Starting a business requires a lot of work. The amount of documentation, legal requirements, and strategic development can simply be overwhelming. But without putting in the effort, you’ll struggle to turn your idea into a successful business.
Now, we’re not looking to scare you away from entrepreneurship. We just want to keep things realistic, while telling you that it is 100% possible to start your own business. It’s going to take time, effort, and potentially a few setbacks, but you can do it.
How to start a business
At this point, you may be wondering where to start. Should you work on your business name and logo or tackle your business structure? Does it make sense to already start applying for loans or focus on product development?
It can be difficult to know the right steps to take. But that’s ok. Starting your own venture is all about trial and error. Working through the process to find what works for you and what resonates with potential customers.
But rather than being overwhelmed by all the decisions and tasks you have at hand, there are steps you can take to kickstart the development of your business. Let’s get started.
1. Determine if entrepreneurship is what you want
Before diving into the details of your potential business, it’s best to take stock of yourself and your situation.
- Why do you want to start a business? Is it money, freedom, and flexibility, to solve a problem or some other reason?
- What are your skills?
- What industries do you know about?
- Do you want to provide a service or a product?
- What do you like to do?
- How much capital do you have to risk?
- Will it be a full-time or a part-time venture?
Your answers to these types of questions will help you narrow your focus.
This step is not supposed to dissuade you from starting your own business. Rather, it’s here to get you thinking and planning. In order to start a successful business, passion alone isn’t enough.
“Know yourself, and work in a job that caters to your strengths. This knowledge will make you happier.”
— Sabrina Parsons | CEO of Palo Alto Software
Conduct a self-assessment
You need to plan, set goals, and above all, know yourself. What are your strengths? What are your weaknesses? How will these affect day-to-day operations? You could conduct a SWOT analysis on yourself to figure this out.
As you get started, your business will likely dominate your life so make sure that what you’re doing is stimulating and challenging, but not completely outside of your expertise. You’re going to be in it for the long-haul. Use what you learn from the SWOT analysis to think through what you want your life to be like, not just what you want from your business.
Some good questions to ask yourself include:
- What would you do if money wasn’t an issue?
- Is money really important? Or rather, is making a lot of it really important? If it is, you’re probably going to be cutting out a number of options.
- What really matters to you?
- Do you have the support of your family, especially your immediate family? They may have to make sacrifices at the beginning, so it’s important to have them behind you.
- Who do you admire in business? Maybe there’s even someone in the industry you’d like to go into. Why do you admire them? What are their likable traits? What can you learn from them?
Answering these questions (and many more) about yourself and your abilities isn’t necessarily going to ensure you’re successful, but it will get you thinking about your goals and about what motivates and inspires you. Use this time to make sure that you are matching the business you want to start to your personal aspirations.
Be sure to take our quiz to find out if you’re entrepreneur material, too.
2. Refine your idea
Once you know why you want to start a business, it’s time to find and develop your idea. More than likely, you already have something in mind after going through your self-assessment. But if you need inspiration, you can check out our sample plan library to explore different industries, or read up on trending start-up ideas.
Now it’s not enough to just think you have a good idea and run with it. You need to validate that there is a need. You also need to start addressing whether this idea is sustainable or not.
Start with a Lean Plan
We’ll get into the specifics of how to explore the market and determine if you’re idea is a good fit in just a moment. Right now, we recommend that you consider starting a Lean Plan to help make the rest of this process much easier.
The Lean Plan is a simple, one-page document that helps you refine your idea. It ensures that you’re considering your mission and value proposition early on, while also providing structure for the more technical portions of your business. In fact, it will provide you with the perfect template to tackle the rest of these steps.
You can download our free Lean Planning Template right now to get started.
3. Conduct market research
Once you decide on a business that fits your goals and lifestyle, it’s time to evaluate your idea. Who will buy your product or service? Who will your competitors be? This process will help you address your opportunity, value proposition, the market size, and competition sections of your Lean Plan.
There are a number of ways you can do this, including:
- Performing general Google searches,
- Speaking to people already working in your target industry
- Reading books by people from your industry
- Researching key people
- Reading relevant news sites and industry magazines
- Taking a class or two (if this is possible).
If you don’t have time to perform the research or would like a second opinion, there are people you can go to for help, like government departments and your local SBDC.
“The more you know about your industry, the more advantage and protection you will have.”
— Tim Berry | Founder of Palo Alto Software
Evaluate your target audience
It’s not enough to just state the current market. You need to know what portion you’ll be able to claim and if it’s really possible. To determine how attractive your prospective market really is, we suggest doing a market analysis.
It will guide your research as you think about:
- How urgently do people need the thing you’re selling or offering right now?
- What’s the market size? Are there already a lot of people paying for products or services similar to yours? Have you honed in on who exactly your target market is? Being specific will help you focus your marketing message and investment.
- How easy is it (and how much will it cost you) to acquire a customer? If you’re selling enterprise software, this may require a significantly larger investment than a coffee shop.
- How much money and effort will it cost to deliver the value you would like to be offering?
- How long will it take to get to market? A month? A year? Three years?
- How much up-front investment will you need before you can begin?
- Will your business continue to be relevant as time passes? A business that repairs iPhone X screens will only remain relevant so long as the iPhone X sticks around. If your business is only relevant for a specific period of time, you will also want to consider your future plans.
Research the competition
If you like, you can even take things a step further and consider the consumer needs currently not being met by businesses in the industry. This is a good time to take a look at potential competitors. And remember, the presence of competitors is oftentimes a good sign! It means that the market for your product or service already exists, so you know that you have potential customers who are willing to spend money on your product or service.
While you’ve got the time, learn as much as you can about your competitors, about what they provide to their customers, how they attract attention, and whether or not their customers are happy. If you can figure out what’s missing before you even get started, your job will be made that much easier when you do finally set up shop.
Validate your idea
Lastly, it’s important to field test your idea, services, or products. As you conduct research, take the time to actually speak to your potential customers. Present them with the concept you intend to launch to gauge interest, as well as confirm which competitors they may already use and the price they’d be willing to pay. If you can, it may be worth developing a minimum viable product (MVP) to help showcase what you’ll be providing.
You don’t even need to do this process in-person. Instead, you can:
- Send out surveys
- Join forums and Facebook Groups
- Run ads
- Sell pre-orders
The important thing is to establish what success looks like. Know what threshold you need to hit and be willing to pivot your idea or target audience if it’s not panning out as you expect.
4. Write your business plan
If you will be seeking outside financing, a business plan is a necessity. But, even if you are going to finance the venture yourself, a business plan will help you figure out how much money you will need to get started, what it will take to make your business profitable, what needs to get done when, and where you are headed.
A roadmap for your business
In the simplest terms, a business plan is a roadmap—something you will use to help you chart your progress and that will outline the things you need to do in order to reach your goals. Rather than thinking of a business plan as a hefty document that you’ll only use once (perhaps to obtain a loan from a bank), think of it as a tool to manage how your business grows and achieves its goals.
While you might use your business plan as part of your pitch to investors and banks, and to attract potential partners and board members, you will primarily use it to define your strategy, tactics, and specific activities for execution, including key milestones, deadlines, and budgets, and cash flow.
You have a head start with your Lean Plan
Here’s the thing, your business plan does not have to be a formal document at all if you don’t need to present your plan to outsiders. Instead, your plan can follow a Lean Planning process that involves creating a pitch, forecasting your key business numbers, outlining key milestones you hope to achieve, and regular progress checks where you review and revise your plan.
If you aren’t presenting to investors, don’t think of this as a formal pitch presentation, but instead a high-level overview of who you are, the problem you are solving, your solution to the problem, your target market, and the key tactics you will use to achieve your goals.
Hopefully, you’ve already started developing your Lean Plan at this point as you explored your business idea. If not, now is the time to get started. Because, even if you don’t think you need a formal business plan, you should go through the planning process anyway. The process will help to uncover any holes or areas you have not thought through well enough.
What goes into a formal business plan?
If you do need to write a formal business plan document, you should follow the outline below.
The standard business plan includes nine parts:
- The Executive Summary
- Target Market
- Products and Services
- Marketing and Sales Plan
- Milestones and Metrics
- Company Overview
- Management Team
- Financial Plan
If you would like detailed information on how to write a business plan to present to banks or funders, there are plenty of online resources, including our own comprehensive guide.
You will also find hundreds of sample plans for specific industries on this very website. Use them at your leisure but be prepared to adapt them to suit your precise needs. No two businesses are the same!
Types of business plans
If you are simply creating a business plan in order to stimulate a discussion with potential partners and associates, you may want to consider opting for a “startup plan,” also known as a feasibility plan. As your business grows you can flesh out the sections as you see fit.
In contrast to the standard plan and the startup plan, is the operations or annual plan. This type of plan is used for internal purposes and primarily reflects the needs of the members of the company. This type of plan is not intended for banks and outside investors. You will use it either to plan your company’s growth or expansion or to set company-wide priorities.
If the latter is true and you are using the plan in order to direct your internal strategy, you are creating a strategic plan, a type of plan that will include a high-level strategy, tactical foundations of the strategy, specific responsibilities, activities, deadlines, and budgets, and a financial plan.
5. Make your business legal
Realistically, registering your business is the first step toward making it real. However, as with the personal evaluation step, take your time to get to know the pros and cons of different business entities.
If at all possible, work with an attorney to iron out the details. This is not an area you want to get wrong. You will also need to get the proper business licenses and permits. Depending upon the business, there may be city, county, or state regulations as well. This is also the time to check into insurance and to find a good accountant.
Types of business formations include:
Spend some time getting to know the pros and cons of each business formation. If you need help, we’ve got a full guide on Legal Entities, Licenses, and Permits.
While incorporating can be expensive, it’s well worth the money. A corporation becomes a separate entity that is legally responsible for the business. If something goes wrong, you are less likely to be held personally liable.
Other things you will need to do include deciding on a business name and researching availability for that name.
6. Fund your business
Depending on the size and goals of your venture, you may need to seek financing from an “angel” investor or from a venture capital firm. But, most small businesses begin with a loan, financing from credit cards, help from friends and family, and so on.
Investment and lending options include:
- Venture capital
- Angel investment (similar to venture capital)
- Commercial (banks)
- Small Business Administration (SBA) Loans
- Accounts receivable specialists
- Friends and family
- Credit cards
For in-depth information on funding, see our complete guide on how to get your business funded, which includes detailed information on each of the above-mentioned options.
Note: A beautifully fleshed-out business plan does not guarantee you will get funded. In fact, according to Guy Kawasaki, the business plan is one of the least influential factors when it comes to raising money.
To stand a realistic chance of getting hold of the funds you need to get started, you’d be better off first focusing on your “pitch.” Not only will it be easier to fix because it contains less, but you’ll also get feedback on it—most investors don’t bother reading the full business plan, though they may still expect you to have it.
It’s also much easier to turn a pitch into a business plan than it is to pare back your plan.
7. Pick your business location
Your business plan has been laid out, the money is in the bank, and you’re ready to go. If your business is online and you won’t need a storefront, you’re probably looking at building your website and choosing a shopping cart solution. Maybe you’ll be able to work out of a home office or a co-working space instead of renting or buying office space. But if your business needs a dedicated brick and mortar location, there are many considerations.
Finding a location. Negotiating leases. Buying inventory. Getting the phones installed. Having stationery printed. Hiring staff. Setting your prices. Throwing a grand opening party.
Think through each of these steps carefully. Your business location will dictate the type of customer you attract, what types of promotions you can run, and how long it will take you to grow. While a great location won’t necessarily guarantee your success, a bad location can contribute to failure.
What to look for in a physical location
As you’re thinking about where you want to set up shop (including the city and state), consider the following:
- Price: Can you realistically afford to be where you want to be? If not, or if you’re cutting it fine, keep looking.
- Visibility: Will people easily be able to find you? Will they see your promotions and offers? Are you in the center of town or further out? How will this affect you?
- Access to parking or public transportation: Can people easily find you from available parking options and transportation routes? If they have to look too hard, they may give up.
- Distribution of competitors: Are there many competitors close to you? If so, this may be a sign that the location is premium for the clientele you wish to attract. It may also mean you do no business. Consider carefully how you wish to approach this type of situation.
- Local, city, and state rules and regulations: Look into regulations, as areas may be more stringent than others. Ensure there are no restrictions that will limit your operations or that will act as barriers to your store.
Things to consider when developing a retail location
Your marketing will set the stage for the future of your store. It will set expectations, generate hype (if done well), bring business in from day one, and ensure that people know where you are and what they can expect from you.
Your store’s layout, design, and placement of your products will decide not only the overall atmosphere of the store but what products people see and buy. Consider the areas you want well lit; how you will display products (if necessary); what various colors will make people feel, and how people will move through your store.
There are reams of literature on why we buy what we do, all of it fascinating and much of it informative. Begin thinking about how you shop—this will get you to think more critically about your own store.
Your choice of products and how you decide to price them will create a reputation. Rather than stock everything of a similar price range from one or two catalogs, consider only choosing those items that will create the feel you want to become known for.
If you’re a service business, build your services in a similar manner, considering your different clientele and the value they will get from the different options you have on offer. If a very affordable package will cheapen your brand, consider excluding it. If a pricier option will limit your clientele too drastically, maybe cut back on some of the services included.
Many retail locations are still facing closures in 2021, making it more and more likely that businesses will launch online. An online or remote business potentially eliminates some risk, but it does add other complications that you’ll need to consider.
First, you need to prioritize web development and your online user experience. If you don’t have a physical location or live customer service, you need to make sure that your site experience is seamless. This means carefully choosing an eCommerce platform, testing your UX design, and consistently making tweaks based on user feedback.
Second, you need to integrate remote work within your business. It may be just you to start with, but as you grow and expand you need to know how to handle a virtual workforce. Vet remote working tools, look to ingrain virtual processes and documentation from day one, and be sure that you know how to communicate online. By handling these things upfront, you can ensure that these won’t become stumbling blocks down the road.
8. Prepare for growth
Whether you’re starting your first or your third business, expect to make mistakes. This is natural and so long as you learn from them, also beneficial.
The best thing you can do to take advantage of any mistakes is set up review processes to help you make decisions. This is where the Lean Plan, or full business plan, you’ve been working on comes into play.
If you have your plan up to date, you can set up monthly review meetings to go over the numbers, your strategy and develop forecasts for the next month, quarter, and year. This is a simple way to keep track of performance and actively make decisions based on actual results. So, rather than reacting to bad situations, you are preparing for them and facing uncertainty with certainty.
To help you start your review process, you can download our free cash flow statement and balance sheet examples to begin tracking your financials. And for a simpler solution, that makes reviewing forecasts and financial statements faster and simpler, you may want to consider LivePlan.
With LivePlan, you can create your Lean Plan, full business plan, pitch, and develop forecasts all within one platform. But, if you’re not quite ready to invest in a planning platform, the templates within this guide will be enough to help you get your business up and running.