So you have an idea and your all pumped up to turn it into the next big thing and change your life! Now what?
How do you turn this idea into a reality? This small business guide is meant to take you through those basic steps of getting your business off the ground and you don’t even need an online MBA to start your own business!
This guide will continue to be revised over time. Please leave comments on what’s missing or what is unclear. We’ll keep tweaking it!
1. Decide What Products or Services Your Small Business Will Offer
Seems simple enough right? But you would be surprised how many people jump into business with out ironing out this MAJOR detail. There is also a major difference between your main stream of revenue (which should be your focus) and all of your other secondary ideas for producing income.
Example: Starting a website and saying I’m going to make money off consulting and advertising.
That’s a good start but which is your focus?
Ad dollars means driving big traffic numbers, creating social media friendly posts, and catering your site to meet advertisers goals and needs.
Consulting means you will be better off creating more of a community and forming person to person relationships. You will want to cater your content to serve them which may mean a lack of “viral” posts or mass audience content.
You can’t be all things to all people. But this does not mean you have to give up on one altogether. You can have ad revenue while focusing on consulting or vice versa but you need to determine your focus and let the secondary streams of income develop on their own.
Some questions to ask about your product/service:
- What makes you an expert in your industry or what makes your product different from the rest?
- Does the product or service meet a need?
- Have you thought about the future of your market? Where are trends headed? Is your product riding a wave or already being phased out?
Most important question! Are you passionate about your product? Do you love it? Does it keep you up at night? Would you wake up every morning excited to work on this business?
Your business is going to be your livelihood, so you need to love it. Success does not happen overnight, it will take time months, even years to make big strides. If you aren’t in love with your business you will stand a good chance at losing the motivation to push forward. Is this something you could see yourself doing for the next 5-10 years?
Your energy and excitement will also show through with your clients and customers. It will be a lot easier to make sales and get people to listen to you if you are passionate about your product and service. You should not have to put on an act when talking about your company or marketplace, it should flow just like a baseball fan talking about the World Series or a music lover talking about their favorite band.
The people that love their business work on the weekends not because they have to but because there is nothing else they would rather be doing!
2. Know Your Market and Your Competition
Understanding your market goes a lot deeper than “I sell coffee, so my market is people that like coffee.” The market needs to be broken down so you can develop a clear picture of who your ideal customers are.
Some questions for defining your primary market:
- What demographic are they from?
- Age, sex, geographic location, income level, education, buying habits
- What do they do for work and for fun?
- Where do they hangout?
- Where do they get money from? ie. If your market is children you may want to look at their parents.
- What common traits do they have?
- What are their common goals?
- What influences their decisions?
You also need to define your competition. Spend the time researching your industry to dig up everyone who is doing anything in your field. When your customers say “have you heard of so and so.” you want to be able to say yes and here is how I am different or better.
There are two main ways to find your competition:
- Word of mouth!
1. Set aside some time and just start researching your market online. Try tons of search combination’s and check out each site and learn which ones are the main players. Also, check out a site like Alltop.com and research the blogs and publications in your industry. The bloggers will usually be talking about the companies and people already making headlines in the industry.
Tip: When Googling things don’t forget to check out the ads that come up on the top and on the sides! These ads are companies that pay to show up for those search terms you plugged in because they are in that field.
2. Get out there and ask who is the best in the business. Go to where your market spends their time and see how people are using and buying products/services in your industry. Ask them what is missing or what they wish could be better. You can also utilize social networks, things like LinkedIn, Twitter and Facebook are great for crowdsourcing. Markets are conversations. Start listening!
Some questions for beating your competition:
- How saturated is your market?
- Is there a large need for what you are selling?
- What are you offering that is better then the competition?
- What is your competitive advantage?
Important: Define your Value Proposition and your Competitive Advantage
3. Business Plan (Executive Summary)
An executive summary is very important at the start of a business. It’s a summary of all the main points of your business plan and is great to help you put your ideas onto paper. Your executive summary should fit on one page and be simple to read. Try to avoid complicated jargon–you should be able to easily explain your business to a middle schooler. Your executive summary should give the synopsis–what will an investor, new employee, co-founder or loan officer want to know to believe in your business?
Your business plan should answer the following questions:
- What need or want are you filling?
- What problem does your business solve?
- What is your mission?
- How big is your market? (Everyone is not an answer)
- How will you target that niche?
- How are you different?
- What is the outlook on competition? Are their barriers to entry?
- How will you market your business? (Please say more than Facebook)
- How does your business make money?
- What is the business structure, how will it operate and who’s involved?
- How does your product or service actually work?
- How is your product or service distributed to the customer?
- Why will your business be successful?
- How do you plan on scaling your business?
- What are the costs involved? Need startup funding?
- How much money does your company have the potential to make?
- When will your business make money?
- When are the investors going to see ROI?
- What is your exit strategy?
The more specific you can be the better. This is the most important part of your plan is the hook. You should be able to clearly pitch and describe your entire business in this document so an investor will understand it and see the potential.
More importantly it makes you write down and define your ideas and goals and create a plan to get there. This is something to hold yourself accountable to so you will have a better chance at succeeding!
4. Choosing a Business Structure
There are a few options when it comes to choosing your business structure. No structure is absolutely right or wrong. Each has its own benefits and drawbacks. While it’s advisable to consult with an attorney, it is very possible to setup yourself.
- Sole Proprietorship
- Limited Liability Company
The basics of each:
- Easy to set-up
- Limited fees
- Limited paperwork
- Your personal assets are vulnerable to creditors and lawsuits
- Don’t get certain tax breaks
- Your company name is not protected from someone else taking it
- Easy to set-up
- Limited fees
- Limited paperwork
- If your partner messes up you are accountable
- More difficult to raise funds
- Company name is not protected
- Shields you from personal liability
- Numerous tax benefits
- Company name protection
- Flexibility to raise capital
- C-Corp and S-Corp options for different tax structures
- Initial fees and paperwork to set-up
- Maintenance – Annual reports and up-to-date corporate records
Limited Liability Companies:
- Less on-going paperwork then corporations
- Shields you from personal liability
- Tax flexibility
- Company name is protected
Negatives are limited but vary against each type of structure.
Summary: Limited Liability Companies (LLC’s) have become increasingly popular because they combine a lot of the benefits of corporations and sole proprietorship’s with few of the negatives.
How you structure is up to you and it is recommended to consult an attorney or try LegalZoom.com. Again there is no right or wrong structure for most businesses you just have to match up what suits you and your business goals the best.
5. Finding Funding
Any business you start is going to have some funding needs. Even if they are minimal you need to figure out how you are going to cover them. It doesn’t matter if you need $500 or $500 million. Lets look at a few of the basic options .
Friends, Family and Fools
This should be everyone’s first step when looking to raise some money. Go to the people you are closest to and that trust you. Ask your parents and family members to make an investment in your business rather than birthday or holiday gifts this year. Also, ask them to reach out to their friends who may find it interesting to put up some money if they believe in what your doing. Maybe they pitch in and buy you office supplies to put under the tree.
This method won’t raise you millions but you should be able to come up with a couple thousand even if you have to mow the lawn all summer.
The only drawback to this method is the close knit ties you have to your funding source. If something goes wrong or you can’t pay them back it will feel twice as worse. Thanksgiving dinner can get awkward. Proceed with caution.
You can always choose to fund the whole operation right out of your pocket. This is great because obviously you have no obligations to pay off anyone. You retain 100% of the equity and the business venture is all on you. You can use savings, initial revenue, credit cards, or grab that part-time job.
Of course the drawback here is personal debt. If you use up all of your savings or rack up credit card debt and then your business hits a rough patch you could be in for a tough road. The important thing to remember is to keep it all manageable. It’s okay to rack up some debt but keep it within reason so it can be paid off if the business fails. Figure out a way to cut your living expenses to the absolute minimum.
Angel Investors or Venture Capital
Once you exhaust the other types of funding these two sources are next.
Angel investors are generally individuals who have already made it big themselves and are looking to invest their own money. They take more of a personal interest than VC’s and will also provide consulting and mentoring to your company. Angels will generally help provide upwards of 1 million dollars for your company.
Angels are a great resource if you can find them..there is a reason they are called “angels”. You will also be giving up equity in your company in return for their investment but also often times mentorship, support and connections.
Venture capitalists invest in businesses from a fund. They can provide huge sums of money but will also take major control of various aspects of your business. Expect high demands as they want to see return on their investment fast.
VC’s are more likely to invest in established entrepreneurs (ones who have a proven track record). If you have a fast growth business and need major capital to get it off the ground VCs are the way to go.
Incubators are still a relatively new way of funding and starting up companies. Major incubators like Y-Combinator provide the necessary resources to take your idea to company. Many incubators will offer start-up cash, offices, supplies, financial services and a team of consultants to mold your idea. If you join an incubator you are in the program for a set period of time, maybe 6 months or a year.
The incubator will take equity in your company and will also require that you move to their offices so their team can work with you. They can be hard to get into as there are not many and there is a high demand to get in.
6. Name Your Business
Obvious? Well even though it sounds simple the name of your business is extremely important. This is the first thing you will tell people and the #1 thing they will remember you by. It should be catchy, easy to remember, easy to pronounce and easy to spell. Think about how it will translate into a domain name for your website.
Keeping it simple so people can type it into their address bar is crucial. You want to avoid hyphens and odd spellings of words if possible.
Example: Facebook is a great domain name. Not only does it provide a bit of a description of the actual site but it is extremely simple to say and spell. It’s great if you can put 2 common words together like “face” and “book”.
Example: Flickr is not the perfect domain name. This is because of the odd spelling of “flicker” and the fact that it will do very little for search engine optimization because nobody will be searching that term. The good news is that it is brandable, but you will have to start from scratch and raise awareness about your service.
The best way to tackle this whole process is to make a list of words that describes your business. Then narrow it down to the 1, 2 or even 3 words that best describe the company. Try to put these words together into a name and of course it also depends on availability for your domain name.
Head over to www.GoDaddy.com to check availability and to purchase a domain name.
It is possible to buy domain names from an owner but that takes time and negotiating. The price will surely be higher then getting a new one off GoDaddy so unless you absolutely have to own it you should try to find something available.
7. Setting up Your Website
A website can look like a daunting task to someone new in the online world. With the right tools and knowledge you can come to find it is very simple to get going.
1. Make sure you have that domain name from the last step section.
2. Buy hosting. We recommend HostGator.com. Either one will work fine. To start most people just need the most basic plan usually it will work out to somewhere between $6-$10/month depending on how long you buy it for.
3. Setup your site. You have two options here. Go at it yourself or hire a web designer. If you decide to go at it yourself you can generally start off by using WordPress. This platform is great for most basic sites especially blogs but even if your looking for just an informational site you will find it very easy to use.
On your hosting dashboard you should be able to find a 1-click install for wordpress that will take you through the setup steps. It may also be called a 5 minute WP install. Once installed you can begin to play around and navigate the wordpress dashboard. You will also want to choose a theme for your site. There are many free themes available but there are also premium themes. The thesis theme is one of the most popular and reliable premium themes.
It will take some getting used to but give yourself some time and you will realize how easy it is to configure things and update your website.
Like anything if you invest the money into hiring a web designer you will see the results. Depending on how complex your site needs to be this may be the only option.
8. Partner with Great People
The people in your company are your most important assets. Everything starts with the entrepreneur but the team you are surrounded with will be the ones that carry out the tasks. Don’t partner with just anybody, be picky and take your time. Check out how to choose your bootstrapping staff.
One key to look for is someone with a different skill set then yourself. If you are a great salesperson you may want to bring on a great web designer. Now you have two pieces of your company that are powerful and you won’t get crossed up when deciding what tasks each person should do.
It is also important to be extremely compatible with a person. They say having a business partner is like getting a married. You will be talking with this person everyday and most likely working in the same space as them everyday. You also won’t see success right away and will have to get through down times. Most importantly you will have to work through decisions and work out disagreements.
Two heads are always better then one but not if both those heads are constantly clashing.
How to find them?
- Referrals – Ask people around you or other connections you have made in the business world for recommendations.
- Hire for small projects – Looking for a web designer? Hire a few designers over time for smaller projects for your company. See who is the easiest to work with, does the best work and is in a situation where an opportunity to join a company would look very appealing.
- Network Network Network – In the end the more people you meet and know the better chance of finding that perfect fit. Hit up networking events and prepare yourself to ask people questions that will help you with your search.
9. Brand and Market Yourself
Before you jump into marketing you need to develop your foundation which is your brand. A brand is not just your name and logo…it is your companies identity, personality and appearance. You need to craft your story so that customers stick to your company and are confident in your work.
Think Red Bull: Everyone knows the popular energy drink. How would you describe it? Edgy, exciting, bold, dangerous, hip, exotic…you get the picture. These words and feelings are what they want you to think. They want their customer to have these feelings and its a huge reason for their tremendous success.
What to do:
- Define your audience’s demographic’s (age, sex, income, education etc.) – should be in your business plan anyway!
- Define your audiences touch points. What excites them? What makes them tick?
- Craft a story. What are you going to tell people when they ask about the company?
- Define colors and get a logo!
- What is your end promise? What will your product or service deliver at the end?
With these steps you should now have a start on your brand development. Don’t rush! A solid brand takes time to craft and develop as you learn and test your markets. It’s perfectly fine to change things and adjust as you see fit.
Now that you have your brand its time to show it to the world! This is where the marketing comes in. There are various ways to market and you can choose one or a bunch of them.
Grassroots – This is the most basic of marketing that every business should be involved with. Attend local events and network with people. Hand out business cards or brochures. Tell friends and family and let the business spread via word of mouth.
Online Marketing – Being online is crucial in today’s business environment. Your main marketing material is your website. Get a professional and get SEO help so you can generate leads in your sleep! You can also advertise on search engines (it’s how Google makes money) but do the research and understand how to build a solid campaign.
Get involved with social networks like twitter, facebook, youtube and linkedin. There are also a million small niche groups and forums in your industry somewhere online. It’s important to understand how to get involved in the community so you are not mistaken for a spammer! But with the correct methods and the effort these free tools are priceless!
You can also buy banner ads online as I am sure you have seen on sites at some point. While not as effective as other methods if you find the right site with a loyal niche audience banner ads can still prove successful.
Tip: Email marketing can be an extremely valuable tool for your business. You will be building a list of your most loyal customers and fans that you can provide special tips, offers and ideas to.
PR Marketing – While time consuming this can help get your company in front of large audiences. It will also help brand you and your company as experts and increase credibility if you get noted in the right sources. Make sure to take the time to draft up solid press releases or pitch interesting angles to reporters for stories. You can also search online for bloggers and sites that interview startup companies or experts from your industry and ask to be included.
Traditional Advertising – While fading traditional advertising still has its places and can still be beneficial. Looks for local publications to buy ad space in or local radio and tv channels.
10. Make the Leap!
In the end it is all up to you! Nobody is going to hold your hand or show you every little step. It takes hard work, dedication and some courage.
But don’t let that scare you! Ask anyone who has made the entrepreneurial leap and they will tell you what an awesome ride it was.
Look to friends and family for support. Make sure you have some people who are behind you in your journey and you will have a better chance at pushing through any hard times.