Starting a new business in 2021 can be viewed as an uphill task as many people would rather try something else than start a new business, which goes on to provide a logical explanation why they’re not many entrepreneurs out there.
However, this is not to suggest that starting a business is something beyond the capabilities of an average Joe. No, it’s not! Every intending business owner or entrepreneur must consider some important steps before taking a full plunge. And these are steps that can not be ignored if anyone must succeed in building a profitable and flourishing business that will also stand the test of time.
These Are the Steps to Consider
(1) Have a Clear Ideation
First, you need to have a clear grasp of what business you want to start; the type of product or service you want to provide, and of course, the market you want to enter. So this calls for a painstaking analysis of your business concept, factoring in the profitability and concomitant challenges.
Within this period, you are expected to do some thorough research on the companies or firms who are already into the same kind of business and try to know the challenges they face. Know who the market leader is within your industry and the strategies they employed. Know why they are ahead of other competitors, then see if you can find areas your brand can do better.
At the end of the day, you should be able to know if your proposed business can deliver value or something other potential competitors don’t provide; or perhaps, you feel you can deliver the same thing but faster and cheaper. So before starting out on your new business be thorough, and be sure to refine the idea to the point that you’re confident enough to take the next step – which is building your business plan.
(2) Create a Business Plan
Now that you already have a clear idea of which business to go into and have considered all important factors, it’s time to create a business plan. There are a few questions you may want to ask yourself that would help you go through this stage smoothly; such questions as, What do I want to achieve with this business? Who are my potential customers? How will I cover the startup cost? These questions and many others would make creating your business plan less daunting.
No doubt, it’s way harder than that. However, it can’t be ignored because it’s one of the most important steps you have to take before starting a business. Unfortunately, many inexperienced entrepreneurs sometimes skip this very important step and rush into starting off with their business idea.
Just the same way a Sailor can not do without a compass, so also an entrepreneur can not do without a well-laid out business plan before starting the business. Business owners who ignored this step, more often than not, end up in a disaster and have their businesses fold.
So what are these important elements that must be included in a good business plan? First, try to identify your target customer base – these are the people who will be patronizing your brand. What are the short-run and long-run costs that are required for you to float this idea (business)? What are the opportunities and potential threats in your chosen niche? What is your exit strategy? The answers to all these questions will certainly bring you closer to crafting a unique business plan.
Now it’s of signal importance, to state here that you must not design your business plan all by yourself, in fact, as a first-timer, you could be overwhelmed at this stage. So it’s instructive that you check online for standard templates and free business plans to use as a guide, or you can hire the services of an expert to get it sorted out. Find 500+ free samples of a business plan here. You can also download some software or apps that make the process a lot easier. Whichever one you choose, be sure to capture the basics in the final draft of your business plan.
(3) Evaluate Your Finances
Of course, you need to decide how you intend to fund the business; how you are going to cover the costs and concomitant expenses as captured in your business plan. But before then, you must thoroughly evaluate your finances to know, in specifics, how much you have in relation to how much that is needed to start and run the business. At this point, you should be able to know if it’s within your means to fund the startup or you will need external financial support in form of a loan or grant.
In financial planning, carrying out a break-even analysis at the early stages is very essential because it helps the business owner determine their financial needs. Also, be able to project when their business would become profitable.
Take a look at this formula below:
Fixed Cost/(Average Price – Variable Costs) = Break-Even Point
This is quite simple though, but powerful, simply because it provides a very cogent piece of statistical information on the minimum performance your business must attend so as to avoid running at a loss. It further helps you to ascertain the basic channels from which the profits come in and as well help you set your production goals aright.
Here are the 3 basic common reasons why you must conduct the break-even analysis as a business owner:
(a) To Determine Profitability: Making a profit is at the core of most business ventures, hence, you must make sure that your proposed business is equal to the task. You may, therefore, start by asking yourself how much revenue you must generate to cover all costs and expenses. So knowing which products or services bring in profit and the ones that are responsible for the losses brings you closer to your target. In order to get these accurate data, you will have to use your break-even analysis.
(b) In Price Fixing: As a business owner to fix accurate pricing for your product or service, you must factor in the cost of production. You need to know your variable, fixed, and total costs. And all these should capture the cost of physical goods or inventory and the cost of labour. Very importantly, also, you need to know how your competitors are pricing their products and services, this is because you can’t just fix prices arbitrarily, else your brand won’t stand a chance.
( c ) Data Analysis: Of course, as a business person you must know what quantity of goods or services you need to sell in order to achieve profitability; this is what the break-even analysis helps you with. When this data is available you can now ask yourself how you can reduce the variable cost per unit or the overall fixed costs, or how you can improve in your marketing to boost sales.
(4) Determining Your Business Legal Entity
One of the very important things to do while starting a business is to determine the business legal entity before you finally go for registration. They all have their pros and cons, so you have to have a clear understanding of each and if they are suitable for your business. This must be taken seriously because it will determine how you file your taxes eventually, and to what extent your personal liability is immuned if anything goes wrong.
Take, for instance, a sole proprietorship is suitable for a one-man business, where you own everything and intend to take full responsibility for all debts and obligations. But on the other hand, you need to also note that this option has a direct impact on your personal liabilities. Your person and the business are inseparable, if your business faces any legal charges it affects your personal liabilities as to the owner.
You might, also, want to consider a partnership business. Here two or more people share the liabilities as to the business owners. If this option resonates with you, then it’s advisable to choose someone whose capabilities would most likely complement yours because it will help your business to flourish.
In comparison, forming a corporation avails you the opportunity as a business owner to completely separate your personal liability from that of your business. Owners of a corporation are adequately insulated from any legal matter filed against their business; the company serves as an entity that carries the legal burden. Also, corporations can own properties, assume liabilities, sue and be sued, pay taxes, etc.
For you to get a clearer understanding of which to choose while forming your business, you will have to consult with some legal experts, especially business or corporate lawyers, or some other knowledgeable persons (like business experts) in order to determine which is best for your business.
(5) Register Your Business
After determining your business legal entity, it’s then imperative to have it registered with the government or the IRS as the case may be. For a corporation, it will need an “articles of incorporation” document; contained in this document are business name, corporate structure, business purpose, stock details, and other important pieces of information about your company.
You may also decide to register it as just a business name, and this can be your legal name or a “doing business as” (fictitious) name. Oftentimes, this is more suitable for a sole proprietorship. Generally while registering your business, remember to confirm if your business requires some licensing or trademark which is meant to provide extra legal protection for your business.
But bear in mind that all these legal kinds of stuff are better handled by lawyers and experts, so you need to engage their services as regards this.
(6) Build Your Team
Even if it’s a small or medium-sized business, setting up a team makes everything come out smoothly especially when you are working in synergy. In present business realities, a team of workers mustn’t stay together in a particular location to be productive, the internet, innovative gadgets, and applications have completely removed limitations often occasioned by space and distance. For instance, a team of workers may be working from different countries but connected to the same workspace. Meetings are now held on Zoom, Google, and the rest without losing their effectiveness.
Except you intend to run your business all by yourself as a sole proprietor, building a team is very crucial to the overall success of your business.
(7) Business Branding and Advertisement
Now after building your team, you may feel that you are now ready to launch out into the market and start ‘making a killing’, but hey, Hold your Horses!
Before you start selling your products to your clients, it is very important to build your brand and create sufficient awareness. Because this will ensure that they’re potential customers who are on the qui vive for you to launch your product so they can patronize you. This approach helps to create a ready market for your brand when you have created a sufficient awareness for your brand whetting your potential customers’ appetite.
Create a unique logo for your brand, it helps your clients to not only easily identify you but also differentiate you from other brands. Also, create a website. Most businesses have moved away from the traditional brick and mortar setting to embrace the internet and online business space. And the easiest way to do this is by creating a business website. Also, having a presence on all the major social media platforms such as Facebook, Twitter, Instagram, etc. helps you generate a lot of traffic if well managed which can be converted to dedicated customers.
In our present society, promoting your brand through the internet and online instrumentality stands as a monument of gold to all savvy business people, irrespective of which industry you belong to. So you too can take advantage of these digital facilities to carve a niche for your brand in the ocean of multiplicity of choices.
In the final analysis, we want to say that starting and building a business has never been an easy task, that’s why more than 50% of startups never make it beyond 5 years’ anniversary, not because they didn’t have enough resources, but because of poor planning and execution.
Experience has shown that starting a new business could be overwhelming, however, if you follow these steps stated above you will find it less daunting and above all, highly rewarding too.
Starting a business definitely comes with a price, but it’s one that’s worth it! If you have business ideas that you would like to invest in and make a reality, then this guide is for you. When you eventually have your business registered, the next thing may be to find ways to fund your projects, community engagement, and more. Grants for these purposes can come in handy, and finding grants for your business is a great way to fund your business plans. If you would like more information on applying for grants for your business, click here to speak to one of our grant experts who can help guide you through the process.