Before you start a business, you need to be realistic about how much money you’ll need to get up and running. Startup costs can include inventory, office space, equipment, anticipated tax costs and employee payroll. Being passionate about something — owning a restaurant, beauty salon, technical service or construction company — is not enough on its own to guarantee success. The length of time it takes to start a business often depends on the type of business and the location. If it is just one person and no loans are required, it could take as little as a month or two to get started. If it is a larger company with employees and startup funding is required, it could take up to a year to get the business off the ground.
First-time business owners will need to understand the essential steps to follow as they launch their new venture.
- Research the market and competitive landscape. Figure out who your main competitors will be and what your ideal customers look like. You can research this by conducting phone or face-to-face interviews, online surveys or focus groups with potential customers to get their feedback. Consider asking them why they purchase a specific product or service, what they like or don’t like about competitors’ products and what price they would be willing to pay for what your company plans to offer.
- Identify what you’ll sell. Whether you plan to offer a product, service or both, narrow in on what you’ll sell and how you’ll make it different from your competitors’ offerings. Even if you’re selling identical products or services, you could distinguish yourself with your location, customer service or shopping experience.
- Write a business plan. A business plan is a roadmap for the future of your company and often outlines the goals for the first, third and fifth years in business. If you need outside investors to loan you money in order to get started, they will need to review your business plan and financial statements before investing.
- Set financial goals. Get specific about how much money you’ll need to invest, borrow, spend and can reasonably make during your first year in business. Some businesses aren’t profitable for the first few years while they build their reputation and customer base. You’ll need a plan for covering expenses during that time.
- Consider partnership. If you don’t have the funds or expertise to launch a business on your own, consider partnering with someone who has complementary skills or money to invest. A potential partnership could develop over time and offset your startup costs with additional funding from a partner. Another possibility is that you are hired by an owner of a company who wants to sell the business in the future and offers you the opportunity to buy the business in a phased buying process. Instead of needing to have cash on hand for an upfront sale, the owner might offer you a stake in the business for investing a number of years as an employee. This could be a good solution for an aging owner to transition the business and secure the future of their employees, as well as their own retirement.
- Secure funding. From getting small business loans to crowdfunding campaigns, there are many ways you can raise money to start your company.
- Create your business. Make it official by choosing a business name and creating your business entity. You could have to register your business; get government and local tax identification numbers, permits or licenses; and may want to file for trademarks, copyrights or patents. You can also set up a bank account to manage the business’s money.
- Hire employees. If you hire workers, you’ll want to make sure you’re following regional and national employment laws and learn about managing employees. Your country’s department of labor’s website could be a good resource for learning more about labor laws.
- Build your customer base. Once your business is up and running, you’ll want to focus on building your customer base. You can do this by providing excellent customer service, special deals and offering incentives to new customers. A marketing campaign can also help, and it could be as simple as handing out a printed coupon or offering incentives like two-for-one sales.
- Market your product or service. It’s also important to promote your new business and build awareness of the business, which you can do by creating a website, social media accounts and marketing at community or industry events. If you have the budget, consider starting an advertising campaign. You can do this online, in local newspapers or wherever else you think your ideal customers will see the advertisements.
- Monitor cash flow. Keeping an eye on incoming and outgoing cash (i.e., cash flow) is critical to managing a business. Often, unexpected business expenses can put owners into a cash-flow crunch that can impact their ability to pay suppliers and employees.