Starting a business is a huge leap of faith for an individual or a group of people. Not everyone is cutout or equipped to do this because it requires a lot of determination, hard work, patience and oodles of the ‘never-say-die’ spirit. However, if you are one of those determined and persevering individuals, you’ll be joining the thousands who survive the ordeal and go on to enjoy the rewards of entrepreneurship.
There cannot be a ‘one strategy fits all’ solution to starting a business, but by far most of the successful businesses were started by individuals who made themselves a detailed plan in order to achieve the goals they set.
Steps to start a business
These are some of the basic steps to look at while starting a business. There are bound to be connected issues within these larger strategies that may need specific attention but if you get the basics right, then everything should fall into place.
- Idea brainstorming – new businesses begin with creative ideas, but that’s not enough. Every business idea has to be a viable business model in terms of planning, funding and operating. And double doses of passion and energy to make it work. It’s not an ideal situation to make the plunge into business just to become a ‘business owner’ but business franchises today offer an easier way to utilize the opportunity of setting shop as most of the business processes have already been tried and tested; only ingenuity and innovation are required.
- Building a Business Plan – this is the ‘master document’ that acts as the guide in establishing and operating the business, anticipating potential obstacles, sustaining business through difficult times and so on. The Business Plan covers these aspects:
- What the business is about and the goals to accomplish
- Background research on target market
- How the business will meet market needs
- Organization structure of the company including management personnel, advisory boards etc.
- Detailed description of product or service lines
- Legal information such as copyrights, R&D activities, tax structure, insurance etc.
- Estimated costs and break-up of funds required – e.g. percentage of self-funding, external loans, mortgages
- Mitigation of losses, if business fails, and many others.
- Assessing finances – there is no pre-determined price in starting a business but there has to be an upfront plan on covering costs of setting up. Most entrepreneurs put their own money into the business for funding while others raise funds through bank loans, funds from lending institutions and private investors, mortgages and so on. External funding needs a lot of financial planning beforehand in matters relating to financing terms, interest rates, rescheduling of loans and mortgages etc.
- Determining business structure – a business has to function as an entity and the business structure has legal bearing on its operation. Determining whether the business will function as a sole proprietorship, partnership, corporation of LLC (limited liability corporation) needs inputs from financial experts because of implications relating to taxes, profit sharing, business restructuring, legal protection and liabilities etc.
- Registering with the government and taxation or audit authorities – a business has to be registered with the government to be recognized as a business entity. The Articles of Incorporation document has to be provided detailed business name, ownership, corporate structure, business purpose, trademark provisions etc. The next step involves audit and taxation authorization to operate the business from the point of view of employee appointments, federal and state tax obligations, licenses, permits, patent laws, IP laws etc.
- Building a team – the ‘people’ element of a business is extremely crucial as the labor force is the foremost asset of any business. Putting together a team that is identified with the business and works together to achieve common business goals while accepting individually defined roles and responsibilities contributes greatly to the success of a business.
- Branding and advertising – building brand value for a product or service that the business will launch is crucial. Once the product and brand are finalized, testing the market is essential to understanding market feedback, ensuring greater reach of the brand.
- Constantly growing the business – after the initial business launch and sales processes are established, ways and means of ensuring profits and helping the business overcome obstacles and sustain its growth goals have to be put in place. Business networking is an important part of business growth besides using tech tools to achieve the next level of growth.
The challenges and risks of starting a business are many but by planning and being equipped, entrepreneurship can be a satisfying journey.
Which one to choose – Offline or online business?
The entrepreneur urge has hit you but the idea of an online business may not seem quite so fascinating in spite of much advancement in opportunities and technology. Some of the most successful modern business ventures are those that are completely operational online. The advantage of being digital helps a business avoid costs and expenditure relating to physical presence as in a brick and mortar structure, where rentals and overheads can be very prohibitive and limiting reach to a specified location.
Top online business choices
Some of the success stories in small businesses online revolve around the following:
- Affiliate marketing – word-of-mouth marketing is still a huge draw for large companies and smart people who use their persuasive approach to promote products for certain companies are rewarded well. This requires complete understanding of marketing and skilful operation of technology to get maximum results.
- SEO consultancy – businesses need an expert to interpret data analytics and to help them structure business content online to get more traffic to websites.
- Social media consultancy – with diverse responsibilities in running operations, a business requires the services of a consultant to devise strategies and tactics that can extend the reach of the business through social media networking to help grow the business.
- Web design – an online presence is extremely crucial for every business and what makes one stand out from the other is attractive web presence and skilful navigation.
- Specialized retailing – an online retail presence enables global marketing to products and services using the Internet and its tools.
- Business coaching – if you are an experienced and expert entrepreneur you can share your knowledge and experience of business function and skills through online platforms and forums to enable new business starters get a good start.
- Professional freelancing – part-time contract workers are increasingly filling skill gaps in many companies across multiple areas and fields of function bridging time zones and using technology. This offers greater flexibility and provides a refreshing change of work pace.
Advantages and disadvantages of online business
Benefits and risks are part of every business venture and online businesses are no exception; however the nature of the business also allows for unique pros and cons. Online businesses now account for nearly 40% of retail sales but positioning e-commerce with customer friendly processes is crucial for online businesses.
- Easy market access
- Rapid growth potential
- Widening geographic scope
- Reduction in overheads
- Analyzing customer intelligence
- Website and infrastructure costs
- Dealing with web security and fraudulent online practices
- Online advertising budget
- E-commerce and legal issues
- Establishing customer loyalty and trust
A UK study revealed that respondents ranked the following non-conventional offline businesses as some of the most promising ones.
Promising offline business choices
- Auto detailing – with car accessorizing the current fad, having skills and the space for fitting accessories and doing car makeovers is good business
- Vending machines – a lucrative business opportunity provided the locations for vending machines are ideal
- Property rentals – positioning and marketing properties for rentals is a useful income generator
- Commercial cleaning business – with a good stream of commercial clients, this is a win-win situation
- Car wash – setting a new one can get the start-up cost high but with a good clientele and steady stream of business, returns can be achieved in good time
- Furniture maker / refurbisher – armed with a creativity and passion for DIY jobs, this is a great way to set up a lucrative business
Advantages and disadvantages of offline business
Offline businesses or what are commonly known as ‘brick and mortar’ businesses, which has been for centuries the traditional method of conducting a business. Owning an offline business has its fair share of pros and cons.
- Location based marketing serves as an actual marketing tool
- Business legitimacy improves trust with people and encourages face to face interaction
- Options for reducing start-up costs by sharing space and infrastructure – e.g. a kiosk within a retail outlet, a hair or make up salon within a fitness centre etc.
- Undefined working hours
- Responsibility to employees and their welfare
- Business overheads and expenses most of which spike annually
Profitable markets and industries to start a new business venture
Starting a new business requires a lot of planning but it also has to fit into an industry that is seeing sustainable growth. Choosing an industry that has strong positive trends to back it helps to get a good start in a new venture and achieve sustained growth.
Among the fast-growing and profitable markets for business startups, these are seen today as the most promising.
- Education software – the digital education market is estimated to grow at a rate of 20% every year through this decade; the market for pre-kindergarten education software grew from nil in 2010 to an astonishing $14 million in 2012. Although resistant to change at first, this sector is witnessing fast growth after a slow start.
- Green building – with the construction industry back in business and focus shifting to energy efficient and environmentally sustainable construction, green building projects are on the rise. Backed by tax cuts and government subsidies, this sector is growing by leaps and bounds.
- Corporate health and wellness – employee health care and productivity go hand-in-hand and realizing this, many corporate companies have seized the opportunity of bringing healthcare and wellness programs into offices. This is seen as a crucial industry sector to close corporation expenditure in employee health costs and lost work-hours due to illnesses.
- Digital Forensics – with technology digitizing the world, information has become critical and sensitive for the functioning of companies. The digital security industry is helping businesses put in place practices and systems to prevent theft and misuse of data; the industry has been growing at 15% annually.
- Translation services – globalization of the markets has pushed translation services in great demand to tackle employee training & knowledge transfer, advertising & packaging, social media and many others. Although some amount can be done with machine intelligence, a very high degree of sensitive quality control necessitates high-touch approach.
Finding investors to help set up the business
A new business venture requires more capital funding than any business owner can invest from personal savings and liquidating assets. Getting the right investors for a business means extra capital for not only operations but development and research in expanding it. The major challenges that face business start-ups requiring funding is to identify investors and woo them into investing in the project. Business funding is not just amount the money coming in; it is followed by investors and funders who are keen on an equity state or ownership of the company with assured profit returns.
The process of finding an investor starts with –
- Calculating the money required which includes not just incorporation and production costs but major future developments and expansion as well.
- Preparing a business plan that outlines product or service offering, avenues for revenue generation, advantages over competition as well as an exit strategy that will show how money can be retrieved by investors without any losses in case of downfall.
- Seeking help from family members, friends and associates who know first-hand about your abilities and capabilities in succeeding. However, in addition to financial losses in case of downward spiral in business, it can also strain relationships.
- Approaching investment advisors, business communities, trade associations commercial lenders and bankers who can offer sound business advice, provide contacts and also offer loans for start-up.
- Networking with regional and area-appropriate business associations and industry events to identify venture capitalists and angel investors.
- Developing relationship with others who have succeeded in similar start-up businesses; there’s always the possibility that they are looking for strategic alliances or additional investments to diversify. If nothing else, they can be assured mentors.
However, contrary to popular belief, investors don’t always go by business plans that convey information; very often, they invest in a product or the skill sets of people who form the background of the company.
Business strategy for new business
The concept of ‘business strategy’ is used very often in business but not always firmly understood. Business strategies are different for big companies and start-ups; choosing the right strategy and implementing it is vital for the survival of any new business.
Where the goal for big companies is to maximize return on public and shareholder investments, for start-ups it is an entirely different challenge. A survey based on information gathered from entrepreneurs in the UK and US shows that there are some prime factors that boost the rate of success for start-ups.
- Picking the right goals – only an inspired person can step away from assured pay to start a new venture and only someone who is inspired by a business idea will invest in it. Together the idea has to grow.
- Choosing markets wisely – competing in all already over-crowded market is no fun; the business proposition has to fit into a niche category.
- Raising capital – the funds raised should be sufficient to pay the bills and to maintain control of the venture till customers’ trust is gained. Selling a stake to a venture capitalist or participating in an IPO can follow next.
- Selecting an A-level team – start-ups need multi-level talents of the highest order; besides the passion and determination to succeed, there should be an emotional connect with the business.
- Responding and adapting to change – it’s not enough that products find buyers; changing customer profiles and needs, new technologies and strategies to ward off competition should always be on ‘tasks to do’.
The market today is flush with money and the environment for growth is friendly; however government agencies and trade analysts warn against procuring investment and funding from people and corporations that are not wealthy or seasoned investors. These are the sources that understand the risks of business well and can advise against lessening financial impacts and mitigating losses.