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What are the key steps towards a startup?

Starting a business requires a lot of work such as legal requirements; documentation and strategic development can simply be overwhelming. But without putting in the effort, you will struggle to turn your idea into a successful business. A startup is typically defined as a new business created to solve a problem for the specific customer segment. The term ‘startup’ refers to any type of entrepreneurial venture that is built to scale quickly.

Startups can be defined by the following three stages:

1. Finding the right product-market fit
2. Create a repeatable, profitable or scalable sales model
3. Scale up the business

1. Research Your Idea

The first step in starting your business is determining whether there’s a market for your idea. The SBA emphasizes the importance of understanding the market for your product or service before starting a business.

Some questions /answer during the market research phase of business development such as:

• Do other companies already offer similar products or services? How much do they charge?
• Who is the intended audience for your product or service?
• Does your product or service provide customer benefit or solve a problem?
• About how large is this intended audience? What percentage of the audience is already served by another business?
• What are the demographics of your intended audience, including income level and employment rate? Where do your customers live?

2. Write a Business Plan: The research phase is where you flesh out your idea - now it’s time to get it down on paper. Ifaren’t currently planning to apply for financing with a traditional bank, your initial business plan can be relatively simple. According to templates provided by The Balance, a basic business plan should include the following sections:

• Vision: In this section, describe your business concept or plans for the future. Detail the type of business you are building, how you want it to grow over the next year and where you plan to be in five years.
• Mission: Here, detail the products and services you plan to provide, identify your target market and describe your unique selling proposition - what you will offer that your competitors don’t. Note whether you’ll be a home-based business that sells primarily online and/or if you plan to have a brick and mortar location.
• Pricing Strategy: How much will you charge for your products or services? You will need to set a competitive rate that will attract customers while allowing you to earn a profit. This section should also project your business’s earnings and expenses.
• Marketing and Advertising: Describe the channels you plan to use to let people know about your new business. Consider both digital and traditional marketing strategies, as well as client referrals.
• Objectives: How will you measure success? This section should list several measurable, time-specific goals, such as a revenue target for the first year or a benchmark for the number of customers you want to reach in the first six months. Include potential challenges you’ll face in reaching these goals and strategies to overcome these obstacles.
• Action Plans: Detail the steps you’ll take to achieve your objectives.

3. Create a Budget

Whether you plan to minimize expenses with a lean startup approach or you have already saved the capital to launch your business, estimate the costs associated with starting and running it. While the actual costs vary dramatically by industry, there are following possible categories:

• Startup costs:
  • State and local business licenses and permits
  • Equipment
  • Legal fees, especially if you plan to incorporate
  • Business insurance
  • Brand and website development
  • Market research
  • Inventory
  • Trademarking
  • Rental lease

Use these numbers to extrapolate your estimated expenses for the first six months. Entrepreneur recommends keeping costs as low as possible with the goal of turning a profit within the first 60 to 90 days in business. Nevertheless, the magazine also notes that you should add a 20 percent burn rate to your budget. This will be spent on unexpected incidentals and will help you plan your realistic cash flow.Set up a system to manage your finances that keep business income and expenses completely separate from personal income and expenses. This will make your life much easier come tax time.

4. Start Promoting Your New Business

If you want to have a successful small business, get used to telling everyone you encounter about your new venture. Join your local chamber of commerce and explore the resources they offer to fledgling small businesses in your community. They might have a platform where you can present information about your business or meetings where you can network with other small business owners. If you are selling a product, set up for booth at a local farmers market and provide free samples. Use this as an opportunity to gather market research and test the public response to your offerings. Although business cards might seem outdated, they are actually a useful networking tool that provides something tangible to give potential customers, increasing the chance they’ll remember you when they need your product or service.

5. Decide on a Business Structure

Incorporating your small business protects your personal assets from business liability. That means the business is legally considered a separate entity, so your house, car and other property can’t be seized to pay business debts or legal judgments. Incorporating your business also has tax advantages. Whether it’s best for you to establish a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation depends on the type of business, the number of employees and other factors.

A business attorney can advise you on the best strategy for your specific venture. For most sole proprietors, keeping the business structure as simple as possible will keep costs low as starting out and give you a chance to determine the ideal setup as you grow. Entrepreneur recommends new businesses wait 3 to 6 months before forming a legal entity. Keep in mind that even when you select business structure, nevertheless, you can always reorganize to become a different entity down the road. The IRS requires some small businesses to register for an Employer Identification Number (EIN), which is used for payroll and certain types of taxation.