Almost all of us at some point or another will dream about owning our own business. The thought of being your own boss is appealing for many reasons. But how do you start a business, anyway? Where do you even begin? How do you go from having a concept to actually having a business that is up and running? That’s where we come in. In this six part series, we’ll go over all aspects of starting and running your own business:
- Putting the plans in place
- Financing your idea
- Getting the word out
- Taking care of employees and customers
- Keeping an eye on cash flow
- Covering your bases
So you have an idea
Over the course of the last year, consumer habits have been changing quite a bit and some of those changing habits will be permanent. As a result, now is a great time to consider starting a business but you need to ask yourself three questions in this very early stage of your journey:
- What are your key interests and talents?
- What doesn’t currently exist in the marketplace that you wish did
- Does your idea for a business connect those two?
Choosing a business just based on current market demand won’t get you through the days, weeks and months ahead. Having passion for your product or service will definitely help.
Before you get started, consider your competition. A Google search might unearth the answers you need to make the decision whether to not to move forward. Is there already a crowded market for your business idea? How many competing businesses are out there? Would your product or service fill a void in the marketplace? As you compare pricing, does it seem like you could turn a profit based on the time you need to spend on your business? Remember, as many as 42% of small businesses fail because there is no market need for their services or products. Don’t let that be you.
Ask whether your business idea follows a proven concept, or is a completely new idea that could disrupt your industry – or even create a new industry. Disruptors are new and unproven, so they’re high risk, high reward. Though some entrepreneurs might be reticent to blaze new paths, the current climate also means there are opportunities for disruptors. The coronavirus crisis has changed the world, and in doing so it has changed customer perceptions, expectations and needs.
Proven business concepts are often considered safer for new entrepreneurs. Though there is already competition, startups can study existing businesses to identify what works and eliminate guesswork. With proven business concepts, it’s easier to decide which products and services to offer, set pricing and develop marketing strategies.
Having a great idea isn’t enough, and the last thing you want to do is invest considerable time and money into a failed venture. Before you jump in with both feet, vet your idea to gauge its viability. Here are five ways to vet your business idea:
1. Ask the right questions
Asking tough questions now can save you from unexpected (and unwanted) surprises later. Start by answering these and other questions to help vet your business idea:
- Is my business idea unique? If not, what is my unique selling proposition?
- Who are my customers and how will I reach them?
- What problems will my business idea solve for my customers or how will it make their lives easier?
- Is there a proven market for my product or service? If not, how can I evaluate demand?
- Am I qualified to turn my business idea into a successful business? If not, what don’t I know and how can I learn it?
- Is this the right idea for me? Will I follow through when the going gets tough?
- Is this the right time for this idea? Does it have a chance to succeed in an uncertain world?
2. Leverage online communities
Seek communities populated by prospective customers and run your business idea by them to gauge interest. Though this strategy doesn’t guarantee success, it will lend insight into what potential customers think about your idea. Facebook groups and LinkedIn can provide a wealth of information. When you participate in these and similar groups you can lean on advice from fellow entrepreneurs and interact directly with your target audience.
3. Talk to customers
Once you’ve identified potential customers, you can reach out to them directly to get feedback on your business idea. Doing so can also lend insight into potential problems as well as opportunities you haven’t thought about. Consider surveys and focus groups. You might need to offer a small incentive for participation, such as a gift card or other giveaway, but doing so can lend valuable insight into how your target audience receives your business idea.
4. Consider business incubation
Business incubators help startups get off the ground by providing resources and services such as coaching and mentorship, networking connections and access to seed funding. By joining a business incubator, entrepreneurs can get the feedback they need to evaluate their business ideas, identify potential roadblocks and strategically plan for success. Typically, you will need to apply and pay membership fees, so be sure to find the right fit.
5. Study competitors
Create a list of your competitors by searching Google for products and services like yours. Once you’ve identified a list, study their products and services. How do they vary from yours? How do they compare on price? Research their marketing strategies – visit their website, sign up for their newsletter and follow them on social media. Identify and understand their customers – view engagement on social media and search for online reviews. Then finally, use what you’ve learned to identify your competitive advantages.
Naming your business
Now that you’re feeling pretty good about what you’re selling and who you’re selling it to, you’ll need to come up with the right name. Your business name is your identity and branding is a critical marketing component that helps customers identify with your business. We’ll get more into brand later but you need to start with the right, unique business name.
A great business name satisfies the following criteria:
- Relevant to the company’s products and services
- Reflects the company’s values and mission
- Resonates with customers
- Easy to remember, spell and pronounce
- Has an available web URL
The last thing you want is a name that’s too similar to another company – or even a competitor – which means lost potential customers before you get a chance to make your pitch. Conduct a web search to see if any other businesses are using that name. You’ll also want to conduct business name search and trademark search to ensure that you can legally use the name.
With your business idea and name in line, it’s time to start thinking about a business plan. Building a business plan may sound overwhelming. But at its core, a business plan is simply a roadmap that helps you navigate the startup phase and ongoing management of your new business. It’s often used to help obtain funding and convince investors your business idea is solid, and can be grown into a profitable enterprise.
Time for a business plan
Building a business plan may sound overwhelming. But at its core, a business plan is simply a roadmap that helps you navigate the startup phase and ongoing management of your new business. It’s often used to help obtain funding and convince investors your business idea is solid, and can be grown into a profitable enterprise. Taking the time to develop a strong business plan can vastly increase your chances of success.
Business plans generally come in two different sizes – traditional business plans and lean business plans. Traditional business plans might be required by lenders. They’re typically 30-40 pages and good for complicated business ideas. Busy investors, however, might prefer a lean business plan. Lean business plans are typically just a few pages and work great for more simple business ideas.
Traditional business plans
Traditional business plans are extremely detailed documents that are written three to five years out into the future. They should include a variety of topics that help your lender or investors understand everything they need to consider lending you the money you need to fund your business. Those topics should include:
- An executive summary. What does your business do, what problems will it solve and why will it succeed?
- Company overview. Where is your business located and what is its mission?
- Competitive analysis. Who are you competitors and why do their customers buy from them?
- Products and services. What are you selling now and what will you be selling in the future? Why are your products or services better than your competitors?
- Target Markets. Who are your customers and how will you serve them?
- Management team. Who is running your business and what is your investment?
- Financial plans. What funding do you need and how does that support your budget?
- Risk Factors. What are the risks involved and how are you addressing them?
Lean business plans
A lean business plan is a much more condensed version of its traditional counter part. With the speed of business today, a lean plan can help you get up and running quickly. Here are nine sections to cover:
- Value proposition. What original qualities or problem solving abilities can your offerings or services bring to the market? The proposition should sum up the value of your business.
- Key partnerships. Who you will partner with for success, including outside businesses, vendors and suppliers?
- Key activities. What will you sell and what are your strategies and competitive advantages?
- Key resources. Do you have any intellectual property or capital that you can leverage to create value for your customers?
- Customer segments. Who are your customers and how are you serving them?
- Channels. What marketing channels will you use to promote your business?
- Customer Relationships. How will you engage them and what will they experience?
- Cost structure. How will you keep costs low to maximize value?
- Revenue streams. How will you make money?
Beyond these common sections listed for both business plans, lenders or investors might also be interested in how you plan to handle the “new normal”. Is your business prepared to handle a pandemic, for example? Have shifts in consumer behavior affected your business segment? How are you going to handle talent acquisition in a competitive market? How will you be keeping employees or customers safe?
Sound market research is critical to your business plan, but in this rapidly changing world, many statistics and data quickly become outdated. For example, the coronavirus crisis rendered much of the market research that was conducted just one to two years ago irrelevant. Here are three ways to get up-to-date insights to inform your decisions.
- Only study recent data. Be sure to check the publish dates and data collection dates of any information you find.
- Conduct surveys. Gain timely insight by surveying people who match your customer demographics.
- Study the news. Create relevant alerts for your industry, adjacent industries and general consumer behaviors.
Similarly, you can’t rely on last year’s sales figures to study competitors. That can make competitor research challenging for new entrepreneurs; however, you can study sources such as industry reports, SEC filings, online reviews and news outlets to gain insights on how competitors are weathering the economic storm.
Creating a business plan isn’t a simple task, and you should never make assumptions. Fortunately, there are plenty of places to find help for business plan development, including:
- SCORE: The Service Corps of Retired Executives offers free business planning resources and free mentorship to help startups succeed.
- SBA: The Small Business Administration offers free business plan templates and free business counseling via its Small Business Development Centers
- Deluxe. We’re more than happy to assist with a number of services designed to empower your business to succeed, including incorporation services, website design and hosting, merchant services, promotional products, print services and so much more.
- The business community: You can ask successful entrepreneurs in your network to review your business plan; many will be happy to share insights gleaned through their own experiences. Join local business networks or participate in online forums and social media groups.
- Friends and family: Get real-world insights from friends and family members. Ask them to evaluate your idea and to pull no punches in their critique. Friends and family know you best, so they can lend insight into whether they feel you can meet expectations and follow through with your idea – plus, they might help spark inspiration for the next great idea
With your business plan in place, how will you get the funding you need? Next time we’ll tackle the complicated topic of financing your idea.