Steps To Start A New Business
What are the key steps to start a new business, in what order – and without so much risk?
Below is a list of the key steps, in order – the really important processes – that you will need to go through to successfully start a business and give it the best chance of success. It might seem like a lot, but don’t worry. Millions of others have gone through these steps and honestly, each one can be fun and you will learn a lot as you go.
Develop your business idea
First, begin a list of possible business ideas. Update that list daily or as needed. Always write them down because you’ll forget, trust me on this. Sooner or later you’ll have a business idea that you really like over all the others. You’ll weigh a number of considerations such as whether you think there’s a good market for your idea, whether there’s a good profit available, whether you know enough about the target market, and many other things.
You need to find a business idea that’s a good match for you – your skills, your knowledge, your situation. It’s common to go through many ideas before landing on the one that seems right.
Often the best ideas are things that you have wanted or recognized there’s a need for within your own field of experience or expertise.
This process can take a while. It’s common for new business founders to search for months or even years for an idea that seems right for them, because it’s a big commitment to pour all your time and energy into building the business. Be patient, and search actively, every day.
Proper planning and researching your idea is next
After you’ve chosen an idea, the next step is to validate your business idea. You need to ask yourself important questions: Is there a market out there who needs my product? Do I know enough to build this business? Can I raise the money, or risk my own? Will I be able to cover startup costs? Is there enough profit that I’ll be able to pay myself a salary?
You’ll want to research competitors, get honest feedback from potential customers, and basically plan the entire thing out on paper – before you start spending money on it.
Do not jump into the building stage before you do all the planning and market research to validate your business idea – this is critical.
Develop a rough business plan
You’ve heard about the need for a business plan. I have a love/hate relationship with business plans – many people think a business plan is a literal map of your entire business timeline set in stone. But the reality is that they should be flexible. If you need to pivot or change the plan, do it. Your business might not end up the way you originally envisioned it. That’s OK if it’s healthy and making money!
Should you spend the time to create a business plan before you get busy building the business? Absolutely! Doing this step helps you solidify and weigh your actual plans.
The process of creating a business plan is really the most important part – maybe more important than the plan itself – because it forces the founder (you) to commit to paper what exactly your plans are, who the potential customers are, how you will locate and sell to them, how you plan to pay for all of this, and who the competition is. Only after you’ve spent hours or days putting together your own business plan will you be able to objectively evaluate your strengths, weaknesses, and chances for success.
Test your business idea to see if the world likes it as much as you do
This is the item that nearly every new business owner misses. Don’t miss it yourself. If we had a magic wand, we’d be able to know if the whole business model will work before we spend all the time, energy and money to test it in the real world. If it turns out to be a success, great – we build the business. If not, we don’t build it and we’ve saved ourselves a year or two and probably thousands of dollars minimum.
Luckily, there are numerous ways to test and validate your business before you commit to it and spend all that time and resource.
Some businesses are harder to validate than others, but the bottom line is that you want to validate your idea in as many ways as you can, knowing that the more affirmations you get, the greater your chance of having a winner of an idea.
Check to see if the business has the potential to make you the money you need – before you go any further
Before you decide to move forward, do a simple financial projection. You’re checking one thing: does this business have the potential to make the money you need it to make?
You might have an idea for a business that customers would love – but if it can’t generate enough profit to support your financial goals, what’s the point? Start with simple estimates: how much could you charge? How many customers could you realistically serve? What would your expenses be? Does the math work at a scale you could realistically achieve?
If the clear financial potential is not there, it’s a No-Go. If the numbers can never add up, everything that follows is a waste of your time and resources – check this first.
Decide whether to go forward or not – this is the Go/No-Go decision
If the business doesn’t show promise – STOP.
You’ve taken the Business Validation quiz, reviewed your results, run the numbers, completed a business plan, and done as many validating tests as you can. You’ve carefully evaluated your chances in many different ways. It’s time to decide: do you move forward and build the business, or do you stop and find another idea?
I believe that building a successful business that works well and makes money is not very easy, so my advice is to only move ahead if most of your validating steps are encouraging.
Financing your business: how to and how much will you need
Put together a spreadsheet to guesstimate how much money you’ll need to launch your business and get through the first 6–12 months. Most people use their own money, not business loans or grants, particularly when they are small businesses run by the founder.
Crowdfunding is a popular option. Sites like Kickstarter or GoFundMe give you a chance to show off your idea and get people to each invest a small amount. If you fund the business yourself, remember: only use money you can afford to lose since up to 33% of small businesses fail within 2 years.
Here’s the cardinal rule of financing: DO NOT, I repeat DO NOT quit your day job because you are relying on your new business to start paying your bills anytime soon. It takes time to build up enough profit to pay yourself and I see far too many people who are desperate for cash trying to start a new business, with no available capital. Do not do this.
Incorporating and legal stuff
Most new business owners will want to set up a legal business entity before starting to conduct business. Forming an LLC or corporation creates a separate legal entity, which generally helps protect your personal assets from the business’s debts and liabilities – though that protection isn’t absolute. You can still be personally responsible in certain situations, such as when you personally guarantee a loan.
For most small businesses the choices are: Sole Proprietorship – the simplest option, no legal separation between you and the business. LLC – a separate legal entity that generally helps protect your personal assets. Corporation – also a separate legal entity with more formal requirements. Note: an S-Corp is a federal tax election, not a separate entity type. Talk to your accountant or attorney about which makes sense for you.
If you take on a partner, make sure to put together a contract that spells out what the arrangement is, and how to dissolve it in the event you aren’t getting along.
Never do this on a handshake without proper paperwork because if things get sticky – and they often do – you will undoubtedly have a difference of opinion about what the agreement was, so the paper contract will be key.
Building the actual business
Here comes the fun part – finally! It’s time for what I think is the best of the steps to building a small business – to be a small business owner and begin building the actual business. Get your finances ready. Figure out who your team is or who you need to hire. Write all the text for your website and plan out the pages. Form your legal entity if that’s your plan. Open a business checking account.
Better to launch with a slightly imperfect product than to delay for too long. Get that product into your customers’ hands and get feedback, then revise as needed. If there are areas where you need to hire help, do it – trying to do everything yourself with little experience is a sure-fire way to end up with a sub-par product.
How to market your business
Marketing is the effort you put into telling others about your business. Typically you do this in a number of ways including advertising, word of mouth, email marketing, building and driving traffic to your website, direct mail and social media to name a few. Your marketing strategy is your overall plan for how you will let the world – and your target market – know that your new business exists.
Do not build a business if you don’t have a good sense or knowledge about how you will market it. Marketing is the fuel that drives the customers to your business. The world is littered with cool businesses that nobody knew about because there was no viable marketing plan.
Many new founders think that running paid ads will be the thing that drives all the business they need – but in the real world it’s better to focus on non-paid methods first, and once you have a lot of your social media and email marketing campaigns in place and running, that’s a good time to try paid ads. Before you begin running ads, learn all about the best practices – it’s really easy to waste all kinds of money if you don’t know what you’re doing!
Lean into social media platforms – it’s the cheapest and often most effective way to market these days. Instagram, YouTube and Facebook are the big ones to pay attention to. TikTok is getting pretty huge also, and don’t forget Twitter if you have extra time.
The bottom line with social media and email marketing is to provide something of value to your customers. If you are delivering little nuggets of wisdom, or inside info, or tips, hints, market trends, how-tos, money saving tricks and other pieces of value – your clients and potential clients are more apt to open your emails and not unsubscribe.
Daily operations
If you’ve never run a business before you’ll find that “wearing a lot of hats” as they say, can be a little daunting. But don’t worry. Everyone has to go through this, and you learn.
The best advice I can give you is to make a short list of your three top priorities each morning, and do your best to knock out those three items. Learning time management and creating efficiency in your systems is huge also. Develop checklists for recurring processes so everyone on your team is working to the same quality standard.
Growing your business
After you’ve managed to get your business planned, financed, built, launched, marketed and profitable, you’ll want to grow the business. Growing your small business means looking for ways to boost profits, cut costs, grow your customer base, increase sales, increase efficiencies in your work, increase distribution and partnerships, maximize advertising, and other things.
Ultimately you want to know what kind of business you’re really trying to build – are you hoping to sell your company to a larger firm? Or are you trying to create a small business that cuts you a nice paycheck each month? It’s a good idea to consider where you are really going to help make sure you get there.