How to Start a Business

Many articles have been written about this topic but, in my opinion, fall tragically short of what I would consider to be a comprehensive, step-by-step guide on how to start a business. If the thought of launching a startup company doesn’t evoke some kind of emotion within you, you’re probably not thinking big enough. You should be feeling excitement, anxiety, inspired, confused, motivated, overwhelmed, optimistic, hesitation, trepidation and uncertainty, all at the same time.?

Starting a business takes an iron stomach so if your motus operandi is to play it safe, I would recommend keeping your job and finding a hobby instead.?People become entrepreneurs because they know that owning a business is very rewarding, allowing them the opportunity to be creative with the potential to make more money than they ever could working for someone else.?The key is to mitigate risk, as eliminating risk is not possible when starting a business.?

Confidence is definitely an important component to being a successful entrepreneur but being overly confident is the easiest way to crash and burn during your first year of operation. It’s easy to assume that successful business owners steamroll their way through the startup process, gracefully leaping over every hurdle effortlessly as if it were their life’s purpose to do so.?Unfortunately, the process is not so glamorous.?We complain to our friends and family, we wallow in self-doubt, we have sleepless nights, we worry obsessively and basically sweat our way through the entire beginning stages until we reach somewhat of a plateau where we can regroup and prepare ourselves for the next tumultuous phase.

Let’s jump right into the steps and then I’ll elaborate thereafter.

1.?????Think of a concept: product, service, solution

2.?????Conduct market research

3.?????Think of a company name and register the business

4.?????Design a logo

5.?????Trademark your company name and logo

6.?????Think of a URL/website address and register a domain name

7.?????Open a bank account

8.?????Write a business plan

9.?????Determine financial projections

10.??Secure startup capital

11.??Create a budget

12.??Develop a website

13.??Write a marketing plan

14.??Interview vendors

15.??Develop operational protocol

16.??Create a pricing matrix

17.??Establish a sensible risk to reward ratio

18.??Secure a location if applicable

19.??Hire employees if necessary

20.??Purchase supplies, equipment, inventory, etc.

21.??Schedule a soft opening

22.??Schedule a grand opening

23.??Fail

24.??Start over

25.??Repeat the steps listed above until you succeed

Concept:?Whether your business will be product-based, service-based or solution-based, gain clarity on what it is that you intend to offer.?Compare your ideas with that of your competitors to see if they’re doing something different or better.?It’s always a good idea to choose a vertical market that you’re familiar with, interested in or have a passion for.?This will make it easier for you.?Another option is to find a problem, then solve it.?In other words, if your target audience is encountering some type of complication in their business or in their lives, devise a solution that addresses this problem. People are often willing to pay to make their problems disappear.

Then define your ideal client by creating a client profile. Find out what your prospective clients want, and more importantly, need. Write down everything you can think of about your target audience including their age, income, gender, race, lifestyle, geographic location, level of education, job title, interests, fears, marital status, needs, goals, values, pain points, habits, customs, cultural specifications, psychological abnormalities, behavioral quirks, character flaws, spending patterns, etc.?You need to know how your clients think, what they spend their money on, how they spend their time and what their concerns are better than they know themselves.?Once you know who your prospective clients are and what motivates them, then you’ll know how to serve them better.

Try not to be all over the place with your initial offerings.?Focus on one particular area to start.?Even Amazon started off selling mostly books and CDs before they ended up selling everything.?Get niche, get rich.?There are many already existing and established companies that have been doing what you’re trying to do a lot longer than you have.?The more unique your products/services are, the easier it will be to stand out and differentiate your business from the others that were there before you.

Market Research: You will most likely encounter a great deal of competition so entering a vertical market with an unhealthy balance of supply and demand can significantly decrease your chances of success.?Opening a restaurant simply because you think that everyone must eat or opening a funeral parlor simply because you think that everyone must die, isn’t the best strategy for calculating your startup’s potential.?How many restaurants/funeral homes are in your catchment area, what are the demographics of the population, what are the factors that may not be so apparent, what could go wrong??These are questions you should be asking yourself.?

Doing a little reconnaissance on competitors and other similarly situated businesses will give you a sense of the landscape.?Analyze their websites, call them and pretend to be a prospective client, ask them to send you their brochure, pricing and service agreement, etc.?This will give you an idea of what you’re up against.?

You’ll also need to find out if the type of business you’re interested in opening requires a special license, certification or regulatory compliance.?Regulatory commissions are not your friend.?They are typically awful bureaucrats that have no problem making your operation difficult and your life miserable.?Give them what they want to keep them from bothering you any more than they have to.

Company Name: The name of your company isn’t just a name, it’s also your brand.?Being completely unique is the hardest part about this step.?Once you think of a name you feel comfortable with, do a quick Google search to see if there are any other companies using the same or similar name.?Make sure your company name is easy to pronounce, congruous to your line of work and totally original.?It’s hard to build a brand if you are competing with other companies who have a similar name.?Especially if they’ve been around a lot longer than your company.

Once you’ve settled upon a name, you can register the business in several ways.?You can contact your local Department of State, have a lawyer do it or go through an online service who will file the paperwork for you.?They’ll explain to you the difference between an LLC, Sub S, C Corp, etc.?The differences between entities are mostly a matter of protection from legal liability and how to get the most out of certain tax advantages.

Logo:?You may need to enlist the services of a graphic designer to create a company logo.?The cost for designing a good, quality logo could range from a few hundred to a few thousand dollars.?Most corporate logos contain between one to three colors and are fairly simple in design.?The graphic designer should render a high-resolution vector file which belongs to you entirely.?Use the logo to represent your company on your website, business cards, brochures, packaging, labeling, signage, etc.

Trademarks: A trademark isn’t something that is necessary right away.?Most people won’t be interested in stealing your company name or logo until your brand becomes big and valuable.?To trademark your company name or logo, you can hire a trademark attorney or use the same online service that you used to register your company name, such as LegalZoom.?Once your trademark is registered, you’ll be able to use the little R with the circle around it next to your logo.

The TM symbol is something you can start using right away to indicate that you believe you are the owner of the logo icon.?Another cost-effective way of protecting yourself is to print out a piece of paper with your company name and logo, seal it in an envelope and mail it to yourself.?The envelope will have the postage seal issued by the post office which will include a date.?Keep the envelope sealed and only allow a judge to open it if you need to prove that you had possession of the logo design prior to the time someone else did.

Domain Name: Your website address should match your company name to make it easier for clients and prospective clients to find your website.?Some companies have chosen to use a domain name that is different than their company name for certain reasons.?It’s very hard to find a unique domain name these days.?Try to get your domain in a dot com form.?Dot com domains seem to be favored by Google.

URL is an acronym for Uniform Resource Locator which is basically your website address (www.yourcompany.com).?Domain names get snatched up quickly so once you’ve decided on a company name, buy your domain name as soon as possible.?You can use a domain registrar such as GoDaddy to purchase your domain.?

Bank Account: At the very least, my recommendation is to open a checking account in the name of your business so you can start depositing funds and paying bills.?I would not recommend using your personal bank account to pay company bills.?The whole point of registering a business as a separate entity is to shield yourself from liability.?The comingling of funds eliminates this layer of protection if a judge feels that you have pierced the corporate veil.?

Choose a bank where you can develop a relationship with the branch manager.?This person might be able to help you during difficult times when you’re managing complications with your company finances.

Business Plan: You may have an idea in your head as to what you want to do with your new business and how you want to do it.?However, getting your thoughts down on paper (or digitally in a word document) will force you to think about factors that you might not have previously considered.?Download a template for business plans to help guide you through the various sections.?When you’re done, you’ll have a clearer vision for how to better execute your startup.?If you're seeking venture capital or some kind of angel investor, your business plan must be more formal and include a lot more information to make the investor feel comfortable with your ideas.

Financial Projections: There are three types of financial projections that must be figured, prior to launching your business: startup costs, expenses and revenue.?Startup costs will include all your initial, one-time expenses that you will incur when starting your business.?These will be expenses that you’ll probably not have to encounter again, or at least not for a while (i.e. website).?Your expenses will include your ongoing, monthly and recurring bills (i.e. rent). Your revenue is how much money you expect your company to generate over the course of time.

It's important to remember that you may not make money from day one.?In fact, it could be a long time before your company starts to generate any revenue so you need to make sure you have enough money to carry your expenses until the business is able to pay the bills. ?At the very least, you should try to map out your expenses versus revenue for the first year.?It may not be a bad idea to assume you won’t make any money for the entire first year of operation.?Add up your startup costs and your recurring expenses for the first year to make sure you have enough cash on hand to cover the business until it begins generating enough revenue to sustain itself.

Startup Capital: Once you’ve had a chance to determine your startup costs and project how much money it’s going to cost you to operate the business until it starts making enough money to pay for itself, then you can determine if you have enough cash on hand to make it work.?Many entrepreneurs use their own money to launch their startups.?If you don’t have enough startup capital, you can try to raise the capital from outside sources.?There are startup grants and small business loans available to entrepreneurs who qualify.?Entrepreneurs who don’t qualify for a grant or loan may consider borrowing money from friends and family or seek capital from a private investor.

Regardless of how you fund your startup, the most important factor is that you have enough money to launch and operate the business until revenue starts coming in.?If you don’t, it’s better to wait until you do.?Encountering a financial shortfall is one of the main reasons why startups fail.

Budget: Creating a budget is important for managing cashflow on an ongoing basis.?Some people have difficulty balancing their own checkbook.?It only gets more complicated when you’re running a business.?To create a budget, write a list of all your expenses and compartmentalize them into categories.?Based on projections, figure how much you will need to pay for each expense in each category on a monthly basis.?Then watch your numbers to make sure you’re not going over.?Your accountant can help you with this.

Website:?With the domain name that I had previously suggested you purchase, the development of your company’s website should follow.?Establishing an online presence is imperative in the digital world we now live in.?Your future clients will most likely find out about your company online before any other way.?Cheap websites are ineffective so don’t cut corners here.?You’ll want your website to exude quality and credibility, not only to prospective clients, but also to Google and other search engines.?Poorly designed websites don’t get ranked well on Google and they certainly don’t convert online visitors to actual paying clients.

Marketing: Many entrepreneurs think long and hard about their product, service or solution but forget how they’re going to inform their prospective clients about their products, services or solutions.?Your startup will not succeed without marketing.?Let me say that again…your startup will not succeed without marketing.?Informing the public that your company is in existence is crucial for generating sales.?Marketing can be in the form of ads, SEO, social media, content, blogging, etc.?The most effective strategies for marketing your business may vary predicated on the type of business it is.?

Vendors: Despite what you might think, you may not be able to accomplish everything on your own.?You may need help from other professionals who have experience in different areas of expertise.?Vendors you should consider might be a Business Consultant, Lawyer, Accountant, Insurance Agent, Manufacturer, Supplier, Website Developer, Sales Agency, Marketing Agency, HR/Payroll Company, Billing Company, etc.?These people will help you run your business and utilizing their skills are probably more cost effective than trying to figure them out on your own or hiring an employee to do it inhouse.

Operational Protocol: You’ll need a system for how your business will operate.?Regardless of your industry or vertical market, it will be important for you to devise a way in which you will conduct business.?This system needs to be determined prior to your launch date.?Being organized is extremely important in business.?Figuring things out as you go is a recipe for disaster.?If you’re starting a franchise, operational protocol will be shown to you by the franchisor.?If you’ve previously worked for a company that is similar to the one you’re about to start, you can adopt some of the procedures from your previous employer.?If you have no idea how to run your business, consider hiring a consultant to help you.?Starting a business that you don’t know how to operate is very risky and could have disastrous consequences.?Make sure you’re prepared.

Pricing: Setting your prices requires in-depth market research. The right price can generate more sales while the wrong one can make potential customers look elsewhere. Consider the following when determining what to charge:

• Conduct a thorough market pricing analysis.
• Analyze your target audience.
• Profile your competitive landscape.
• Consider industry standard markups.
• Analyze your costs and how it relates to profit.
• Determine a reasonable profit margin.
• Implement incentives, deals, specials, discounts, offers, etc.

Different types of pricing structures include the following:

• Cost-Based Pricing: Use production costs as a basis for pricing.
• Value-Based Pricing: Price based on the benefits it provides to clients.
• Competition-Based Pricing: Comparing the price of other companies to come in just below their price.
• Demand-Based Pricing: Maximize profit by responding to customer behavior.

Risk to Reward Ratio: Starting a business involves risk.?Therefore, every entrepreneur must establish his/her own risk tolerance.?It’s never wise to risk everything.?It’s better to predefine how much you’re willing to lose in order to determine how much to risk.?Either way, establishing a sensible risk to reward ratio is the best way to get ahead in the long run.?When managing your decision-making process, if the reward is greater than the risk, you won’t even have to be right all the time to stay ahead.?In other words, if it costs you $1000 per month for 6 months to work on getting a project that will pay you $20,000, then you are risking $6000 for a reward of $20,000 if you win the bid.?That’s a sensible risk to reward ratio.

Location: If your business is a traditional brick-and-mortar style company, then you’ll need an office, warehouse or retail location to operate out of.?Many factors go into securing a location for your business.?It may make more sense to lease the location at first.?Purchasing the location is typically more expenses and you’ll need that extra money for a marketing campaign and other startup expenses.?Make sure you negotiate favorable terms with your landlord.?Avoid lease agreements that include personal guarantees or rent that is predicated upon how much revenue your business generates.

If possible, it may be advantageous to create a separate business entity to sign the lease under.?That way if you ever need to vacate the premises before the end of the lease term, it won’t affect your main business.

Employees: Payroll is typically the largest expense of many businesses.?Having employees is difficult because employees are people and people can be emotional, disloyal and problematic.?Some businesses cannot operate in the absence of employees while other business models can be managed by outsourcing certain functions to vendors and subcontractors.?Just know that employees are just as much of a liability as they are an asset. Most employees work just hard enough to avoid being fired because they know that most employers will pay them just enough to prevent them from quitting.?

Supplies/Equipment: You will undoubtedly require some supplies, equipment, furniture, inventory, etc. in order to run your business.?Remember that the first year of operation is the most fragile so this is the time to be frugal.?Be a bargain shopper when it comes to these items.?Consider purchasing used equipment and furniture instead of new.?Make an assessment of what you need to get started and try not to over do it.?You can always buy more in the future as resources and finances allow.

Soft Opening:?A soft opening is like a trial-run or a pre-opening for startups. Businesses use soft openings to prepare their staff before officially opening to the public.?The purpose of this is to work out any bugs before opening your business on a grander scale.?You can also use this opportunity to gather information, data and client feedback so that you’re better prepared for your grand opening.?Soft openings are generally accessible to a smaller group of people, such as family and friends, but not necessarily the general public.?This gives companies an opportunity to identify problems on a more manageable scale so they can be fixed and resolved before the grand opening.

Grand Opening: This is what you’ve been waiting for so hold onto your nuts and hope for the best.?Try to do as much marketing as you can to publicize this event.?Your local chamber of commerce may be willing to organize a grand opening event with a ribbon cutting and invite prominent community members such as your town’s mayor.?The purpose of this type of ceremonial event is to make as big of a splash as possible so people know your business exists.?Depending on your business model, a grand opening may not be as applicable.

Fail and Start Over:?You may be surprised that I included this as a step, and I hope it doesn't happen to you, but it must be considered. We’re often led to believe that in life, we either fail or succeed.?This isn’t entirely accurate.?In more realistic terms, most entrepreneurs fail until they succeed.?Many successful people don’t disclose their failures so it's easy to assume that they just became successful.?Statistically, 9 out of 10 startups fail.?Yours may also.?It’s ok.?You may fail more than once. That's ok too. When you do, rest and allow yourself the opportunity to be sad and frustrated.?Cry, yell, break something, or process those feelings however you want. After those emotions subside, pick up the pieces and start over again.?The next time, you will be a lot smarter.

Conclusion:?I don’t mean to paint a dismal picture of what it’s like to launch a startup business.?I also don’t want to smother you with optimism.?Starting a business is extremely challenging but also very rewarding once you begin to achieve your goals.?Sustaining morale is easier on some days and much harder on others.?Just know that many monolithic businesses were established, and enormous fortunes have been made, after initial failures were overcome.?

Entrepreneurship is not for everyone.?Most schools don’t teach students how to become business owners; they teach students how to become employees.?One of the hardest aspects of starting a business is just getting started, despite everyone around you suggesting that your ideas are crazy.?Some of those people may be asking you for a job in a few years.?

There are some ways of minimizing your risk of bottoming out in the beginning, such as holding onto your job for a while during your first year of operation or trying to line up a few clients before you open.?Just remember that unwavering persistence and tenacity may be your best friends during this process.?Starting a business and getting it to the point of profitability is very possible for entrepreneurs with the right tools and mindset. Good luck and Godspeed.

For more information on how to start a business, call 1-800-619-3734 or visit www.IlluminationConsulting.com .

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