Starting your own business requires many things. Motivation, focus, capital, and a great idea are just a few of the necessary components of starting a successful company. Most people are aware of those aspects - and in fact, the absence of any of those things can be enough to stop some people in their tracks.
Savvy entrepreneurs will tell you that a fresh idea is just the first step in a successful venture. What do effective entrepreneurs wish they knew before they started out? We asked around and found several tips for would-be business owners to take stock of before diving in.
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11 Things to do Before Starting Your Own Business
Starting a small business is a huge decision. Creating a sustainable business that can grow over time is even harder. A survey from Constant Contact and National Small Business Week stated that business owners found it “extremely hard” to start their venture. However, respondents also mentioned serious rewards: 84% say if they had it to do all over again, they would still choose to run a small business. That means the risk is often worth the reward, but it’s essential to know what you’re getting into. Make sure you follow these steps in order to set the best foundation for long-term success.
1. Research, research, research
Have you heard the expression “Measure twice, cut once?” Having the right information available is a key part of any business strategy. First of all, you need to make sure you’re clear on the industry you’re serving and what the demand is. What evidence do you have that this is a needed venture? What competitors are out there already, especially in your area? Remember that even your most brilliant idea may have been had by someone else before. Why were they successful (or not)?
2. Know your audience
Who is going to spend money on your product or service? Who is your target audience? This group of people will be a driving force in every decision that you make so it’s important to have a real understanding of them. When you truly understand your audience, you can fine-tune your offerings and create effective marketing and sales strategies. Begin by thinking about if you are B2B (business to business) or B2C. Will you sell to other organizations or directly to individuals? Within those parameters, also consider factors like age, income, and demographics. Remember, it’s not about what you want. Everything you do should be focused on what your customer wants, or your business won’t last long.
3. Have a vision and mission
There is no magic formula that will create success. You have to be ready to put in the work. That’s easier to do when you feel passionately about what you’re setting out to do. Recognize and be able to document your businesses strengths, differences, and purpose. Having all this information will help you to expand your services down the line while adhering to what mattered to you in the first place.
4. Choose a business structure
What we mean by that is understanding the various legal entities that are available to you and identifying which is right for your operation. This structure dictates tax liability, lots of paperwork, liability issues, and different aspects of employing other people. On top of that, you’ll need local and state registrations and the right paperwork associated (exactly what you need is dictated by the type of business you open). Owners need to make sure they have all of their ducks in a row, including articles of incorporation, employer identification numbers, and applications for various state and local licenses. All of those items are going to vary by state and industry, so it’s important to do your research and create a checklist of the necessary legal items to cover.
5. Carefully plan your finances
Your great ideas might be infinite, but time and money are not. Capital makes a huge difference in how fungible a business can be, so it’s something you need to be realistic about from the beginning. Often, starting your business requires money that you don’t actually have at the moment. Most entrepreneurs start with a small amount of capital, since getting more money early on is a big hurdle to many people. However, don’t be discouraged, because there are a lot of options out there. The most common option is obtaining investments from friends and family. That may not be enough, so you can create a pitch for a venture capitalist or angel investors. Business loans through banks and small business associations are always an option provided you have a decent credit history. Check with local chambers of commerce or other small business groups in your area to see what help is available - there tend to be more resources out there than you might think! Have a professional help you to understand how the finances will work, whichever route you go.
6. Understand taxes
Financial planners say one of the biggest errors they see is not being prepared for tax season. When you start out, you need to be clear on your tax liability and other fees. Unlike your personal taxes, there are multiple tax deadlines for business owners - and being late on any of them can result in late fees. You need to know how much your payroll will be and then make those payroll taxes on time. What other taxes will you be responsible for? Consider other business taxes like city, county, and state. In most cases it makes sense to consult with a CPA early on in order to get everything in order (but remember, you’ll need to set aside some money to pay that expert as well). Remember that it’s always worth an up-front investment that can help you over the long term; versus making costly mistakes that can cripple your business later on.
7. Have a clear idea of the risk
Any new business venture requires a certain degree of risk. There’s no getting around that. Calculating and planning for that risk is what effective entrepreneurs do. In order to do that, you need to assess your industry’s risks ahead of launching. You’ll also need this information in order to purchase business insurance. The way this works varies by industry, but you need accurate estimates so you can plan financially. For example, an accountant needs to consider professional liability insurance for if a client files a lawsuit based on costly errors on their tax returns. Restaurant owners need liquor liability insurance as well as coverage for more generalized slip-and-fall incidents. As you go through this process, it’s important to be honest with yourself, your business partners, and any investors. Think about what could really go wrong with your new venture. Then you can work contingencies into your overall business plan, plus ensure you’re equipped with the right insurance coverage. Additionally, factor this risk into your overall life. How long will you be financially solvent if something goes wrong with your business? What does a backup plan look like? It can be fun to think to yourself “There is no backup plan; this has to work.” However, that’s not practical and can hurt you in the end.
8. Write your business plan
Creating a formal business plan should never be overlooked, no matter how small you’re starting out. This plan will outline everything you need to know about creating and running your business successfully. It’s important for you, in order to develop a focus for moving forward. It’s also important for sharing with potential partners and investors to gain capital. It’s also an important document for attracting talent early on before having real results to share. Business News Daily has a helpful resource for creating business plans, including some templates to try. However, almost all business plans benefit from the following components:
- A mission statement
- Description of your business
- List of products or services
- A SWOT analysis (strengths, weaknesses, opportunities, threats) of both your company and the market as a whole
- Biographies of key people within your company along with a possible visual of the decision-making tree
- Your financial plan written in such a way that reviewers can understand the real opportunity
9. Ensure timing is right
Timing is a really important element of starting a business (in fact, it's more important than many people want to give it credit for). On a macro-level, it’s more attractive to start a business when the economy is booming and your desired industry is growing. However, another common theme we saw was getting the timing right for making decisions. Experts say that too many people take too long to make decisions: they want to feel 90% confident in a choice, and sometimes that’s not possible. While waiting to feel really, really sure about something, they’ve wasted valuable time. One piece of advice we read was to make decisions when you feel 70% of the way there. If you’re leaning toward something and have good reasons for that, then keep moving forward. When it comes to many decisions, there is no “right time”. Go with your gut but always use the data available to you as well.
10. Find advisors
Mentors are important for everyone, no matter what degree of success they’ve achieved. Starting a business shouldn’t be an independent journey. Who has completed this journey before you? What can they teach you about the process? Network with other people in your market, attend industry-specific workshops, and reach out to thought leaders in your industry. Don’t be afraid to reach out to someone you admire and admit the truth: you’re starting a business and would love to pick their brain. If you’re really exploring new territory, you might want to hire a coach who can give you more pointed and actionable advice.
11. Hire experienced professionals
Unless your new company is a solo operation, you’ll need some help. There’s no way to know everything about your entire new venture. In order to grow your company, you need to be able to focus on what you do best. For that to happen, you’ll need to bring on and trust other professionals with different competencies. This tends to be true particularly in the areas of legal guidance, accounting, technology, and supply chain. Though gaining access to these experienced professionals requires an investment, it's one worth making. Establishing relationships with an attorney and an accountant at the beginning of the process can save you a lot of headaches and resources later on, should you run into any issues.
Must-Haves for a Successful Business
How you measure success will vary based on your own goals, industry, and several other factors. That being said, there are a few qualities that seem universal for successful businesses. Our research shows that impactful entrepreneurs share these traits:
- A tolerance for risk - High risk, high reward. As we mentioned, there will always be some risk associated with starting a new business. Boldness and a willingness to take chances are good signs when it comes to your new company’s prospects.
- Specific and unique value propositions - It’s essential to stand out from your competitors. How will you do that? You don’t want to focus on only price, because chances are there will always be people who can offer something cheaper. Things like customer service, loyalty programs, or expert advice can all be differentiators that set you apart.
- Determination - To achieve and sustain success, owners must have a certain level of tenacity. Being able to be persistent in the face of challenges is a key characteristic of brands that make it big.
- A customer-centric strategy - Your own personal goals for the business are important, but not as important as what your customer wants. A strong customer focus is essential and should permeate everything you do in your organization. Creating a culture that is centered around customers will help you to streamline all of your products, processes, and business operations. Successful businesses consistently deliver high-quality goods or services to a market that is well-researched.
- Smart marketing - Successful businesses most often have great marketing supporting them. Using a broad mix of marketing channels tends to be more effective, with a multi-channel experience most likely to reach potential customers. For example, creating a pay-per-click campaign and then also reaching out to those people through social media and an email series is more likely to result in immediate sales as well as long-term relationships.
- Passionate leaders - Business leaders who are truly excited about the company are the backbone of thriving companies. In this way, they can get employees and partners just as excited as they are. Nurturing that passion throughout the organization will lead to delivering excellence for customers.
- Employees who can make decisions - Empowered staff makes a huge difference in how quickly and efficiently things get done in your organization. Employees should not only be aligned with their company’s mission, but able to take ownership of their work and make choices. Micro-management is the enemy of fast and effective operations.
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“What I Wish I Knew Before Starting my Own Business”
Even with the best planning, there will be hurdles along the way. Wondering what entrepreneurs say they wished they had known when starting out? Here are a few pieces of advice we gathered from several business leaders.
- “Every business is a people business.” - No matter what industry you’re dealing with, people respond to people. You will be working with people and selling to them. You have to be able to get along with others.
- “Things will never go exactly as you planned them.” - How you respond when things don’t go according to plan will dictate your business prospects. Something might feel like failure in the moment, but remember that it’s just a roadblock guiding you to a different path.
- “Adaptability is the only strategy that matters.” - It’s been said that the only real constant is change. Chances are that you feel tied to your original ideas, but being too rigid will hurt your business over time. If you’re consistently hesitant to change, then the overall direction, performance, and growth of the company is going to be limited.
- “Activity does not equal growth.” - You can spend your entire day doing things that don’t actually impact your bottom line at all. It’s important to identify what the real revenue generating activities are, and focus your energy there. What are the activities that create more cash flow for your business? What changes need to be made to your schedule to allow more time for those activities? Identify the tasks that are most essential to the growth of your company, and delegate the rest.
- “Don’t be afraid of outsourcing; in fact, embrace it.” - Related to the point above, once you know which areas you really need to focus on, figure out how to unload the rest. You need to spend your time on the core activities that contribute to revenue. Other tasks can probably be completed faster and more effectively by someone who is an expert in that space. Note: that doesn’t mean investing in full-time employees right off the bat. You can hire freelance workers or project-based help to accomplish a variety of needs such as marketing, accounting, IT, etc.
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We know it can be scary (and exciting, and exhausting, and rewarding, and stressful) to start your own business. We’ve been there, and that’s why we applaud all the risk-taking entrepreneurs out there. Use this guide as a checklist for setting the foundation of your new business, and make sure to follow our blog to get more tips on productivity. In our blog, Shift experts and industry leaders regularly share updates, tricks, and tips on everything related to the world of work.