Almost everyone has had an idea for a business at some point. Most people never take their idea to fruition - either because the idea wasn’t great or because they just never had the skills or motivation to see it through. Because the idea itself is actually the easy bit. You can generate a dozen ideas in a few minutes. It's how you choose the best business ideas, and how you actually execute the idea which is the hard part.
So what exactly is involved in getting a business off the ground? This article will lay it all out for you.
What Do You Need to Start a Business?
In this section, we will cover the general steps you need to take to launch your venture.
Come up with a business idea and try to validate it - quickly
The most basic step is to decide what type of business you would like to start. It’s best to choose an idea that you are passionate about and have a background in or knowledge of. But that’s only part of it; being passionate about a business idea that no one else is passionate about won’t make for a successful business.
So, before you go much further, you should try to test out your business idea as quickly and cheaply as possible. You can start by just talking to friends and family about it. Beware though: people you know are likely to be kinder on your idea than strangers. But even so, it can still be a good first step.
Next, you should try to find target customers, and test out your idea on them. This may be possible without even building your product or offering your service. If not, create an M.V.P. (minimum viable product) and try it out on your potential customers.
At this stage, the goal is not to make money, but to validate your business or product idea, as quickly and cheaply as possible, to determine whether it’s worth investing more time and money in. If you're not getting interest, it's probably time to ditch your idea and move on to another one.
Create a Business Plan
Once you have a business that you have validated in some way, it’s time to get more serious and develop a business plan. At this stage, it doesn’t have to be a complex document. It simply states what products or services you offer, how you plan to make money, who you need on your team, the equipment and supplies you will require, and your basic company goals and vision. You should revisit your plan every six months as you learn more and your company evolves.
Choose a Business Name
The name of your business should be catchy, easy to spell, easy to pronounce, and it should give consumers an idea of what you have to offer (although as we see from companies like Amazon and Apple - this is not always necessary). You’ll also need to make sure it’s not already being used by others in your industry.
Choose a Business Structure
There are several business structures you can choose. When you start, it’s best to use the simplest and cheapet from of company. You can always upgrade later.
It’s advisable to work with a CPA or an incorporation attorney to determine the business structure that’s best for. They will guide you through the application process.
Types of business structure include:
- Sole proprietorship
- Partnership
- Limited liability company
- Corporation
Get a Federal Tax ID (if you’re based in the US)
Every business will require a federal tax ID (EIN) number to do taxes. The process to acquire one is relatively easy. It can be done online through the IRS.
For those outside of the US, you’ll likely need the equivalent for your own country.
Apply for Licenses and Permits
Your business may require a business license to operate legally. Consult with your Chamber of Commerce or local city officials to determine which permits and licenses you need and find out what’s required in applying.
Open a Business Bank Account
It’s important to keep your personal and business finances separate for tax and liability purposes. Therefore, setting up a business bank account is a necessary step in opening your company.
Get Financing
Most people will need some amount of financing to get their business off the ground. There are a variety of financing options including:
- Bank loans
- Credit cards
- Crowdsourcing
- Borrowing from friends and families
- Investors
Again, try to use minimal funds when you are still in the validation stage of your business. You can always take on more once you have proven there's sufficient demand for your product.
Prepare to Pay Taxes
If you've got to the stage where you're making revenue, congratulations! Now you'll have to think about paying taxes, which can be complex. It’s best to start a relationship with a business accountant early on. They can provide you with solid advice on getting your taxes done and other financial matters.
Get Business Insurance
Business insurance will help keep your assets protected. Most companies will need general liability insurance in case a legal claim arises. You may also need other types of insurance depending on your business model.
Hire Employees
Hiring employees is optional, but if you decide to go this route, you will need workers’ comp insurance and payroll software.
Develop A Marketing Plan
You may have a great product, but unless your prospective customers know about it, you won’t make many sales. So you’ll need to find ways to get your product offering in front of your target customers. Decide the best way to reach customers whether it be through online platforms, in-person means, or a combination of both. You can read more about how to write a marketing plan here.
Business Document Templates for new Businesses
There are several templates that will come in handy when you are launching your business. These include:
- Business Plan: A business plan template will help you develop a business plan and ensure no information gets left out.
- Competitor Research Template: A competitive research analysis template will provide the key business areas you want to look at in your comparison.
- Expense Report Template: An expense report template will help you keep track of your expenses. Find one that’s tailored to your business.
- Job Description Template: A job description template will assist you in determining the criteria you need to find the best talent.
- Employee Scheduling: An employee scheduling template will help you organize staff shifts.
What to Consider When Starting an Online Business vs. a Traditional Business
These days, it’s rare to have a bricks and mortar business that doesn’t have at least some online aspects. Even the most hands-on business will benefit from an online presence. Depending on what you are offering, starting online may also be a cheaper and faster way to market. Consider these things when you’re deciding the balance between online and offline:
- Cost: Online businesses do not require a physical location, so they are less expensive than a brick-and-mortar businesses. However, you may eventually need some sort of facility if you are planning on hiring employees or if you require storage space.
- Type of Business: Certain businesses will only work with a brick-and-mortar location. For example, you can’t repair cars online. But, you can reach customers online.
- Loyalty: When you own a brick-and-mortar business, you see customers on a regular basis. The face-to-face contact promotes a sense of loyalty that’s more difficult to develop with an online business.
- Wide Audience: An online business reaches a wider audience. You can sell to customers all over the world. A brick-and-mortar business, on the other hand, has local appeal, and if you pick the right business for the right product - less competition. For example, if you open a sandwich shop in a town that has no other places to buy food, you may capture the market. If you open a bookshop in a place that has no bookshops, people can still shop on Amazon.
- Shipping Cost and Time: With an online platform, all products must be shipped. This is a time and money expense that must be passed on to customers which can be a deterrent. Physical stores can get their products immediately
How to Decide on a Name
Your business name can help your company's success, but it’s actually the product itself that is most important. If you can find a catchy name and you will stand out from the crowd. But don’t get too obsessed with trying to find the perfect name. Many of the world’s most successful products and businesses, became popular despite the name, not because of it. Take ‘McDonald's’, ‘Ford’ or ‘Apple’ for example. These are not particularly stand-out names, but they all make hugely successful products.
Here are some tips for naming your company:
- Avoid names that are hard to spell, too long, or difficult to pronounce
- Don’t pick a name that can be limiting as your business grows
- Conduct a trademark search and Secretary of State search to ensure the name is not taken by someone in your industry
- Choose a name that conveys some meaning as to what your business has to offer if you can (but this is not necessary)
- Try to get the .com domain name if possible, although the domain suffix is becoming less important these days.
Tips for Starting a Business
The sad truth is, most businesses fail within a few years of opening. The most common cause is that there simply was not sufficient demand for the product or service being offered.
However, here are some tips that will increase your chances of succeeding:
- Test out your product idea on your target customers before you invest a huge amount of money. If your idea or prototype is not gaining any traction, ditch the idea and move on to your next one.
- Think about how you will market your product. Some of the best products are spread by word of mouth, but how can you get your business in front of the people who would want it?
- Provide excellent customer service: once you start seeing some traction, give great service. This is especially important in the early stages when you are trying to build up a customer base and get word-of-mouth referrals.
- Experiment and iterate: it’s likely that you’ll learn a lot in the first few years of launching a business. Don’t be too rigid in your planning; allow for learnings to be acted upon and to change tact if required. The more flexible and adaptable your business is, the higher the chance it will survive and thrive.