5 Simple Steps to Make Your Business Dream a Reality
Starting a business sounds complicated, but following these simple steps can make it easier and make your goals achievable.
If you are thinking about starting a business, chances are, you already have a solid idea in mind for what you want your products or services to be. It is still vital to create a step-by-step business plan so that your team can fully align on your goals and how you plan to execute them. Entrepreneurs should familiarize themselves with these basic steps to get their new business off to the best start possible:
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1. Create a Business Plan
A business plan is essentially a written summary of how you want to run your business and the goals you want to achieve along the way. The first part of a typical business plan is called an executive summary. The executive summary is arguably the most valuable part of your business plan because it introduces what you wish to accomplish. It should include your mission statement, information about your team, the products and services you offer, the market opportunity, and a summary of plans. Think of your executive summary as an overview of your entire business plan, with the sections that follow it going into more detail.
The following section that you will want to expand upon is your business objectives. Two of the key points this section needs to hit include the strategic and operational objectives. Your strategic objectives will lay out your long-term goals that correlate with your business’s mission statement. Strategic objectives are more workable plans that will support your short-term goals.
After this point, you will want to go into more detail about the products and services you offer and the market opportunities. The explanation of your products and services should lay out the benefits of your business and how it is unique.
2. Validate the Idea for Your Product or Service
If it feels a bit overwhelming to dive into the details of your business without it being off the ground, this step will give you more confidence in your abilities. If you are starting a company that sells products, one great way to get the ball rolling is to have some family and friends try out your products and give you feedback. This will provide you with a better idea of real-world applications for your products and an honest portrayal of how successful your product could be in the market. Once you have fine-tuned what you offer, you can begin making initial sales.
If you do not have a product and are offering a service or feel ready to create a product yet, you can rely on test marketing to get you through this next step. For those who are just starting, “small-scale testing” is the name of the game. Even if you do not have a fully developed product, a simple prototype can go a long way. If you will be marketing a service, this is an excellent time to look into reviews for similar services. You can look on Yelp, Google reviews, Foursquare, and Facebook reviews to see what kind of challenges similar businesses are up against. The feedback and results you gather from this process can help you anticipate any issues with starting your business.
3. Assess Your Financial Projections
When you layout your business plan, it is important to follow it up with a solid projection of your finances. You need to determine how much your costs will be and how you can cover them. This is where you can decide if you have the means to get your business off the ground or if you will need to consult with investors. The last thing you want is to start your business, only to find that you have to shut down shortly after because you cannot balance costs. To avoid this, you can follow a simple formula to determine your “break-even” point or the point at which you will not be losing money. The break-even formula is as follows:
Fixed costs/ (Average price - Variable costs) = Break-even point
A break-even analysis will help you determine profitability, price your products or services, and decide what volume of goods or services you need to have to be profitable. Once you have all of this information, you can determine whether you have the funds to launch your business comfortably, if you need to reduce your fixed costs, or if you need to acquire funding from other sources.
Some resources you can use to gain the extra funding you need are:
Banks will take a few different factors into account when determining whether they want to invest in your business. These factors include cash flow, time in business, personal credit scores, and business credit scores. Based on your eligibility, the bank can set a loan amount and a repayment period that ranges from one to twenty years. This kind of loan can take a few weeks to get approved.
Business grants can come from a range of sources. Grants are also different from a conventional bank loan because they do not require repayment of any kind. For that reason, grants can be a bit more difficult to come by. They become available when a government agency, nonprofit, or private business sets aside grant money for a specific purpose. There are plenty of grants available, but it takes a bit of research to find them.
When you think of finding an investor for a business, you might reminisce on late-night episodes of “Shark Tank,” where entrepreneurs convince wealthy investors to give them money for their business venture. The process can be a bit more extensive than that in real life. Some entrepreneurs might find that asking friends and family for capital is the easiest way to raise money for their startup. With this kind of investment, it is still vital to provide a proper pitch and proposed plan for the terms of their repayment. You can also consult with angel investors and venture capitalists and present your business plan to them.
Crowdfunding is a way to raise funds for your business by asking a large number of people to donate small amounts of money. The two main types of crowdfunding are donation-based funding and investment crowdfunding. Donation-based funding is given on the simple basis that those who donate believe in the business and want to see it thrive. Investment crowdfunding involves businesses that are seeking capital that sell ownership stakes online.
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4. Determine the best business structure for you
This step often gets overlooked as a minor detail, but it has a significant impact on decisions you will make later down the road. This is because the type of business structure you choose determines which income tax return form you will need to file. The most common structures include the following:
This is a common business structure because it is simple and does not require legal filings. It is especially common for those who do not anticipate hiring other employees and want to remain a one-person business. A sole proprietorship can also be a good decision when the business is self-financed. In other words, if you did not need to use any of the financing options above in order to start your business, a sole proprietorship might be your best choice. Please note that some cities require all small businesses to be registered, and others do not. The Small Business Administration will connect you with the right resources.
Like the name would suggest, a partnership is a business in which two or more people share ownership. In these situations, both partners are responsible for contributing to all aspects of the business, including money, property, labor, or skill. Each partner shares the profits and losses.
Most people just think of a corporation as a big business, but not many realize that a corporation is a legal entity that is separate from its owners. Unlike sole proprietors and partnerships, corporations pay income taxes on their profits. This might make a corporation seem unappealing, but corporations have an advantage because they can raise capital through stock sales. Often, corporations are a good choice for medium or high-risk businesses or businesses that plan to go public.
S corporations are eligible to be treated as a corporation that can pass corporate income, losses, deductions, and credits to their shareholders. Your business must meet certain guidelines to qualify for status as an S corporation.
5. Invest in marketing
Before you can begin marketing your business, you need to have a solid understanding of your target demographic. The main demographic segments you will want to identify are age, gender, occupation, and background. Your target demographic might evolve, but before your business is established, you should think about who would be most likely to benefit from your product or service. For example, if you are a family law firm, you might choose to market your business to working-class or middle-class adults in their late 30s-40s. Not only will establishing your demographic help you to understand their needs, but it will also help determine how much money they will be reasonably able to spend and where you can allocate your marketing efforts.
At Scorpion, we are passionate about helping businesses thrive and lifting them up to their full potential. If you need help getting your business off the ground and want to make your communications as effective as possible, it would be our pleasure to work with you. Talk to us today to learn more about our capabilities and what we can bring to your business.