.
- Ready to sign the lease? Have an attorney review the lease contract before signing.
- E-Commerce:
- Physical Product –
- Create an e-commerce website or sell your product on Amazon, eBay, Etsy, etc.
- If you’re inventing a new product, you may want to order prototypes to receive feedback from early users.
- Test your product for defects to make sure the product is working the way it was intended.
- Collect reviews by offering incentives to those who leave reviews.
- Digital Product –
- Promote your digital product on your social media channels. Join Reddit groups and engage with your customers.
- Service-Based –
- Build a website to promote your product
- Have a funnel to collect email leads
- Get beta users to test your MVP
- Develop MVP and make changes based on feedback from the beta users.
- Affiliates –
- The easiest category to participate in but also makes the least amount of money.
- Find a product or service and then promote it using various digital marketing tools. You will earn commission on every closed lead.
- Physical Product –
Marketing
Each business will require a different marketing strategy based on the type of product or service and location of the company. For example, a local restaurant might benefit more from a direct mail marketing campaign than an online SaaS company. Always keep in mind that a good marketing strategy should have at least 3 to 4 different marketing channels, i.e. direct mail, social media, Google ads (PPC), email, and your website. Also, in-store promotion is an excellent strategy for Brick and Mortar businesses.
Marketing done right can produce revenue for endless months, so it’s essential to delegate this to some who knows how to market. As a business owner, you wear multiple hats and marketing should not be one of them. Why do you hire a CPA to complete your year-end tax returns? Because you want the tax returns to be done correctly, right? So why should marketing be any different?
Most small business owners try to handle and manage the marketing themself. Henceforth, when they see no or very little return, they become discouraged and discredit the power of marketing. A well-strategized marketing campaign can be a well-oiled machine that will continue to generate revenue month after month.
