How to Start a New Business: Basic Guide for Beginners
- Starting a new business can be one of life’s great fulfilling goals.
- Going through the steps of planning your business while it is still a gleam in your eye will help to place the venture on a steady footing and reduce its risks.
- Once you’ve launched your business, continue to refer back to your business plan and refine it to remain a helpful guide.
Starting a new business, whether your first or 21st, can fill you with both exhilaration and anxiety. Our checklist below, created especially for beginning entrepreneurs, walks you through the key steps to confidently begin your venture.
Define Your Business Idea
As the old saying goes, if you don’t know where you want to go, then it doesn’t matter which path you take. In order to ensure that you end up at the destination of your choosing, your first step is to define your business idea. Inspiration for this idea doesn’t have to come eureka-style like a clap of thunder, it can come from time spent researching trends and observing the world around you.
Great sources for ideas include thinking through challenges that you’ve encountered in your everyday life, and identifying products or services that, with some tweaks, could meet the needs of your local community or social group.
Once you have a list of ideas, hone in on those that spark excitement or joy. Your business idea should monetize what you love, what you understand, and what you are already spending your free time doing. Starting a business that you’re passionate about is vital in helping you stay motivated when the inevitable curveballs happen. For instance, if you love real estate, then perhaps a business as a real estate investor— through wholesaling or house hacking— might make for a great fit.
If you don’t mind doing your taxes and tracking your budget, and in fact, secretly love spreadsheets, then opening up a company preparing taxes and advising clients on budgeting could be an enterprise that perfectly matches your skills and passion.
Recommended Read: Real Estate Advice for College Students
7 Basic Elements to Plan Your Business
Creating a business model can feel overwhelming, but at its core, it involves answering several key questions needed to move your business from thought to action. There’s no one way to write a business plan. Its main purpose is to crystalize your business products and services, operations, and financing. Whatever format your business plan takes, the basic elements include the following:
1. Executive Summary
Your executive summary boils down, in a sentence or two, what your company does, how much it will cost to get started, how much you forecast making, and why your business will be successful.
2. Company Description
In your company description, provide additional detail on what products or services you sell, and the specific problems you will address. Using the house hacking example above, your business description might be to provide affordable, stylish, short-term housing accommodations to a student population that is short on choice at a nearby university. The goal of your company description is to give you a picture of where your business is located, your customers, and the solution you are providing those customers.
3. Legal Structure
When forming a company, one of your first steps is to obtain a social security number of sorts for your company. This social security number is called an EIN- an employer identification number. You can apply for an EIN, free of charge, through the IRS’s website. A second component in thinking about your company’s structure is determining the legal structure you’d like. Among the alphabet soup of available choices are a C corporation, an S corporation, and an LLC. Again, the IRS’s website and the bureau of corporations for your state will provide you with ample information on these legal structures.
4. Research Your Market
Market research is the process of gathering information about potential customers and competitors to determine whether your small business idea can be turned into a successful business. Online resources, business associations, and conversations with potential customers are great market data sources. Conducting analysis on your target market can help you improve your business idea, as you will inevitably gain insights from comparable products and services along the way.
Image Credit: AS photo family / Shutterstock.com
Market research will also help reduce risks before you take the all-important step of spending money on your business. Questions to answer when conducting market analysis include:
- Is there a demand for my product or service?
- If so, how many people are interested in buying it?
- What do these customers look like regarding their income range or shopping habits?
- What’s unique about my product or service versus similar options that may exist?
- What price are customers paying for these similar options, and what should I charge?
At a minimum, your products and/or services will need to cover the cost of providing them. One step you can take to price your product is to research what competitors are charging for a similar product or service and then determine how much it will cost for you to provide that same service.
Using the example of a tax preparation services business, the elements you will consider in the cost of this service are the tax preparation software you will purchase, a laptop and printer if you don’t already own one, some form of marketing, and your time to prepare each client’s taxes.
6. Marketing and Sales
If you will be selling your products and services to friends and family initially, you might be tempted to underplay the need for social media management. However, to grow your business, you will need to consider how to attract new customers and retain the ones you have. A marketing and sales plan can help you think through the details to accomplish a larger customer base.
7. Financial Projections
Financial projections do not need to be a complex spreadsheet. They can be a simple summary of the costs to start the business, the expenses to provide your products/services, and the revenues that you will make. Keep in mind that your business, different than a hobby, must make money.
If your forecast shows that you will lose money once you are past the first year or two of start-up, then go back to the drawing board and focus on how you can increase your number of customers, the number of services you provide them, your sales price, or some combination.
Recommended Read: How the Facebook, Instagram, and WhatsApp Outages Hurt Small Businesses
The Money Wrap-Up
Starting a new business can be one of life’s great fulfilling goals. Going through the steps of planning your business while it is still a gleam in your eye will help to place the venture on a steady footing and reduce its risks. Once the business is launched, continue referring back and refining your business plan, so it remains a useful compass.
Main Image Credit: mavo / Shutterstock.com