Stop thinking about your great business idea and actually do it. It can seem daunting to start a business from nothing, but, like any big project, it will feel less overwhelming if you break it down into a series of smaller steps.
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6 Steps to Take to Start a Business from Scratch Today
#1. Determine your market size
It’s essential to conduct market research before you put up the real or metaphorical “We’re Open” sign. Identify the market size for your business – the number of potential buyers – by evaluating:
- the problem your business solves
- your existing competition
- your unique value proposition
- and your target demographic
Now you’ll know if there is the potential to be profitable and you’ll be able to make a smarter marketing strategy because you know who you are selling to and what they want.
Reference The Top Reasons Startups Fail – Statista
#2. Create your product or service.
Now it’s time to bring your product or service to life. If you have a physical product, you need to design and manufacture it or buy inventory. When you choose what to price it, remember to make sure it’s more expensive than the manufacturing or acquisition cost so you make a profit.
When you have a service business, you are the product. You don’t have to create or buy anything, but you have to decide what you sell and how you sell it. If you are a writer, for example, you could include a variety of services such as:
You also have to have a pricing model such as charging an hourly rate, a project rate, a price-per-word, or a combination of both.
#3. Write a business plan.
You wouldn’t embark on a road trip without a map and you shouldn’t start a business without creating a business plan. Think of your business plan as a roadmap for your business. There are a few primary components of every business plan:
You’ll need a business plan if you raise funding, but it’s also worthwhile even if you aren’t raising venture capital because it helps you make strategic decisions.
“By failing to prepare, you are preparing to fail” [Benjamin Franklin] – Share on Twitter
#4. Decide your business name.
Get ready to brainstorm your business name. It can be tricky to find a creative, memorable name that is legally available. If you are in the United States, you can check the U.S. Patent and Trademark Office database and state and local databases to see if someone else has trademarked the name.
Found “the one”? Make sure that your business name is also available as a domain name and register it. Once you do that, you can move to the fun stuff like designing business cards and stationery and setting up your website and social media accounts.
#5. Choose a business structure.
Your business structure will determine how you pay taxes, your personal liability, and your team structure. The most common business structures are:
- a sole proprietorship
- a partnership
- a limited liability company
- a corporation and a cooperative
There are pros and cons to each, so it’s helpful to work with an accountant and lawyer to identify the best decision for your business.
#6. Plan your finances.
Starting a business doesn’t have to be expensive, but you do need to make an initial investment that will cover your operations costs. Your costs will be lower if you have a service business because you are not manufacturing a physical product or buying inventory. But either way, there are basic costs like building a website, incorporating your business, and paying taxes. Calculate the initial cost for setting up your business and your operating expenses for at least a year.
Now plan how you’ll pay that amount. For example, you could raise venture capital, have friends and family around, use a crowdfunding service, or take out loans. You could also bootstrap your business, set a careful budget, and you’ll have an extra incentive to make your business profitable right out of the gate.