Are you starting a business? You’ll need more than a good idea. There are legal, tax, financial, and strategic factors to consider. Not to mention the mental and emotional impact of being an entrepreneur.
As you begin your startup journey—consider the following tips to set your business up for success.
Need help tracking your progress? Download our free Startup Checklist and review the complete guide for starting a small business.
1. Be passionate about your business idea
You won’t love everything involved with being a small business owner. Diving into the financials, dealing with vendors, the hiring process, or a variety of other tasks—no one is passionate about every facet of business operations.
That’s completely fine. You just need to be driven by at least one thing. The driving factor that led you to start a business. It can be the idea, the customers, the mission, the grind—whatever it is; there’s something that keeps you going.
Make sure you know what this is for yourself before investing the time, money, and energy into starting a business. Without a north star guiding you through the downturns, frustrations, and risks of being a business owner, you’re just setting yourself up to fail.
2. Determine if there is a viable market
Don’t launch without testing your idea first. Sure, your friends and family say they love it, but that doesn’t guarantee that actual customers will. You need to determine if there is anyone clamoring for your solution.
Take the time to conduct market research and identify your target customers. Ensure you understand the competitive landscape, barriers to entry, projected market growth, and what you can realistically achieve. With this information, you can forecast the viability and profitability of the business. It’ll also help you set strategic milestones to enter the market successfully.
3. Don’t quit your day job
While you may be enamored with becoming an entrepreneur and bootstrapping your business, don’t quit your day job.
Instead, start your business off as a side hustle. Do the groundwork of researching and testing while you still have the income to support yourself. If it takes off, look at what financial milestones you need to hit in order to go full-time.
If you find that you have the financial runway to go full-time immediately and are willing to take on more of a risk, go for it. Just be sure that you have a backup plan if your business idea fails to gain traction. This could be something simple like being prepared to seek out short-term employment or reexamining your business structure and trying again.
4. Prepare a business plan
According to a report from the Harvard Business Review, entrepreneurs who plan are 16% more likely to achieve viability. And Small Business Economics found those who create a plan are 152% more likely to start their business. In short, proper planning leads to more successful businesses.
The benefits of planning don’t end with starting a business. It will prepare you to pursue funding and make you more likely to get it. Your plan can also evolve into a growth tool that helps you make more informed decisions.
In short, creating a business plan early on will make starting, managing, and growing your business easier. You’ll have a roadmap for success that you can actively review, revise, and share. Without a plan, you’ll just be making guesses and hoping that you’ll find success.
Recommended Reading: How to Write a Business Plan in 7 Steps
5. Find the right partners
When starting a business you’ll wear many hats—CEO, bookkeeper, manager, customer service representative, brand advocate—the list goes on and on. While you will be involved, you simply can’t become an expert in all of them. So, you need to find mentors, partners, and employees who are.
Working with the right individuals who complement your skillset will elevate the potential of your business. It allows you to spend more time on what you’re good at. But with the added benefit of having people you trust handling the rest.
Now, not every business can immediately hire more employees, and you may not have someone you want to bring on as an official partner. In that case, focus on connecting with other entrepreneurs and business mentors. Seek out advice, get recommendations, and talk through challenges as you grow your business.
6. Track finances early
Even if you’re not a numbers person, you need to track your finances. Whether it’s with spreadsheets, accounting software, or an accountant—your financial statements need to be up-to-date and organized. This prepares you to file taxes, pitch to investors, apply for small business loans, manage credit card spending, and easily track the health of your business.
Just to be clear, maintaining clean books is the baseline. To truly stay on top of your finances, you should start creating financial forecasts as early as possible. They are not as complex as you’d think and are a great way to explore the future of your business and make informed decisions.
You don’t even need your own financial data. You can reference industry benchmarks or make educated guesses on your own. Once you have actual financial data just update your forecasts.
Recommended Reading: How to forecast cash flow
7. Really get to know the competition
To improve your chances of successfully entering a market, you need to understand the competition. You should be able to answer questions like:
- Who are the key players? Who is your immediate competition?
- What do they offer? How do they position their product/service?
- Who do they target? How large is the available market?
- What are their weaknesses? Are there opportunities for disruption?
Competitive analysis should be embedded in your initial market research. You should map out who is present and dig into their operations, marketing tactics, and position in the market. This will inform who you identify as ideal customers, how you position your business, and even if you should launch this type of business at all.
8. Consider financing early
Funding may not be the first thing that comes to mind when starting a business. Most entrepreneurs are not looking to launch a startup, pitch to angel investors or financial institutions, and land multiple rounds of capital.
There’s actually a lot of value in bootstrapping your business. Building it from the ground up and making it sustainable without bringing on excessive amounts of debt. However, that doesn’t mean you shouldn’t consider and plan for the possibility of financing.
Maybe you gain traction far quicker than anticipated. Maybe you need to acquire more equipment or hire additional employees to get past production limitations. Both situations, along with many others, require additional funds.
If you don’t plan for funding, you’ll be stuck preparing when you should be acting. So, create a scenario for your business that includes an influx of cash from external sources. You can account for the type of funding, how much you need, and how it will be spent—even if you don’t intend to pursue it for a while.
9. Pay attention to your legal needs
Part of starting a business is completing the required legal steps to turn your idea into a legitimate business. This includes defining your business structure, registering for a tax id and business name, obtaining permits and licenses, and finding out how much you’ll be paying in taxes.
Most of these legal requirements will naturally be dealt with as part of the startup process. Still, it’s worth noting what is necessary so that you don’t unintentionally skip setting your business up as a legal entity. For a full list of potential legal requirements, check out this write-up.
10. Have enough cash on hand
A business can look good on paper without actually being healthy. You can be increasing revenue, growing sales, and maybe even cutting costs. But if you don’t have enough cash on hand none of that matters.
Cash is crucial for every business. Without it, you can’t cover your expenses, handle a financial crisis, or grow sustainably. Keep an eye on your inflow and outflow of cash. Pay close attention to the consistency, the timing, and look for opportunities to bring in more cash while diminishing how much and when it leaves your business.
The exact amount of cash you need on hand will vary. As long as you are actively tracking and analyzing your performance, you can make the right adjustments to keep cash flowing and avoid any surprises.
11. Identify professional gaps
To start a business, you need to outline your organizational structure. This includes the hierarchy of individuals as well as their roles and responsibilities. Even if you’re running things solo, you need to have this represented in some way.
In the beginning, your organization may be rather small with just a handful of people. However, it’s not really enough to just include who is currently present. Instead, you should identify and flag any roles or gaps you intend to fill at a certain point.
If it’s a role, you should address why that role is important and when you intend to add it. If you have a specific person in mind, you should have their resume and qualifications handy. This will tie the additions of roles and individuals to your plan and make it easier to create milestones around them. It also prepares you to seek out funding and address any questions about organizational growth.
12. Build your organic presence
Creating a name as a new business isn’t easy. There are well-established competitors with brand recognition and money heavily invested in advertising and sales. Rather than trying to go toe-to-toe, dollar-for-dollar, you can invest your time early in building authority organically.
Focus on your web presence and answering questions related to your industry, customers, and the problem that your products/services solve. This could be articles, comparisons between products, videos showcasing use cases, social posts that showcase your brand, and any number of other content-focused material.
You don’t need to be an SEO expert to make this work. Focus on creating content around what you know, tailor it to what people are searching for, and refine it over time. All it will cost you is time, but it’s a great way to establish a presence and compete without investing too much money upfront.
13. Prepare yourself mentally
Running a business isn’t easy. You’re responsible for how it performs, the people you hire, the products/services you sell, the culture you develop—the list goes on and on. While you can steer the ship, there are plenty of things beyond your control. Production errors, rising costs, supply chain disruption, competitor changes, souring consumer sentiment, etc.
If you aren’t prepared for the challenges that come with the excitement of running a business, you’ll sink. It can lead to excessive stress, long working hours, and financial struggles, among other things.
Now, don’t let that scare you away from starting a business. Instead, prepare yourself with some self-reflection. What are you good at? Where do you struggle? How will you manage your time? What gaps do you need to fill? How will you manage stress? What environment is best for your business?
You don’t need answers to everything. Just be aware of them and consider them as you start, manage, and grow. Look for opportunities to optimize, make adjustments, and grow yourself as an entrepreneur and leader.
14. Be creative and consistent
This last bit of advice on starting a business is a bit of a balancing act between structured consistency and a willingness to be flexible. You need to be consistent in the time you invest, establish milestones and metrics for success, and solidify a process for reviewing performance. This doesn’t have to be perfect, but you need to set standards for yourself and your business.
The other piece of this is preparing yourself to break the mold. You need to be creative in how you approach problems, willing to make adjustments, and constantly test what you think works to make it better. The worst thing you can do is get stuck in an inefficient or unfriendly process that hinders your business.
Recommended Reading: How to run an effective monthly plan review meeting
Ready to start your business?
There’s a lot that goes into starting a business. As you begin your business journey, keep these tips in mind, focus on planning, and take the time to test as much as possible. The more you prepare upfront, the more likely that your business will succeed. For additional guidance, check out our step-by-step guide for starting a business as well as the legal requirements you’ll need to consider.