10 Things to Consider Before Starting a New BusinessWritten by Mindaugas on February 04, 2019
Starting a business from the ground up doesn’t happen overnight. There are a variety of things to consider before starting a new business – you will have to refrain from diving in right away.
You probably have already familiarized yourself with the dreadful failure rates of new businesses. Looking at those numbers it can become disheartening to even think about becoming an entrepreneur.
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Chances of success increase exponentially with the right approach that turns your idea into a thriving enterprise. Here are the 10 things you should consider before starting a new business. Careful, level-headed approach will put you on a path to entrepreneurial success.
1. Evaluate Competition
Before jumping in and turning your idea into a full-fledged business, look at your potential competition. Who else is out there doing what you want to do? How well are they performing? Perhaps you may even notice an Achilles’s heel of your competitor that you can improve on or even exploit.
Competitor assessment is all about gathering information. You must have a clear understanding of how the customer perceives the product and the business in general. Information pertaining to cost of production and profit margins may also be available to you.
Running into a competitor that dominates the entire market is also a real possibility. Find their shortcomings – your business can remedy faults and create an even more sought-after product or a service.
2. Understand Who Your Audience Is
Attempting to appeal to every individual is futile. It’s in your best interest to have a specific audience in mind that you will attract with marketing and product development.
If we were to revert back to your competitors, look at consumer reviews that have accumulated. Dig a little deeper and browse through each individual consumer to get a glimpse of what type of people are keen on purchasing these products.
Questionnaires can be utilized to get additional input from would-be consumers. Depending on your delivery, this method is bound to reveal vital data about the audience you could potentially target.
Networking groups are plentiful and accessible. People congregate here who wish to conjure up business partnerships and even conduct market research. Make an effort to show up and interact with people. This is a more personal mode of interaction which may open up additional consumer insights.
Understanding your audience is critical. Be as specific as you can, even create buyer personas.
3. Location, Location, Location
What is your method of bringing out the product to the market? Will you have an online stall? A full-fledged e-Commerce site? Brick and mortar location on a scenic promenade?
If you have made it this far, you probably already have an idea in mind as to what you want to produce and sell. Where you sell your product is another important thing for you to consider.
For example, let’s say you have a delicious family taco recipe – the flavorful delight must be shared with the masses. Opening up an online store may not be suitable for such endeavor. However, you could use a food truck to create and sell these savory treats.
Take a hard look at what you’re planning on selling and where these transactions will take place. Often times, 2 or more marketplaces can be used by a single business.
A lot of smaller e-Commerce sites employ third-party fulfillment services to handle product packaging and delivery. This may be something for you to consider in the future – again it all depends on what time of business you’re looking to start.
Outsourcing fulfillment and shipping helps allocate the bulk of operations to those with the right infrastructure. Once the orders start ramping up, handling all the requests without fulfillment services can overwhelm you quickly.
4. Create a Business Plan
Your investors, colleagues, partners, banks, and even you as an entrepreneur need a solid business plan. By investing time in a business plan creation, you’re providing a proof of concept to yourself and everyone involved. Initial devotion of time and resources becomes part of a calculated risk rather than a complete uncertainty for everyone involved.
The aforementioned information such as competitor analysis and audience will fall into the overall business plan creation. A comprehensive plan is a walk-through guide for the inception of your business. All the people who are part of your entrepreneurial dream will too be guided by the same plan and minimizes confusion.
5. Securing Finances and Capital
To get a business off the ground you will need cash. Amount of cash may vary dramatically depending on the type of business you’re planning to start.
Under ideal circumstances, you’d be in a position to fund your own scheme – but that’s not usually the case. Most entrepreneurs invoke the help of investors that would endow with enough startup cash to get the ball rolling.
Usual go-to option is inquiring friends and family about the initial investment. This could be the simplest solution – or the most difficult; mixing money with family and friends doesn’t suit everyone.
Your other options could include venture capitalists, angel investors, crowd funding, bringing on partners, or bank loans. Some places even offer business grants to spur small business development.
One thing to take note of is that banks will scrutinize every nook and cranny of your financial history. Before attempting to secure a business loan from a bank, be sure to have great credit. You may incur a lot of debt in the first few years of operations – your ability to borrow will be stifled and interests rates will be exorbitant.
On the top of financing your dream, you need to allocate money for your own survival. If you’re diving into this full-time, assess your savings account and see if it will keep you afloat for the next year or two.
6. Settle on a Name
Having a proper name that reflects the values, passion, and the product of a business is vital. Think this through long and hard as re-branding your business down the road is time consuming and an expensive process.
You will also want to start brainstorming some logos to go along with the chosen name. All this will play a part down the road when it comes to marketing and promoting the business you have created.
7. Legal Matters – Making It Official
Your business needs to be legit – we’re law abiding citizens after all. Laws do play a considerable part in how a business can be run. Some types of industries are a bit more heavily regulated than others.
Food, alcohol, chemical, accounting, health, law, and many other industries require specific licenses and certifications before your venture can take off. Many jurisdictions around the globe dish out severe penalties to proprietors if they attempt to circumvent laws and forgo the acquisition of specific certifications or licenses.
Sole proprietorship – Simplest and least regulated. One owner controls and operates the business. Profits and business income is taxed as personal income. Big disadvantage is the unlimited liability carried by the owner for all claims, taxes, and debts.
Partnership – The partners involved in company operations can individually hire employees, borrow money, and operate the business. Profits are still taxed as personal income and all liabilities rest on the shoulders of the people involved.
Limited Partnership – This partnerships avoids personal asset liability. There are however additional tax rules for Limited Partnerships.
Limited Liability Company – Composed of one or more members which provides owner(s) personal asset protection. Owner(s) are taxed as if they were partners or sole proprietors. Members can invest in the LLC for a % of ownership interest.
Corporation – A legal entity that exists separate from it’s owners. It limits the owner(s) from personal liability but also creates double taxation on earnings. Corporation can raise capital through the sale of shares.
8. Promoting and Marketing Your Business
Just because you have a great product, doesn’t mean people are going to start swarming your just yet. You need to actively promote and market your business so that people are actually aware of your presence.
Good news is that you don’t need a huge marketing budget to spread the word – just be a little creative. Develop a strong online presence with a solid website, social media profiles, blogs, videos. Build up a mailing list through online sign ups which you can use for promotional purposes later on.
Strong content marketing accumulates its potency as it gets older. Social media profiles can host a medley of content to help get the word out. Overall, inbound marketing is a proven method that generates valuable leads with minimal financial investment.
Networking groups are also a great promotional asset. Most cities around the world host networking events where like-minded business moguls and entrepreneurs gather to share knowledge, promote businesses and cultivate partnerships.
Your local chamber of commerce could provide ample promotional opportunities, likewise with a radio station – people still listen to the radio.
9. Bringing on Additional Help
It’s okay if you’re unable to get everything sorted out on your own. There may come a time when you will definitely be needing additional help in order to keep moving forward.
Initially, having a mentor to guide you through the entrepreneurial process is always recommended. Starting a business shouldn’t be a solo undertaking – having someone near by to ask questions, seek advice sets you up for success.
Invoking the help of an accountant and a lawyer may also be necessary. Not all of us are well-versed in financial report creation, payroll or legal business matters so getting these guys involved could prove to be useful.
Hiring employees may be something you’ll have to do soon, especially if your business takes off quickly. The hiring process could pose a few challenges especially for the uninitiated. I have made a guide that aids employers in hiring the best talent – check it out.
10. Come to Terms That Starting a Business Is Not an Easy Feat
I don’t want to scare you away from pursuing your dreams, but starting a business is not an easy thing to do. This process takes years of hard work and sacrifice to get it moving – a business owner works on average 63% longer than the average worker.
Building something with your own hands is a rewarding experience – even if it takes more work than usual. The ability to share the creations with the world and to put smiles on people’s faces is worthy of the sacrifices endured by entrepreneurs.