Published on March 22nd, 2023
Starting a business is exciting. You have a great idea, product, or service you want to unleash on the world, but you aren’t sure where to begin. That makes starting a new business somewhat terrifying as well.
If you want your startup to be successful, you need to do your homework. Great companies don’t just happen. They’re the result of careful planning, constant attention, patience, and an openness to seizing lucrative opportunities.
Take Bill Gates and Paul Allen, who dropped out of their respective colleges in 1975 to launch Microsoft. It wasn’t until they partnered with IBM five years later that their startup had what it needed to grow exponentially. The rest is history.
Of course, not every startup is going to end up on the same scale as Microsoft. But all entrepreneurs should learn what steps they should take to grow and thrive. To get started down the right path, here are four things to know when building a startup.
1. Get The Finances Right
The finances of a new business are almost always the proverbial elephant in the room. You don’t want to talk about them, but it’s risky to start a business without a firm financial footing. And you need to have a long-term plan for how you will remain standing.
Sometimes, people with great business ideas are somewhat clueless about how to finance the dream. In fact, the money aspect can be downright overwhelming. There are startup costs as well as ongoing concerns such as purchasing, taxes, and payroll.
If you aren’t a financial wizard, that’s OK. You just need to partner with a business that specializes in accounting for startups. Some can assist with everything from raising capital to financial forecasting.
Someone has to deal with a business’s finances, no matter what. Whether that’s you, an employee, or a financial services provider, getting this right adds up.
2. Know Thy Industry
Great ideas can get lost in overcrowded industries. Do you really have something to sell in a space that needs it? Think of this as the difference between selling another mousetrap and selling a better one.
Researching your industry and your competition can be a time-consuming endeavor. The information you gather, however, will be critical to your success. Make sure you take your time, and whatever you do, be thorough.
Surveys, focus groups, interviews, and competitor analysis will provide quantitative and qualitative data. Use it to find your price point, distinguish your product from similar ones, and determine who your top rivals will be. You might even uncover hitherto unknown customer problems you can solve by adjusting your product before you roll it out.
You don’t just want to add another widget to the world. You want to own the market and your industry. To do that, you’ll need to explore them inside and out.
3. Pick The Right Business Structure
The most common types of business structures are limited liability corporations (LLCs), sole proprietorships, partnerships, corporations, and S corporations. Before you can launch a startup, you’re going to need to choose one. Because they’re extremely difficult to change, you’ll need to weigh your options carefully.
So many factors into choosing a business structure: the ability to raise capital or sell stock, tax obligations, governance, and potential risk and liabilities. Your business structure will also be influenced by the likely business size and projected number of employees. Some structures are easier to set up, and some are more expensive to establish than others.
In all cases, you should focus on using a structure that protects your personal assets by separating them from business assets. Companies in some industries face far greater potential liabilities than others, so know what those are. For example, a marketing consulting company has far less exposure to liability than a restaurant or hotel.
You may want to consult a business attorney to help you explore the pros and cons of various structures. Once you figure out what will work best for your priorities, you’ll have laid the foundation for your startup. Build it up and out from there.
4. Develop A Business Plan
The devil, as they say, is in the details. The details are precisely what are addressed in a formal business plan. Neglect to develop one, and you really will be winging the venture.
A business plan requires that you articulate your mission, vision, and values. It specifies what products and services the business will provide and analyzes the results of your market research. The plan also includes a comprehensive budget and opportunities for investment by others, such as venture capitalists, shareholders, and lenders.
The exercise of creating a business plan will illuminate potential problems long before you launch. That way, you can remove barriers and clarify information at a stage when it’s easier to do so. You can make revisions to the plan to strengthen it as you gather input from those you share it with.
If you aren’t detail-oriented or if your writing skills leave something to be desired, seek help with this task. Failing to plan is, indeed, planning to fail. Do the hard work first to develop your road map, and then follow your own lead.
Start Your Startup Right
No matter what you do, starting a business will have its challenges. No one gets it 100% correct right out of the gate. But making sure you consider these areas will put your company on a trajectory toward success.
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