Steps On How To Start A Small Business
Every business always starts with an idea. The only person who will succeed is the person who is brave enough to take action and convert those ideas into reality.
Starting a small business can be scary for most people. This is because you need to take a big step towards the unidentified path. Fear is the only thing that is preventing you to take the first step in starting your own business. You fear that people might not take your idea or product seriously; you fear that you do not have enough knowledge about selling your product; or you fear that your business would fail when you have not even started.
Any entrepreneur or business owner would tell you that starting a small business requires a lot of work. Now don’t feel overwhelmed because there are simplified steps that you could follow for you to get started on your small business.
1. Research your business idea.
Some business ideas work without proper research. However, most businesses fail because of lack of research. Being passionate about your idea is not enough to make your business work. Sometimes when you are passionate about your ideas, you get too excited about taking actions without making research and thoroughly planning your steps. Thus, you spend valuable time and money on unfocused activities.
Research about the needs of your products or services, your target market, your competitors, and how will your business fit into the market.
2. Create a business plan.
This is the first step that you need to do before you start with your own small business. This will be your road map or guide that outlines your goals and how you will achieve each of your goals.
Writing a business plan does not need to be long and formal; a one-page business plan will do containing these basic components:
This is a brief introduction of your business, your products or services and what problems it solves, your target market, your goals for the next year or two, purpose why you are writing a business plan — is it for your potential investors, bank loans, etc. Although most people include this in the last part of the business plan, the executive summary should be well thought of before you write your business plan.
Anyone who is reading this part should have a clear understanding of your business idea. You should start with a short description of your business, what you do and what makes you stand out against your competitors. Another tip in writing your business description is answering the who, what, where, when, why, and how of your business.
- Who: are you and the name of your business; your target market.
- What: what do you offer (your product or service); your present and future goals.
- Where: location of your business (physical store or online store).
- When: will your business start; is the deadline that you want to see results.
- Why: should your target market avail your product or service.
- How: will your business function (sole proprietorship, partnership, corporation)
First, you should extensively research your target market; who they are and how they consider a product or service before availing. Once you have gathered all of the information on your target market, you should explain your Market Analysis section who your customers are, their needs, and how you plan to bring your product and service to them.
You should also research your competitors on how you could outshine them, and how would you position your business in the market. This is by collecting and reviewing information about them, like their strengths and weaknesses, and using those to create tactics to gain an edge over your competitors.
Explain your product or service
Give the full details and description of your product or service and its benefits to its consumers. You could start by indicating the problem your product/service is trying to solve, how it will solve the problem, and what sets it differently against your competitors.
Organization and management structure
This part should describe how your business organization operates, the function of each member within the company. You may also add information highlighting the relevant experience of each team member.
Execution of strategy
Use this section to explain what you will do to execute your small business successfully like your marketing plan, sales plan, and anything that is involved in running your business like the equipment that you will use, facilities, vendors, and so on.
The last part of your business plan includes your financial plan. This includes your projected loss and profits, balance sheet, cash flow tables, sales forecast, personnel plan, spreadsheets and charts that will show where your business currently stands and where it will be in the future. This will also help you determine if you need funding for your business.
3. Determine your budget and obtain funding.
If your small business is self-funded, it is ideal that you keep costs low with an additional 20% of your budget as a cash reserve to help you plan for your burn rate. The burn rate is the amount of cash you spent in your business for a month. Determining your business burn rate is important so that you can estimate how long it will take before your cash reserve runs out.
You may also obtain funding for your small business through loans, financing, finding investors, venture capital firms, crowdfunding, and funding from your family and friends.
4. Decide on your business’ legal entity.
Legally establishing your business is important to save you from having future headaches. Before anything else, as a new business in your area, you need to get a permit or license before you start operating. Then you need to register your business name. The next step is to decide on the business entity structure for your business. You may ask a business attorney to help you choose your business entity. Below are the 3 common business structures you could choose from:
It means that you are the only owner of the company and you are the only one responsible for any liabilities. The pros of this structure is that you only need to do less paperwork and you can start operating your business right away under your own name without taking formal actions. However, you don’t get much legal protection when someone files a legal complaint about you.
This means that two or more individuals are the owner of the business. You need to carefully choose your business partner since you will be tied with them financially and legally.
This is a more complicated business structure and is often used for larger companies. It also requires having a board of directors and officers.
5. Manage your finances
You should arrange your financial statements such as balance sheets, income statements, and cash flow statements. Not only will these documents help you track your profit, revenue, and expenses, but these will also help you with your application for financing and tax filing.
Hiring a bookkeeper or an accountant will help you manage your business finances, or you may also use accounting software like Quickbooks and Freshbooks to help you generate your accounting documents automatically.
Fulfilling your tax obligations should be your top priority in financial management because you could lose your business if you fail to do this.
6. Create your website and social media accounts
Having a website and social media platform is important because it establishes the credibility of your business. Most consumers will turn to your store’s website or social media platform before they make a purchase of your product or service. Since we live in a digital world, establishing your business presence online is important to advertise your business and generate sales. This is because your website and social media platforms will help you connect with your consumers to any part of the world at any time.
Lastly, if you want to start your small business, you should start taking action. Having a business is not for the faint of heart. You may experience some failures, but it does not mean that you are incompetent and that you should stop. Think of it as a failed experiment and you need to start over again and keep moving. Every time you rise from an obstacle, you grow mentally stronger. So start working on your ideas now.