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First 5 steps for successfully starting your business
As we swing into the New Year, you are probably reflecting on 2019 and looking toward making your resolutions for 2020. You may decide to join a gym to be more active. You may decide to kick one of your bad habits. And for an enterprising few, you may resolve to finally act on that business idea you have been kicking around in your head.
Why would you want to start your own business? Is it a dream that has been brewing for years, but you haven’t had the courage to try it? Do you see a need in your industry that isn’t being met? Do you just need a part-time side hustle to supplement your income? Do you dream of leaving your current job so you can manage your own time and schedule?
With the right planning, 2020 can be the year you change your life and successfully start your business. The following are the steps you will need to start right.
1. Find a great business idea
Maybe you already have an idea for a great business. If not, look no further than your garage, basement, studio or craft room. You might not realize it, but even hobbies can turn into great small business ideas. For example, if you are a woodworker, you can start by doing projects for friends and family. Not really a business, but you are having fun. You may then make an instructional video and put it on YouTube. Suddenly, you are getting interest in your custom woodworking services from all over. By the end of 2020, you have moved from your garage into a studio, and hired your first employee!
According to the Michigan Small Business Development Center’s (SBDC) Guide to Starting and Operating a Small Business, when deciding what kind of business to start, you should ask yourself the following questions:
- What are you good at?
- What do you love to do?
- What skills do you have that you can capitalize on?
- What problems do people have that you can help solve?
- What unmet needs do you see and how can you help address them?
Have an idea in mind? Maybe two or three? Think of a few different options to research in Step No. 2.
2. Research/validate your idea
By now you have a few ideas of the type of business you want to start. However, there is a big difference between having a great idea, and having a great idea that actually will make you money. That is why this step is so important.
According to the SBA, 50% of new businesses will fail within their first five years. While this is a scary statistic, failure usually can be avoided. In fact, the No. 1 reason that businesses fail is that there is no market for their product or service. For example, if you want to open the first vegan, gluten-free pancake food truck in your community, you might want to first figure out if there is a big enough market of vegan, gluten-free pancake-eaters to support your business. And you want to know how many competing food trucks there are, and how many vegan, gluten-free breakfast alternatives there are to choose from. A little research will help early on to see if you have a winning idea.
Here are some resources you can use to start your research:
- Your local library
- Trade associations
- Google and other online resources (just make sure they are legitimate)
- Your local SBDC office
3. Write your business plan
You have come up with a great business idea. You have done some research and are confident that there is a market for your business. Now it is time to fine-tune your idea so that you know who your target audience is, what they want and how to reach them. You need to know the up-front cost of starting your new business and what the ongoing costs are going to be. You need to know how you are going to operate on a day-to-day basis.
In other words, you need a business plan.
Another one of the reasons small businesses don’t survive in the long run is a lack of planning. Before you start your business, you should have a functional business plan that:
- Defines who you are, what your products/services are, and what make your business special
- Defines your target audience and niche
- Forecasts and details all the financials — sales, expenses, profits and cash flow
- Includes a detailed marketing plan
If you are looking for a small business loan from a bank, you will need a business plan. However, even if you are using your own resources, you should have a written plan to help you stay on track. If a business doesn’t make sense on paper, it won’t make sense in the real world.
4. Set up your business
Still ready to go for it? The next step is to legally set up your company. You will need to choose what type of entity you want your company to be (sole proprietorship, partnership, corporation or LLC), pick a business name and register with the proper government office. If your company has any intellectual property, you will want to make sure it is protected with a patent, trademark service mark or copyright. You will need to register for local, state and federal taxes. You will need to explore business insurance options. Whew! If that all seems daunting, see Step No. 5.
5. Partner with the right people
Your likelihood of success is much higher when you seek the help of experienced, unbiased professionals. When you start a business, you have limited resources, energy and time. Make sure you have the right partners lined up to help manage your new business. These could include:
- Business service professionals, such as lawyers and CPAs, who will ensure your finances are in line and you have met all legal requirements
- Employees (when you can afford it!) who can help free up your time so you be more productive
- Consultants and other service providers, who can help you with marketing and technology needs
- An SBDC consultant who can guide and help you through the entire process of starting and growing your small business
Starting a small business can feel tough, but you don’t have to do it alone! The Michigan SBDC is here to connect you with insight and resources to help your small business succeed. Contact the Michigan SBDC for assistance with:
- Business plan development
- Market research
- Raising capital
- Business education, including in-person and online training
- Technology commercialization
- Financial management
- Export strategy
- Strategic planning
- Human resources and organizational development