Building Your Own Business: Where to Begin?
By Space Coast Daily // November 30, 2022
Imagine being the boss and having your own company. You have a flexible schedule, enjoy financial rewards, and make independent decisions—all good reasons to build a business from scratch.
But more than having enough funding for your new venture, you must be prepared in all aspects. Figures from the US Bureau of Labor Statistics (BLS) show that 20 percent of new businesses fail during the first two years. Quite shockingly, only 25 percent make it to 15 years and more.
This makes preparing for your business all the more critical. You want to ensure you won’t be part of that statistic. And this post is an excellent place to start.
So, where to start?
Despite the concerning numbers above, you shouldn’t give up on your dream to become the next Bill Gates just yet. Forbes’ list of the wealthiest people in 2021 revealed that 90 percent of new American billionaires were self-made. This is despite the economic downturn caused by the COVID-19 pandemic.
Anything’s possible if you work hard and set your mind to it. Although starting a company isn’t a walk in the park, planning works. To get the ball rolling, follow these steps:
1. Evaluate yourself.
Do you have a unique talent or something you’re good at? Can you handle numbers or public speaking? These questions will help you gauge if you have what it takes to start and manage a business.
You can also try to get the opinions of people you trust. The answers you get from the evaluation will help you identify your strengths and weaknesses. You may be quick with numbers but have trouble communicating your thoughts to others. This means you’ll need the help of other people to do that for you.
2. Find a problem to solve.
Having a brilliant idea about a product or service will not suffice. Right now, people need something that can solve their problems and answer their needs. The market is flooding with businesses, so think about what you can offer to make you stand out.
Make a list of problems you encounter every day. How much are you willing to pay someone to fix it for you? Once you’ve identified a substantial problem, start thinking about a product or service that can solve it. Expound on that idea.
Here are common characteristics of products and services that attract attention:
■ Worth paying for
■ Has a unique selling proposition
■ Delivers long-term profitability
■ Satisfies current market demand
Above all, your business idea shouldn’t be too complicated to understand. If you can’t explain it in a minute, you should probably drop it and think of another one.
3. Do market research.
Having good ideas doesn’t mean you can expect your business to become profitable. You still have to assess and determine its viability through research. One of the most important is knowing who you’d like to sell to.
The target market is the essence of every business. You must know your customers’ desires, fears, needs, wants – everything.
Follow this guide to have a well-defined target market:
■ Don’t start big. It’s easy to think that getting a board consumer base will help you. That’s not always the case. Instead, narrow down and ask: Who will be interested in buying my product or service? Focus on that market.
■ Find out what’s in demand in the market that can either help or hurt your new business. Various factors affect the market. Make sure you identify them and see how they can impact your business. Know what roadblocks you’re likely to face.
■ Use your competitors as references. Take a look at who are your competitors’ target audience. Check out their social media platforms and see how they approach their marketing. Identify strategies that contribute to the success of their business. Note their mistakes and learn from them.
Segment customer groups depending on their characteristics, such as demographics and buying behavior. These customers are likely to respond differently to marketing approaches. The further you segment, the more you’ll be able to create compelling, personalized messaging.
When it comes to developing your product or service, here’s what you should do:
■ Take note of feedback: Honest feedback contributes to the success of your new business. So don’t get immediately upset when someone doesn’t like your business idea. Instead, use it to improve the product or service you’re trying to sell. Consider other people’s points and look at them objectively.
■ Build a prototype: Create an object that people can see, touch, and use. A descriptive presentation of a business plan and its benefits works if you’re offering a service.
Do several rounds of market research with different people. You will see some patterns of what they like and dislike. Use this to tweak your product or service idea.
Remember, don’t get frustrated. It’s impossible to come up with something that everyone will love. As long as your product or service appeals to a wide range of target audiences, it should be a good start.
4. Create a business plan.
Think of your business plan as a blueprint. Develop a SWOT (strengths, weaknesses, opportunities, and threats) analysis to make your business appeal to potential investors. This will be your primary weapon to raise money and fund your business, so make sure to “put your best foot forward.”
These are crucial elements that your business plan must have:
■ Executive Summary: This is a one-page summary that lays out the problems your product or service can solve.
■ Market Analysis: This talks about your target market and how your business can fulfill the needs of consumers in that market.
■ Business Strategies: How are you going to penetrate the market? What sales and marketing tactics will you employ?
■ Competitive Analysis: This examines competitors’ strengths and weaknesses and how you can go up against them.
■ Operational Plan: How will your company run? Who are your key players, and what will be their specific roles?
■ Financial Strategy: This explains your expenses, profits, projected revenues, and how you plan to finance your business.
Your business plan shouldn’t only include your current goals. It must also have details on how you see your business in the future.
5. Choose a business structure.
Discuss with a financial advisor what will work best for you, as there are plenty of options. Here’s a quick summary of the common types of businesses and their pros and cons:
This type of enterprise is owned and run by one person. There’s no legal distinction between the business owner and the business entity.
■ Low cost to set up, usually only involves a business license and sales tax license
■ No need to open a business bank account as you can use your personal one
■ Complete control over business decisions
■ Easy to dissolve
■ You’re solely responsible for the debt and liabilities of your company
■ When raising money, you’re not allowed to sell an equity stake in the business
■ Can’t offer an equity stake in the company, making hiring key people will be hard
This is formed when two or more individuals start a business together.
■ Easy and relatively inexpensive to start
■ Hiring people is easier since offering equity ownership is possible
■ Tax payment is easier
■ All profits are shared according to partnership agreements regardless of input
■ The action of one partner can affect the entire organization
Limited Liability Company (LLC)
This business type is quite popular for small and medium-sized enterprises (SMEs). The set-up cost is inexpensive, and there’s a separation between the owners and the company.
■ Unlike sole proprietorship and partnership, there’s limited liability for partners
■ LLC provides protection against debts and liabilities that are solely the company’s
■ Simple taxation – income is only taxed once on an individual level
■ No limit to the number of shareholders
■ Fewer administrative requirements and filings than a corporation
This is much more complex and expensive to set up. It’s independent and legally considered a separate entity from its owners.
■ Complete separation between the company and its owners
■ Owners won’t be held responsible for debts and liabilities of the company
■ Easier to raise capital by selling more company shares
■ Higher administrative costs and tax rates compared to other business entities
■ Dividends aren’t tax deductible
6. Register your business.
At the very least, you’ll need a business license and a state sales tax license. But then again, different business structures have distinct administrative and filing requirements.
Depending on your business location, you can consult plenty of government resources online that outline all the requirements to comply.
Work with a service provider knowledgeable about business registrations. There’s a lot of paperwork involved in building a company. It’s a good thing there are firms that handle these tedious tasks. This way, you focus on what’s most important: running and growing your business.
7. Build your team.
The team you hire will fill in the gaps of your strengths and weaknesses. Your job, then, is to stay on top of the different aspects of your business. This is to make sure everything is running smoothly and has excellent results.
When you’re strapped for cash, hiring people with multiple skills and extensive experience is advisable. This helps reduce costs in hiring and training your team. However, hiring dedicated people with the right skills can increase profitability as the business grows.
Don’t micro-manage every component of your business. This managing technique is quite common with startups because they try to save on recruitment costs. Instead of hiring full-time, outsource trivial tasks to a freelancer or contract worker.
8. Start selling.
Having a good product or service and building a brand means nothing if you don’t make money. If you have an excellent service or product, it’ll sell itself. But it would still require effective marketing strategies, especially in today’s highly competitive landscape.
More than pushy “selling techniques,” good sales come from effectively understanding the needs of people. Continuously look for value-added solutions to a problem and sell them as a product or service.
Launch Your Business Successfully
Building something from scratch is definitely a challenge but also a rewarding experience. By following the steps above, you’re well on your way to joining successful business startups.