Many people dream of starting their own small business, whether it’s their own Etsy shop or a world-changing app. Despite your passion, taking the leap into actually starting a business can feel overwhelming and stressful. With pre-planning, it’s possible to enter entrepreneurship with purpose and resolve. Read on for seven steps to take before starting a small business.
1. Conduct market research
Unfortunately, passion alone isn’t enough to make your business successful. You’ll need to know your industry inside and out to be successful. You’ll also need to be familiar with your potential competitors — and how your business will stand out among them. Is there need and space for a business like yours in the marketplace?
2. Know your audience
To make it, you’ll need to know who is going to patronize your business. Many budding entrepreneurs make the mistake of believing everyone will support their businesses. But that’s rarely true. It’s more likely that a segment of people will become your customers. First, you’ll need to decide if you’re selling to other businesses or to consumers. If the latter, here are a few key questions that will help you determine your business’s audience: Does it appeal more to men or women? What age of people is it right for? Where do they live (country, state, city, neighborhood)? How much money do they make? Do they have children? In addition to these demographics, there are psychographics to consider, such as: What are their interests and hobbies? What are their values? How do they like to shop? The better you can understand your audience’s needs and problems, the better you can solve them with your business.
3. Develop a business plan
A business plan is a document that identifies your proposed product or service, the start-up costs involved, potential funding needs, proposed cash flow, as well as your competitors, potential customers, and market opportunity. It’s the foundation of your business as well as the roadmap forward. Luckily, many of the items on this to-do list will funnel into your business plan. The Small Business Administration offers tools to help you write your business plan.
4. Establish your business structure
Your business’s legal structure — LLC, S Corp, etc. — will influence how you register your business with state and federal governments, how much you pay in taxes, and your personal liability. You may need to consult with a lawyer or tax expert to determine the best structure for you.
5. Secure funding
You’ll need money to get your business going, whether those funds go to securing a physical location for your long-dreamed-of restaurant or purchasing supplies to create your art. Your business plan will help you nail down how much money you’ll need. Then, you’ll either need to save toward that goal or raise capital. There are many opportunities to locate funding, including taking out a business loan or securing venture capital. It’s also wise to think beyond start-up costs and develop a plan to have regular cash flow as quickly as possible.
6. Find a good mentor
Starting a small business is exciting, but it’s also full of challenges. Half of small businesses fail within the first five years. Having the right advice may set you on a path to success. Find someone who has taken an entrepreneurial journey before and can advise you on potential pitfalls, direct you to the best networking events, and/or make introductions to thought leaders. Their guidance may be offered on an informal or paid basis.
7. Hire professionals
As a budding entrepreneur, you’re probably a DIY type. However, as the founder of a start-up business, you won’t know how to do everything. Don’t hesitate to hire professionals in whatever area you need support, whether for your taxes, accounting, marketing, or legal needs.
Owning a small business can be fulfilling. In fact, 84 percent of entrepreneurs say they’d do it all again—despite the challenges. If you’re ready to take the leap into entrepreneurship, reach out to a State ECU representative to learn more about our new line of business accounts and products developed specifically for small business owners.