Much of what determines whether a business has longevity has to do with the planning process. Business planning should start well before you open your first store or place your first ad; of course, there are always influences outside of your control, but there are some steps you can take to help your new business succeed.
..and suddenly, you know it is time to start something new and trust the magic of new beginnings!
1. EVALUATE YOUR BUSINESS GOALS
Begin by asking yourself a few basic questions about your small business idea to refine it:
Why? Think about the purpose of your business and what needs it fills. (Be clear enough about why you’re starting your business so that you can describe its purpose in one sentence.)
What? What is the product or service you’ll be offering?
Who? Who is your target customer base or audience? Be specific in describing demographic characteristics, such as age, gender, income level, location and other factors.
How? Describe your plan for developing your product or service and delivering it to your customers or clients.
Feel free to brainstorm business names at this stage, but you probably don’t want to get too attached to anything now. Later, you can consult with a marketing professional to help you decide on a name, website domain and tagline.
2. START WRITING YOUR BUSINESS PLAN
When starting a small business, it’s never too early to write your business plan. A business plan serves as a guide for every aspect of your new business — a road map that takes you from a simple inspiring idea to a successful company.
Make sure your business plan answers the why, who, what and how questions above. In addition, consider including a business description, market strategies, competitive analysis, design and development, operations and management, and financial data. Here’s a business plan template to help you get started.
Business plans take time to complete —sometimes as long as a year, especially since they’re often 30-50 pages long. Consider your business plan a “living” document. As you move through the process and gain more knowledge, you’ll make adjustments and expand upon certain sections. If you don’t plan on seeking funding from outside sources, business plans can be less detailed (sometimes even just one page long).
3. CONDUCT A MARKET RESEARCH
Market research is critical to help you determine whether your business idea really has legs. It examines customer behaviors and economic trends to help you hone your business strategy. Competitive research looks at product demand, demographic data, market size, economic indicators, location appeal and pricing.
Use competitive analysis to determine how to zero in on a market advantage. You can gather this information through existing sources or by getting answers yourself by conducting surveys, focus groups and interviews of potential customers.
Through careful market research, you’ll be able to figure out who your target customer base is and how to develop products and services that will sell. Market research can also help you determine the name of your business, design color schemes and other branding elements.
Tip: Include the results of your research in your business plan. Make adjustments to your why, what, who and how answers if necessary.
4. BUSINESS STRUCTURE AND LOGISTICS
At this stage, you’ll need to make some important decisions that define your business:
Business name and domain: During the market research stage, you should have chosen a relevant, unique business name. If not, check our guide to 26 business name generators. Purchase website domains if you haven’t already secured them. Domains are often inexpensive, so buy as many as you need to ensure that potential customers find you online.
Business structure: Decide what kind of structure is best for your business, such as a sole proprietorship, partnership, limited liability company (LLC) or a corporation. This is an important step as it can impact taxes, personal liability, your ability to get funding and more. Consider consulting with an attorney or accountant to help you make your decision. Here’s a breakdown of the difference between an LLC and a corporation.
Business location: You’ll not only have to decide where your business headquarters is located but its style of operation — whether that’s a retail outlet or a home office. In addition to your online presence, will it also be brick-and-mortar? If so, you’ll need to think about issues like foot traffic, parking, ordinances, utilities, crime, convenience and nearby competition.
Once you’ve figured out those key components to starting a business, take care of these remaining tasks:
Register your business
Apply for an Employer Identification Number (EIN)
Get federal and state tax IDs
Apply for a business license and permits, if applicable
Open a business bank account
Apply for appropriate trademarks, copyrights or patents
Purchase insurance policies
5. GET FUNDING FOR YOUR SMALL BUSINESS
One of the most important steps to starting a business is getting funding. Start by figuring out how much money you actually need. Your business plan should contain a budget for operating for one year. Using a spreadsheet or budget software, include every expense you anticipate, including costs for overhead, production and marketing.
One way to figure out how much money you need is by performing a break-even analysis. The formula for break-even point is:
Fixed costs ÷ (Item price – Variable costs). This analysis can help you determine profitability, how to price products and services, and how much you have to sell to make a profit.
Once you have your yearly budget, there are a few ways you can fund your new business. Some examples include:
Self-funding from personal savings.
Borrowing from friends and family.
Small business loan or grant.
Online crowdfunding campaign.
Angel investors (e.g., individuals who provides capital in exchange for convertible debt or ownership equity).
Venture capitalists (typically for larger-scale projects).
Accelerators (for short bursts of funding).
Incubators (sustained mentorship network).