Starting a business can be an exciting time for entrepreneurs – a time full of big dreams for the future. But starting a business also comes with significant risks and requires a great commitment (both money and time) to succeed.
While starting a business can be overwhelming, following these steps can put you on the path to success.
1. Refine your idea
Even if you think you have the next billion dollar idea, it’s important to think carefully about whether the concept is really a viable business.
“To really understand the market and its needs, you need to ask yourself some ‘Why’ and ‘What’ questions,” said Karen Kerrigan, CEO of the Small Business & Entrepreneurship Council. “Why are you starting the company? What is the problem you are going to serve in the market?”
Guide your idea through trusted people in your network and ask for honest feedback. Think carefully about any criticism you receive and see if it can help you sharpen your idea. If possible, find a way to test out your idea, whether that’s running a pop-up store or offering a free service to some potential customers to see if the demand meets your expectations.
2. Make a budget (for yourself and your company)
While you may not need a formal business plan, you should have an idea of how much money you will need to run the business and how your business will generate revenue.
“It’s super important to calculate the input costs and the selling price and all the components that make the economy work,” said Tammy Halevy, executive director of Reimagine Main Street.
If you don’t plan to receive a salary during the early years of the business, you’ll need to set aside personal savings or other funds to pay for your living expenses until the business gets off the ground.
3. Find out how to finance your business
While there isn’t one “right” way to fund a business, later this decision will affect the value of your business and its financial flexibility. The best source of capital for your business depends on several factors, including your industry, your access to investors, and your feelings about debt.
Keep in mind that the vast majority of companies are self-funded by the founder or with money from family and friends, as more professional investors or lenders typically want to see a track record before parting with their own capital.
4. Assemble your team of advisors
At a minimum, you will need a small business attorney and an accountant. They can help you find the best structure for your business (whether that be a sole proprietorship, limited liability company, or any other structure) and ensure you have the right amount of cash set aside for taxes.
“Hiring a good accountant can be the best spend of your penny if you’re anything other than a sole proprietor,” said Venkat Krishnamurthy, president of small business networking platform Alignable. “You can do it yourself, but it’s not too much money and it will serve you well in the long run.”
5. Hire carefully
Once you are able to grow your business, take the time to build your workforce. Remember that the first few hires will really help set the culture and tone of your staff.
“Adding an employee is a big step because it will change the nature of the way you spend your time,” said Greg Ott, CEO of small business credit marketplace Nav. “But it can also be the key to unlocking the growth of your company. For most companies, it really is the path to scaling up and growing and generating more revenue.”
6. Market your product or service
It’s never too early to start promoting your business. The best approach will depend on your industry and your budget, but it’s important to think about branding and marketing early on.
While that probably includes building a website and using online marketing tools, it’s also important to focus on building your network and word of mouth. Try a few different methods to see what seems to work with your audience.
7. Prepare to Spin
Remember, Amazon started out as an online bookselling company and Netflix used to sell DVDs by mail. Successful companies change with the times, so expect to make changes to your business model if you find that a particular approach isn’t working.
“Many companies end up in a different place from where they originally started,” said Luis Ramos, director of business advisory at Accion Opportunity Fund. “That’s why I always test how important it is to go outside and test the product first and foremost. You might learn pretty quickly that what you think the market wants is not what it wants or needs.”