By Victoria Treyger, Kabbage
Everyone has great dreams of working for themselves but there are important steps to starting a business that you need to know in order to move your dreams to reality. Owning your own business means a lot of things, including freedom and flexibility. But starting your own business also means a lot of hard work, especially at the beginning.
You will need to decide whether you want to purchase a franchise from an existing business, or if you’d rather start from scratch and build your own business. Will you work from home as an independent consultant for the many home-based businesses? Or will you have an actual “storefront”? Is this a sole proprietorship, meaning you are the sole owner, or will you go into a partnership with others to form your business structure?
Starting your own business is like a giant research project. You want to do your homework, learn as much as you can and set yourself up for success, long before you actually open the doors to your business.
TIP: If you’re working in the corporate world and earning a regular paycheck right now, the transition to entrepreneur (where you work for yourself) will probably mean few or no paychecks right away. Until your business begins performing and returning profits on a regular basis, you will need to learn how to make your dollars stretch.
It doesn’t matter what business you choose to go into, what matters is that you have the passion, desire and willingness to put every ounce of energy into making it succeed.
Here are the 8 steps to starting a business that you’ll need to know to be successful:
Step 1: Choose Your Product.
What will you sell or offer? Is it a product or is it a service? How will you differentiate yourself and your business from your competitors? How is what you offer different or better than what’s already out there? What is your expertise? What is your passion? If you’re not sure, take a moment to think back to past performance reviews you’ve received in the corporate world. What characteristics and traits stand out as your strengths? Build on these and see how they can translate into starting your own business.
Tip: If your business is service-related, you may have a bit of an advantage. For instance, if you’re starting your own business as a professional speaker and your expertise is in training employees to improve their customer service, there are many ways you can differentiate yourself from others in the market. You can use your own personality to customize your presentation each time for each audience. You can learn new tactics, share new stories, pull stories from local and national media, etc. Every presentation you give will have the same theme, but will be different for each audience. This is one way that owning your own business gives you the flexibility to think outside the box and deliver a unique product with a high-value associated with it.
Bonus tip: When starting your own business, a service related business may cost you much less at the beginning. Think about it. If you’re offering resume writing, freelance writing, Internet design, speaking services, tutoring, etc., your start up costs will be very minimal. Chances are you already have a computer, printer, phone and Internet. That’s really all you need from an “inventory” standpoint to begin any of these businesses.
Step 2: Identify Your Perfect Customer.
This is crucial for anyone starting your own business. Knowing who your target audience is and then catering your product to fulfill a need is the perfect formula for success. So how do you define your target market? Is it men, women, teens? Are they older? Married? Single? Veterans? Moms?
Know Your Target Market.
Knowing your target market and what appeals most to them will help you refine your product offerings. It will also help you develop strategic marketing plans. A printed flyer mailed to young millennials will miss the mark, since these folks get the majority of their news and information online. And vice versa, a targeted banner ad campaign on specific websites may be lost on a demographic that does not spend a lot of time online.
Do Your Research.
There are ways to do research – some is free and some comes with a price tag. You can start with your local Better Business Bureau, your local Chamber of Commerce, and your library for some demographic information. The local convention and visitor bureau also has residential demographic information that can be helpful when starting your own business. Also, go online and check out your city or town’s website as well as your county offices
Step 3: Know the Market.
Do you know what your competition is doing? How are they winning customers – and more important – how are they keeping customers loyal? What differentiates their product or services from those that your business offers? Businesses with similar products and services can co-exist in the same markets. But it’s up to you to know exactly how your product is different. Make yourself stand out. Know what your market responds to by doing some simple focus group research. It can be as simple as having cookies and hot cocoa on a cold day and inviting people to chat with you about their needs. Or, a quick email survey through providers like SurveyMonkey can be a quick and easy (and free!) way to gather critical market research to grow your business.
Step 4: Know Your Worth.
It’s important to not underestimate yourself or the price you charge for your products or services. Owning your own business does not mean you give away your services cheaply.
That said, when you’re first starting out as a business owner, you also do not want to overestimate your pricing structure. Do some research and see what your others in a similar business charge for their products or services. As a new business owner just starting your own business, you may want to consider starting out low with your pricing. This gives you a chance to build your reputation and credibility as a quality provider. Once your business is a bit more established and your income is more steady and regular, you can consider raising your prices. At that point, you’ve probably earned a loyal and steady customer base as well.
There are many resources online that can give you estimates of salaries for your industry. These may not always be possible when you start your own business. You will have other expenses as a startup that people working for corporations simply won’t have. Take these into consideration when planning your expenses in the short and long term.
Step 5: Get your finances together.
Do you know what kind of startup capital you will need? Do you need to get a business loan? Will you borrow from friends or family or have investors or partners? Will you need to borrow against your home or your 401k? Use this time to gather your projected income as well – it often takes time for a new start up business to turn a profit. Do you have additional sources of income to get you through the leaner times until you begin to make a steady income? You will need to make sure your credit is in good standing – excellent, in fact – if you plan to get a business loan. If your finances are not quite where they should be, consider going in with a business partner. Perhaps your expertise and their financial strength will help make starting your own business a less stressful venture.
You will also need a Tax ID number. But first you must decide what kind of business you will have. In general, you most businesses are one of the following: a sole proprietorship, a partnership, a corporation, or a limited liability corporation. Do your research and find out which one makes the most sense for you. Then, make sure you are following all tax guidelines for the type of business you’ve selected. Again, there are many resources online – one of the best is the sba.gov, which is the Small Business Administration website.
Step 6: Get a Nest Egg.
Many experts recommend having about six months of savings in the bank. This isn’t just for emergency use; this will be your go-to money while you build and grow your business to turn a regular profit. Put some money aside while you continue to work at your corporate job. This way, when you do leave your steady job and are ready to start your own business, you’ll have a bit of a nest egg to lean on while you get up and running.
Tip: If you are married or have a partner with whom you share living expenses, make sure they can carry a bit of the financial burden while your new business gets off the ground. Emotional as well as financial support is key for an entrepreneur when you start your own business.
Step 7: Write a business plan.
There are many resources online to teach you how to write a business plan. Basically, a business plan is a detailed roadmap of where you expect to take your business. It is a clear picture of who you are, what your business is, how you will reach your target customers, and your plan for revenue and profits. Your business plan is a critical factor when applying for business loans. In fact, it is the very first thing – in addition to your credit reports – that a bank loan officer or other nontraditional lender, such as Kabbage, will look at. Lenders review your business plan to make sure you are a good risk. Don’t be fooled into thinking that your business plan needs to be long and lengthy. As long as it is comprehensive and paints a realistic and strategic picture of your business, your business plan can be as short as one page in length. Some key things to incorporate into your business plan include:
· Description of your business, product or service
· The financials – where you are now and what your projections are for future growth
· The research – your financial projections should be based on solid marketing data. Include that here as well as other economic and demographic data that will show you know who your customers are, what their needs are, and how you will fulfill those needs.
· Your Marketing Plan which should include details of how you plan to reach your target market
· An Executive Summary. Include this at the very top of your business plan. When starting your own business, lenders, investors and even your own employees will be very interested in reading your plans for growth. The Executive Summary provides a professional but concise snapshot of the rest of your business plan.
Step 8: Seek out free counseling and assistance.
The Small Business Administration has local offices in every state. They offer free counseling and training for small business owners. Their services are invaluable to any start up. They can help you develop a business plan, a marketing plan, as well as help you navigate what you need to know about filing and paying taxes as a small business owner. Many of their services and training programs can be found online. Others require that you attend training classes or one on one meetings with small business advisors. These resources are there for your benefit – take full advantage of all they have to offer. And attend as many of their networking events as possible – it’s a great way to meet other small business owners and promote your products and services.
Starting your own business is an exciting adventure! It is possible to take your passion and drive and turn it into a profit-making business where you are your own boss. Follow these steps and do your research and you’ll be well on your way to becoming a successful business owner.
Victoria Treyger has more than 15 years of experience in building brands and customer loyalty. She joined Kabbage because she loved the message: To understand customers better and provide them with cash when they need it. Kabbage has provided $150 million+ in funding to small businesses since 2008.