Written by Tim Russell
It’s the dream of millions of people worldwide. Escaping the 9-to-5, starting a business, and making a success of it. Yes, it’s a lot of hard work and long hours, but when it works it’s extremely satisfying and rewarding. But how do you go about starting a business? To help you plan your new venture, we’ve broken it down into seven simple stages to guide you through the process and give you an idea of what’s involved in launching a new small business. Obviously these steps might vary depending on the nature of your business and where you’re based. But we think they are generally common to most business types and will at least give you a good grounding in how you go about starting a business!
Have a Good Idea
Obviously, having a good idea is the first spark to any good business. If you’re lucky, a great idea will suddenly plant itself in your brain without too much effort. Or you’ll suddenly wake up at 3am with a big lightbulb above your head. For most of us though, coming up with the right idea involves a lot of brainstorming, research and thought. And I looked at ways to generate good ideas in my last post.
But coming up with good ideas is only the start. Before you decide whether that idea is going to fly, you need to validate it and find out whether it’s feasible, achievable and likely to prove popular to your target market. We’ve all seen plenty of good ideas that have flopped. Either because the founders couldn’t execute them, or because the market didn’t understand them, wasn’t ready for them, or simply didn’t want them. Minidisc players, for example, offered compact storage, great portability/performance, and superb sound quality. But they weren’t compelling enough to replace CDs as the go-to format. And they would soon be made to look hopelessly obsolete by the iPod.
Likewise, we’ve all seen what we may have thought to be bad or mediocre ideas achieve great success. If you’d pitched Crocs to me pre-launch I’d probably have laughed at you and said that no one in their right mind would wear them. Obviously, I’d have been wrong as the business went on to be a huge success and is now worth over $4bn!
So just because your idea is great and people like it doesn’t mean it’s going to be a success. Likewise just because your idea seems boring or ridiculous doesn’t mean you should rule it out. Validate your idea by making sure you’re able to execute it. Talk to people about it and get their reaction. Strangers are better. Your mum or your best mate are probably going to be too polite to tell you what they really think! Use survey tools such as Google Forms or SurveyMonkey to elicit feedback.
Study the market and see what the competitive landscape is like, and what users of similar products or services have to say about them. Look at the stock market performance for companies doing a similar thing. Build a prototype or demo and get feedback on that. If you can do all that and still be encouraged that you’re onto something, then go for it! If the response is discouraging, it might be time to either tweak your idea or abandon it for something else.
Write a Business Plan
Business plans may be somewhat unfashionable these days when you’re looking at starting a business. With more and more investors ignoring them and looking more at ideas, teams, and competition. However they are still essential for two very good reasons.
Firstly, they help you get your ideas/plans out of your head and onto paper, and give you some structure for those early months. As the old saying goes, failing to plan is planning to fail. And writing a business plan is a valuable exercise whether or not you’re pitching to investors. Yes, you may well end up abandoning it as soon as you launch. As the old military saying goes, no battle plan survives first contact with the enemy. And you’ll find that the real world cares very little about your finely honed strategy. But getting your plans down on paper at least helps you with the initial stages of starting a business, and makes sure everyone involved knows what the mission is.
Secondly, having a plan helps show potential partners, whether it’s investors, founder team members, vendors, early stage employees etc, that you’ve thought this through and are a legitimate and trustworthy entrepreneur. Rather than someone flying by the seat of their pants and changing direction every week. Investors may not read it, but they at least want to be reassured that it exists, as it shows that you just might be able to execute your idea.
There are thousands of business plan templates online to help you start. But whichever you choose, make sure you include the following key information:
General overview of the business, the idea, the marketplace and the strategy
Detailed look at the company structure, history, products/services, key markets and partners
Products or Services
Full details of what you’re selling and what need it satisfies or what problem it solves
Firstly, who your customers are and why they’ll be buying your product; and secondly who your competitors are, and their strengths & weaknesses
Who you are, and who the people working with you are – including their employment history and previous achievements
How you’re going to find the business, and your financial projections for the next five years
If you are stuck, find a mentor or advisor who can help you prepare a plan. And maybe enlist the help of an accountant or financial wiz for the finances part! Which brings us onto…
Get Your Finances in Order
If you’re starting a business online you may have few if any startup costs. But most businesses will require some level of initial investment. Whether it’s for hiring staff, building a website, renting an office, or buying stock. So make sure you have enough money, either from yourself or investors, to launch your business.
Also make sure you do a break-even analysis to predict when your business will become financially solvent. Do you have enough income to support yourself and your family when starting a business until that point? Nothing kills off more businesses than the founders running out of money and having to go back to the day job. So make sure you’re being realistic here.
Also make sure your products are correctly priced in relation to the marketplace, and in relation to their cost. I set up an Asia office for a travel business last year. Only to later discover that their cost per sale was more than double the average profit per sale. Clearly not sustainable and you need to do these calculations to make sure that your service is actually profitable.
And if you do need investment, make sure you partner with the right investor. If you just need someone to be a silent backer, put the money in, and then leave you alone, make sure they understand that. Likewise, if you want a strategic investor who can also help you grow the business and take a hands-on approach, make sure they’re capable of doing so.
Brand Your Business
An important and exciting step this, as this is really where it starts to get real! And this is where Booming Businesses comes in to help you set your business up for success. Branding involves some or all of the following:
- Business name
- Product/service names
- Business logo/colour scheme
- Collateral (letterhead, business cards etc)
- Social media accounts
There’s no hard and fast logic to choosing a business name. But at least make sure you’re not choosing something that’s already copyrighted and that doesn’t mean something offensive in another language. I remember the launch of Puta Travel in Vietnam. Who swiftly renamed themselves Futa after much initial amusement. Make sure that your chosen name is distinctive and memorable, and which you’ll be proud to have on your business cards for the next few years.
For the rest, you can either do it yourself, see my recent post on The Independent Entrepreneur. Or, if you have the budget, hire a designer or branding expert. Remember, this will be the market’s first impression of your business at launch and the years beyond so make sure you get it right!
Do the Legal Stuff
We won’t go into too much detail here as obviously the legal stuff varies from one country to another. But you’ll almost certainly need to:
- Decide on your company structure
- Get a registered business address
- Register your business with the authorities
- Get a tax & social security ID
- Set up a business banking account
- Get insurance
- Get any special licences or permits your business type requires
Wherever you are, you’ll probably find there are companies that can offer business establishment as a package. And believe me when I tell you this is the best money you’ll ever spend. As doing it yourself is usually a nightmare of paperwork, bureaucracy, and queuing at government offices. A few countries make it easy. It took me half a day in Singapore, for example. But in most, it’s a real headache and it’s well worth paying someone a reasonable amount to do it all for you.
Build Your Team
Once your business is branded and established, you can begin building your team. You may not need a founder team and be doing everything yourself. But you’ll probably need one or two co-founders to help you launch.
This is the time to put your ego aside. Admit you don’t know everything, and look for people who have complementary skills. You may need a tech founder for example. Or if you’re as financially clueless as I am, you may need someone from an accounting or finance background. Just make sure your founder team covers all the skills you need to launch. That you’re able to work together personally. That everyone has a written contract with a very clear understanding of what is required of them and how they will be remunerated; and that everyone is able to put in the hours required and support themselves through the lean early months/years. The founder team is probably the first thing investors will look at. So make sure your team has the right background, skills, and experience to execute.
You also need to make sure you have the right partners/vendors in place. Partners who will deliver what they promise, who won’t let you down, and who are willing to be financially flexible when required. Get references. Meet them personally and make sure you click, run a few trials, and just make sure you’re confident in their ability to support you.
You may also need to hire new staff for your business. In which case, check out my recent post on Key Attributes to Look For When Hiring New Employees!
And now you’re ready to launch! Actually, forget that. You’ll never be genuinely ready to launch. But if you wait until you think you are, you’ll never get started. As Reid Hoffman said, “If you’re not embarrassed by the first version of your product, you’ve launched too late”. Meaning, “good enough” will always beat “perfect”.
It’s all about getting a minimum viable product out there. I.e. the most basic version of your product that works and which people can buy and be satisfied with. Perfection can come later! Going back to the iPod, I bought one of the first versions in 2003. And it was, in hindsight, pretty terrible. I needed to install some new hardware on my PC just to use it. The software was glitchy as hell, the screen was hard to read, the battery life was terrible, and it would switch itself off at random moments. But I still loved it as it enabled me to carry my entire music collection with me wherever I went. Fast forward to 2009 and I bought the iPod Classic. Which had fixed all the above issues and which I am still using regularly 11 years later. A textbook example of launching first, perfecting later!
So while your mileage may vary depending on business type and location, these seven steps to starting a business should help you. At least to come up with a roadmap for going from nothing to launch with as little hassle as possible. We wish you good luck on your journey!