Starting a new business is an exciting endeavor, and most people begin the process with gusto.
Unfortunately, it’s easy to lose steam once that initial excitement wears off and you’re slogging
through the more tedious details of getting a business up and running. These six steps will help
you stay focused and identify potential red flags as you take your new business from dream to
reality.
1. Perfect Your Idea
A great idea for a new product or service is one of the most commonly cited reasons for starting a
new business. However, it takes a lot of work to transform a great idea into a successful
business. Before going any further, make sure that all of the following statements apply to you
and your idea.
A. You Understand Your Idea With Total Clarity
You should be able to explain your idea clearly in one or two sentences. If any part of your idea
feels vague, confusing, or is “yet to be determined,” that’s a big red flag that you’re not ready to
move on to the next step. Until you can articulate your idea with complete clarity, attempting to
proceed will just end in frustration.
B. You’re Familiar With your Target Audience
It’s nearly impossible to pitch an idea, develop a brand, or choose a location if you don’t have a
clear idea of who constitutes your target customers or clients. Ask yourself “who would buy my
product/shop in my store/use my service/visit my site?” If you can’t think of anyone, that’s another
huge red flag that this idea isn’t quite ready.
C. You’re Certain That Your Idea Is Unique
Do some research to see if your idea is truly original, especially if your potential business involves
a new invention or innovative service. Find out: Has anyone already tried your idea? Was it
successful? If so, why haven’t you heard of it until now? Who’s buying it?
If your research indicates that something similar exists, be sure that there is something that
legitimately distinguishes your idea from your competition. How will your business be different?
On the other hand, if your research indicates that you have a truly original product or novel
process on your hands, this might be a good time to meet with an intellectual property attorney.
You’ll be pitching your idea to a lot of people, so be sure to protect your innovation.
D. You’ve Determined That Your Idea Is Profitable
Before you invest money in this idea or ask others to invest, you should be extremely confident
that your potential business is marketable, profitable, and sustainable. Create a budget of
estimated operating expenses. Your budget should include materials costs, labor expenses,
advertising or promotional costs, and overhead expenses like utilities, taxes, and insurance. Don’t
forget to include the value of your own time in your calculations.
Then, figure out how many products you would need to sell to make a profit, and at what price.
Compare these pricing and volume numbers to similar products already on the market. If there
are no similar products on the market, ask: What currently available product or service will your
business replace? How much are consumers currently spending on this product or service?
E. You’ve Verified That Your Idea Is In Demand
Do some market research within your target audience. You may have an amazing, innovative
idea, but it won’t sustain a business if there’s no consumer demand. Be sure your target
consumers are interested in your product and would be willing to pay your asking price. Create a
poll or survey and take advantage of social media.
Find out as much as you can about your potential clients or customers, including: Are they
interested in your idea? How much would they be willing to pay for this service or product? If
they’re not interested, why not? Is there something they would rather see instead? What would it
take to raise their interest levels? What are they currently doing in lieu of using your product? Are
they happy with their current situation? Why or why not? Note: If you’re not comfortable asking
these kinds of questions, that’s another big, red flag that your idea isn’t ready to become a new
business.
2. Secure Funding
If you’ve made it this far, congratulations! You’ve defined and clarified your idea, identified your
target consumer, ensured that your business will stand apart from its competitors, and verified
that there is a real demand for your product or service at a price point that will sustain your
operation. You’re practically there!
First, figure out how much money you’ll need to get started. Based on your research from the
previous step, calculate how long it will likely take you to recoup this startup amount. Then,
assess your financial situation. Do you have considerable savings or other assets? What’s your
credit score? Take the time to get your own finances in line before seeking additional funds.
Most new businesses require some kind of outside funding, whether it’s a private loan, SBA loan,
or investor(s). Until you’ve secured the necessary financing, there’s no need to go any further.
Even a great business idea can be doomed if it’s underfunded at the start.
3. Set Up Your Business Structure and Tax Accounts
Once you’ve got your funding locked down, you’ll need to choose a business structure, such as a
sole proprietorship, corporation, partnership, or LLC. Don’t worry if you’re not sure; you can
always change this later as your business grows and evolves. Choose and register your business
name with your state’s Secretary of State. Next, you’ll need to obtain an Employer Identification
Number from the IRS, even if you’re not planning on hiring employees, and set up any necessary
federal, state, and local tax accounts. This is also the time to secure any necessary licenses
and/or permits.
4. Choose a Location
Next, you’ll need to choose a business location. What kind of equipment will you be using? How
much production space, storage or warehouse space, and office space will you need? Research
facilities in your target area. Does it make more sense to lease, or to buy? Will you try to work out
of your home to start? If so, make sure that doesn’t violate any health codes or zoning laws.
5. Gather Your Team
It’s time to put your team together. Depending on your business idea, this could mean hiring
employees, or it could just mean selecting vendors and subcontractors. Even if you’ll be working
alone, this is the time to find an accountant or bookkeeper, if you plan to use one. You’ll also
need to choose an insurance agent and procure any necessary insurance.
6. Spread the Word
Finally, it’s time to fine-tune your brand and promote your business. Set up your business’s
website, e-mail address(es), and social media accounts. Reach out to those potential customers
from your market research and let them know that your product is now available thanks to their
feedback. Diversify your marketing tactics; you may need to try several advertising methods
before finding one that works. Consider hiring a social media consultant or brand manager.
It takes a huge amount of research and hard work to turn a big idea into a successful business.
These steps will help you get your new business up and running in no time.
