Starting a business can be complicated. From choosing a sustainable business idea to writing a realistic business plan, the process of launching a company from scratch can be intimidating for aspiring entrepreneurs.
However, this shouldn’t deter you from pursuing your dream. If you’re interested in entrepreneurship but don’t know where to start, you’re not alone. Here are seven steps for choosing — and committing to — a business.
1. Finding a Business Idea
The first step to starting a business is coming up with a unique idea. To create one that stands out among others, consider annual trends to help spark your creativity. Some recent trends to consider:
- Peer groups: Entrepreneurship can be an isolating career, and many are turning to their community to fill that void with human interactions via peer groups.
- Machine learning and AI: These trends are only expected to grow, and will eventually be implemented into most business processes — as well as basic human processes;
- Automated cloud deployments: DevOps like visual interfaces that dynamically generates code are becoming more accessible to new businesses.
- Professional organizers: Think Marie Kondo.
- Sustainability: More consumers are embracing minimalism and holding businesses accountable for producing quality, long-lasting items.
- Drones and 3D cameras: These are becoming popular across various industries.;
- Personalized experiences: According to Deborah Sweeney, CEO of startup services and consulting firm MyCorporation, examples of personalized experiences include “offers or services based on customer location, communications that are unique to that preferred channel or recommendations based upon historic purchases.”
- Convenience: In the age of convenience, businesses are expected to adapt and offer products or services that make life easier for consumers.
- Gig economy: The gig economy is continuing to grow, with parents wanting to work from home while caring for their children, or independent contractors seeking the nomad lifestyle.
- Veteran support: More businesses are looking to hire veterans as part of their team.
Which trend inspires you most? Implement one or more of these trends into your original idea, so you can stay relevant and competitive in your industry.
2. Doing Market Research
Once you have your idea, you’ll want to conduct some research to find out who your audience is, how your products or services solve a particular issue of your audience, how to reach your audience, and how to stand out among competitors. The information you gain will help you develop your business in a more profitable and sustainable way.
There are two types of research, both equally important to conduct:
- Primary research, which comes directly from your target customers through research methods like focus groups, surveys and interviews.
- Secondary research, which comes from the public and is likely already available at your disposal (e.g. government stats, market reports, etc.).
First, use primary research to gather insights on what your potential customers want, what issues they might have and how you can help them. From there, conduct secondary research to analyze your competitors’ and customers’ habits.
Saturated markets can be intimidating, but they often are proof that you’re pursuing a worthwhile business idea. There are many ways to differentiate your business from others. By conducting research on your market, you’ll learn how to stand out despite the numerous other companies in the industry.
3. Assessing the Competition
To assess your competitors, you must first determine who they are and how their products or services differ from yours. This can also be done through market research.
Both primary and secondary research methods can help you better understand who you’re up against. What are their habits, price points and offerings? How might you compete in a way that’s still sustainable for your business?
Don’t worry if your idea has already been conceptualized by an existing business; all this means is that you’re on the right path to creating a thriving business. As long as you can articulate what makes your company unique to your competitors and continue to fill the gaps your competitors’ offerings, you’ll maintain a profitable business.
4. Choosing a Business Structure
Once you’ve chosen a business idea, you’ll have to decide on the right legal structure for you. There are many considerations that will impact your decision, from taxes to ownership preferences. Here are the main types to choose from, and some benefits of each:
- Sole proprietorship: The most basic structure, a sole proprietorship involves one business owner who runs the business without any formal structure (e.g. babysitter). All you’ll need to do is register your name with the state and obtain licenses — if any — required for your line of work. Also, be sure to create a separate checking account for your business income and keep records of profits and losses for tax season.
- General partnership: Similar to a sole proprietorship, a general partnership involves two business owners running a company together who share equal profits and losses.
- C corporation: A corporation is a limited liability legal entity that has infinite life. A C corp pays corporate income tax directly to the government rather than through to the owner’s personal return.
- S corporation: Contrary to C corps, S corps are typically the preferred legal structure for small business owners. With limited liability and tax savings (S corps avoid double taxation), this structure is known as a “pass-through” entity because its profits flow through directly to the owner’s personal taxes.
- Limited liability company: An LLC provides the “best of both worlds,” mostly because it’s easy to form and manage, offers limited liability and can have hundreds of members. LLCs are also pass-through entities from a tax standpoint.
Choose which structure works best for your business, based on personal preferences and projected goals for your company.
5. Writing a Business Plan
A business plan is like a roadmap to success. Any time you face hurdles or delays in your progress, you’ll have your plan to reference to or modify if needed. Additionally, the information you include (or lack thereof) will expose what you don’t know and might need to research.
Your business plan will not only keep you on track throughout your entire journey, it will also help you secure loans and investments. In your plan, you’ll want to include details like cash flow, expenses and projections. You’ll also want to create a shorter version for angel investors and a longer version for the bank.
Be sure to revisit and update your plan at least once a year, if not more often, so you can evaluate progress with the goals and measure your successes or shortcomings. This document should be ever-changing and might need to be adjusted or modified, depending on your past, current, and future progress and goals.
6. Pricing Your Products/Services
Your pricing strategy can make or break you entire business, and you don’t want to take the matter lightly.
Your pricing essentially tells your customers your brand positioning and potentially signals your level of quality. For instance, if you underprice a product to appeal to consumers as a “bargain,” your effort might backfire by telling customers your products are cheap or of poor-quality.
When you develop your pricing strategy, you’ll want to ask yourself these questions:
- What is your company trying to achieve with your product/service?
- Are you trying to aggressively penetrate a market, or skim part of a market to gain share over time?
- Who are your customer segments?
- Who are your competitors?
- What is your competitive advantage?
If you’re offering products similar to many other companies, you’ll have to develop a competitive pricing strategy, meaning you aren’t charging way more for your products than your competition is charging.
Just like with your business plan, you should revisit your pricing strategy periodically to ensure you’re keeping up with others in your market.
7. Branding Your Business
Starting a business is more than just offering the right products at competitive rates. Your business’s identity, also-known-as your “brand,” involves how the world views you, both as a business owner and as a company.
Fortunately, you get to decide how you want to define your brand. Ask yourself what your “why” is, or the reason you started your business, and use that as your driving factor. From there, you should focus on the message you want to send to your prospective customers. What narrative do you wish to portray, and how might you remain loyal to it throughout your journey?
Your products and/or services should be an extension of your brand, meaning they should support your “why” as well as your personal story. For instance, if you’re a clothing brand seeking to use higher-quality fabrics like cotton, you likely wouldn’t sacrifice your brand by using a polyester blend for your next shirt.
Consumers appreciate consistent and socially responsible businesses they can rely on. By defining and honoring your brand early on, you’ll be seen as unique among your competitors.