So You Want to Start a Business? Here's What You Need to Know
Being an entrepreneur is not for the faint of heart. It comes with a certain level of risk, but with that risk can come great rewards.
Most people decide to start a business because they no longer want to work for someone else. They desire to become their own boss because that represents freedom, satisfaction, and flexibility. Some people start their own business to follow their dreams and fulfill their passion because they know that their own business will fulfill them in a way that working for someone else will never do (me…I’m some people!). Others start their own business to achieve financial freedom or independence. Whatever the reason may be for taking the leap into the preverbal entrepreneurial waters, every entrepreneur should know what is needed for them to make their venture successful. Here are some key steps to consider before starting a business:
1. Determine your value proposition
This is one of the most important things for new business owners to consider because if you cannot clearly articulate why someone should use your company instead of a competitor, it will be very challenging for your business to be operationally and financially successful. A few questions to ask yourself:
- What gaps have I seen in an industry or in society in general that I am trying to fill or solve?
- Do I understand the industry I am looking to enter?
- Do I understand my potential competitors?
- Is my idea unique enough for the market that potential customers will choose me over my competitors?
A well-written value proposition could be the difference between a company that is in business for less than one year (as Chris Rock said, “Grand opening…grand closing”) and a company that you can pass on to your family for generations (or sell for a profit if you so choose).
2. Know your customer
Presumably, you are looking for people to spend money with your company, and therefore it is vital for new business owners to spend time focusing on their target demographic because catering to that demographic will drive each one of your business decisions.
Is your business a business-to-consumer business? Is your business a business-to-business business? Are you targeting a specific age category, gender or profession? The answers to those questions will help you understand who may need your product or service so that you can deliver what your customer wants and not what you think they want. You must know what drives the buying decisions for your target demographic, so understand who your customers are and make them your priority.
3. You can’t boil the ocean – Start small
Trying to “boil the ocean” is an impossible task, but if you start small and gain customer loyalty and market recognition, you can grow your business into what you want it to be.
Sara Blakely, the owner of Spanx, invested $5,000 of her savings to get Spanx off the ground, and now Spanx has grown into a shapewear juggernaut that’s estimated to do more than $400 million in business each year.
If you can provide the initial funding for your business idea yourself, that is great. Then you can always go for funding from other sources once you show growth. If you are not able to provide the initial funding for your business idea alone, you can seek capital contributions from family and friends and venture capitalists that are looking to fund small businesses or grants. Regardless of how you fund your startup costs, remember that breaking your product or service offerings into smaller pieces at the beginning and not trying to “boil the ocean” when you come out of the gate is the best formula for long-term success.
4. Know Thyself
I sometimes think back to the club scene in Coming to America when Eddie Murphy is trying to find his Queen, and he talks to this woman that says, “Yeah, I wanna work in videos, but I really wanna be my own star in videos because I wanna become a pop singer, and a rock singer, and write my own songs, produce my own songs, and then I’m gonna try an actress because people tell me how talented I am, I’m a natural and stuff like that…so then I’m gonna write my own stories and direct my own stories and produce the movies I’m doing…” WHEW…that’s a whooollleee lot!
As a business owner, you must know that you can’t do it all. There will be times when you need to engage other professionals such as lawyers, accountants, or web page designers that have expertise in areas that you do not. If you're going to be a successful business owner, you must “know thyself” and be able to identify what you do well and what you don’t do well, and then surround yourself with people that can help you with the things you don’t do well.
As an attorney, it is with clear bias that I say that it is especially important to have legal assistance as you’re starting your business to ensure that you are going about the process in the right manner and to protect the business. However, just because I’m biased doesn’t mean I’m wrong! People often think that you only call a lawyer when you’re in trouble, but as someone with years of experience working in-house for large and small organizations, I know that lawyers are there to provide proactive legal advice in order to identify possible risk areas and set the business on the path for success. Trust me, you don’t want to be in reactive mode. Engaging an attorney on the front end will yield positive returns on the back end.
Accountants are another important experienced professional that a new business owner should engage as they are getting their business set up. When I decided to start my non-profit and open my virtual law office, I did all the groundwork, and I knew that the one thing I was going to need was an accountant to ensure I was handling my books and records correctly for tax purposes. They are a true asset to every business.
Bottom line, professionals that are experienced in areas such as law and accounting will be essential assets to make sure that your business runs at its optimal level.
5. Leverage Your Network to Find a Mentor
I know the idea of saying “I did it on my own” sounds very tempting but avoid that temptation. Deciding to start a business is a huge and risky undertaking, and it shouldn’t be done alone. You should reach out to others that have walked your same path before because they can help set you up for success. When I decided I wanted to open my own virtual law firm, I reached out to a former law school classmate and friend that had opened her own law firm a few years earlier. I also reached out to one of my sister’s friends, that opened his own law firm over 15 years ago. I wanted to get as much advice as I could from people that were doing what I wanted to do. If you do not have people that you know within your industry, you can try workshops and events, LinkedIn, or even hire a business coach that can give you clear and concise advice. Bottom line – don’t do it alone. Find someone else that has gone through the process before that can help you through the set-up process.
6. Determine Your Organizational Structure
If you are a single owner, do you want to be a sole proprietor or have a single-member limited liability company? If there will be multiple people involved, do you want a multi-member limited liability company, a partnership, or a corporation? Do you want to have a C-corporation or an S-corporation? The legal structure for your new business will dictate your tax obligations, the type of paperwork that needs to be filed in the applicable jurisdiction or jurisdictions, the liability of the owners, and other legal considerations. Certain structures can even determine whether or not your organization can have employees. In addition to the legal considerations in setting up the company, there also may be certain local, state, or federal registrations that may be required to open your business. This is where it is important for a business owner to know that this may an area that requires the expertise of a legal professional to advise on structure and help file the necessary paperwork.
7. Write Your Business Plan
Having a written plan for your business that contains your projected results and personal goals ensures that you will put your best foot forward and will give you what you need for a successful launch and continued growth. The business plan will help you stay on track because it establishes the focus for your business, will help you recruit talent (if your business will have employees), and, if necessary, secure outside investors.
You might be saying to yourself, “Self, what should be included in my business plan?” Answer: Your business plan should include: (i) mission statement, (ii) business description, (iii) description of services or list of products, (iv) market analysis, (v) list of key stakeholders, and (iv) your financial plan.
Some people may think writing a business plan is unnecessary but it’s better to have it and not need it to recruit talent, raise funds or expand than to need it for those purposes and not have it.
8. Know your numbers
A phrase that will always stick with me is “The language of business is finance.” That is why as a business owner, it is of vital importance that you have a solid grasp on the numbers that surround your business as they will tell you the health and wellness of your business. This means you need to understand what your potential start-up costs might be, you need to estimate your sales, project your profits and cash flow, and other financial considerations that will be dependent upon the nature of your business. Sometimes you must make quick decisions, and knowing the business’s numbers will help guide you in the right direction for effective decision making.
9. Timing is Everything
I think everyone wants to “make an entrance” at some point, and that includes new businesses. Timing your entrance right is what will make it memorable.
What business owner doesn’t want to launch when the economy is booming, and the industry they are seeking to enter is expanding at the speed of light? I mean, that kind of an entrance would seem like a no-brainer, right? While that timing would be perfect in a perfect world, we don’t live in a perfect world, and the truth of the matter is there that there is an ebb and a flow to making decisions, and when building a business, it is important to be decisive.
I recall one of the business leaders I supported saying, “We need to fail fast and be ready to pivot if necessary.” That has always stuck with me because it reminds me that sometimes decisions need to be made even when you don’t have 100% certainty. Sometimes you might have 80% certainty, but you must make a call because you only have so much time to find out if the decision you are making is the right business decision. While I believe the better phrase is “fail smart,” the underlying premise remains the same – even if the timing and circumstances are not your perfect scenario, sometimes you must make the jump and launch.
10. Do What You’re Passionate About
Let me repeat what I said at the beginning of this blog post - being an entrepreneur is not for the faint of heart. It can be lonely. It can be frustrating. It can be heartbreaking. It can leave you feeling unaccomplished because there weren’t enough hours in the day to accomplish everything that you wanted to get done. This is why doing something you’re passionate about is so important.
When I was in training as an elite gymnast, my coach used to say, “You can’t put unleaded fuel into a luxury car.” This means that if you want to perform at your optimal level, you must put the right fuel into your body. The same goes for your business. There will be many hard times, and therefore the fuel that keeps you going must be a passion because, in those hard moments, your passion will keep you driving forward.