A Step-by-Step Guide to Starting Your Own Successful Business: Avoiding The 50%

Amanda Postma
Author

Marvin Ryder, MBA
Author

Soumitra Dutta, PhD
Author

2 years ago

Before you start your business, there are several steps you need to complete. We’ve gathered a list of advice for you to take during these steps to make sure your business not only gets off the ground but is also successful.

Many entrepreneurs start a business with good intentions but never get to see their dream expand into a successful business. In fact, only 25% of small businesses will last for 15 years or longer. Roughly 30% go under within two years and 50% close before five years.

This doesn’t have to be you. You have the opportunity to be one of the 25% to succeed. In order to do so, it’s important to recognize the reasons why a business fails in the first place. The most common reasons include:

Poor product concept
Lack of a business plan
Undercapitalization
Insufficient marketing efforts
Being in the wrong market

Now, you just have to do the opposite of that. Keep reading for our complete list of tips and advice to ensure your business is successful.

Tips and Tricks

We’ve come up with a list of tips and tricks to help you successfully start your small business. Whether you need a checklist or just some advice these tips will help you get your business where you want it to be.

Make sure your product or service works: If you want to sell wine, make sure you can make wine first – especially in the volumes needed to operate a business. If you want to open a hairstyling salon, you need to be certain you can style many different kinds of hair. Would you hire a personal trainer who is not in great physical condition? Are you sure you can do what you say you can do?

Make sure consumers want your product or service: Talk is cheap but cash speaks loudly. Forgive the double negative but businesses do not fail because no one wants your products or services; they fail because not enough people want your products or services. Even if there are some people willing to pay, are there enough in your area to make the business a success? Suppose your idea is to cater to the needs of left-handed people with a specialty store. Opening that store in a city of 1,000,000 people implies there are 100,000 left-handed people available to buy your product. Open that same store in a town of 10,000 people, and there may only be 1,000 possible customers available to you. That may not be enough demand on which to base a business.

Ensure you have the resources to launch the business: There are always two key resources – time and money. Most people wanting to start a business are quite willing to devote time to the business. Remember it is difficult to start a business that is supposed to generate full-time wages with part-time effort. The bigger problem is usually money. Younger people want to start a business but usually have very little cash or equity for their business. Banks tend to loan budding entrepreneurs one dollar for each dollar they have. Depending on how the money will be used, the bank might be more generous loaning two or three dollars for each dollar the entrepreneur has. There can be government grants but these tend to be relatively small amounts and they are highly targeted to certain populations. More likely, there may be some government loan programs available. Because of a lack of cash, many people are attracted to service-based businesses which can be started with an investment of just a few hundred dollars. If such a business is not instantly successful, most budding entrepreneurs just walk away and claim the experience was great for learning. The ability to make a million dollars on an investment of $100 is as likely as winning the lottery or getting hit by lightning.

Put together a team: The most important step is to have an excellent team that brings together complementary skills and can work together in a trustful and agile manner. Of course ideas matter, but the reality is that most startups rarely succeed with the initial idea. Rather the initial idea morphs and pivots into eventual success provided the team is able to adjust to the feedback from the market and change appropriately. Financing is also important but then if you have the right team and a good idea, money usually is not the hardest thing to get today.

Write your business plan: This is like a blueprint for building a house. If you were going to build a house, you wouldn’t just start stacking bricks on top of each other. You would have a plan to follow. The same goes for a business. You want to have a solid foundation that you can build upon first. This plan will help you get there.

Fund your business: While most businesses don’t cost too much money to start up, it’s important that you’re aware of how much it’s going to cost you until you can turn a profit. This way you don’t go bankrupt following your dream. Set up a budget that highlights every one-time cost you’ll have, as well as every expense you’re planning to have in the first 12 months. After assessing your budget, you’ll be able to determine if you need to take out a loan or if you can find someone to invest in your business.

Pick your business location: This is an essential step as it’s important that you know what kind of setup you’re going for. You’ll need to figure out what type of equipment you’ll need and what environment will best serve that equipment. Make sure that you’re office space, whether at home or in a shared space, accommodates your business needs.

Choose a business structure: You’ll need to decide whether your small business could be a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation. Whatever you choose now may eventually change, but it’s good to have something to start with. Especially since whatever business entity you decide on will impact your business name, your liability, how you file your taxes and many other factors.

Choose your business name: This isn’t a step you’re going to want to take lightly. The name of your business is going to play a huge role in every aspect of your business as a whole. You’ll need to go through a list of potential names and sort through all of the implications. Once you’ve settled on the best one, you’ll need to register it and make sure it’s not already trademarked or in use. Depending on what business entity you went with will determine when and how you register your name.

Apply for licenses and permits: During the startup process, you’re probably going to have to fill out a lot of paperwork, but it all differs based on the type of business and the location in which you’re setting it up. There are a number of licenses and permits that apply to small businesses dependent on those two factors. So make sure you’re researching what licenses and permits are required.

Open a business bank account: As long as you have the paperwork ready, this step isn’t going to be too hard to complete. It’s important to have a small business checking account because it’ll help you handle legal, tax, and even day-to-day issues.

Get the Word Out: If no one is aware of your business, how are they supposed to purchase your product or service? This is where having business cards made and creating a profile on social media comes into play. Having a couple of business cards on you at all times is crucial because you never know when you’re going to run into someone who might be interested in your product/service. Then once you’re on social media invite all of your friends and family to like and share your business page. As long as you’re actively promoting your business, word is going to get around.

Questions to Ask Yourself Before Diving in

There are some things you need to really consider before taking the leap of being self-employed. Think “Do I have what it takes?” We’re not saying we don’t believe in you; we just want to make sure you’re ready to fully commit so you have a successful business. We’d sure hate for you to go back to working for unpleasant bosses. So jump into the entrepreneurial pool of possibilities with both feet by answering these questions:

Why do you want to start your own business? The most common answer is for control. People do not want to work under the rules and oversight of someone else. Some people want to start a business so that they can retain 100% of the reward generated by their effort. When they work for someone else, they may share in the fruit of their labour but they rarely get to retain 100% of it. Some people start a business because they cannot find any other job that will pay them the kind of compensation which they feel they deserve. There are “flip” sides to each of these reasons. If you start a business for control, you need to also accept responsibility. You cannot blame anyone else for a mistake or failure. If you want to retain 100% of the reward of your labour, you also earn no reward if your labour fails. There is no such thing as a paid vacation when you are an entrepreneur – if you don’t work, no money is being generated. As for compensation, it is absolutely true that if you want to be a billionaire, you have to be an entrepreneur but 99.8% of entrepreneurs earn compensation less than $200,000 per year. Many barely earn minimum wage.

What are the biggest challenges facing you? The challenges go beyond just having enough money to start the business, and even beyond figuring out how to get the cash rolling in. You need to spend some time developing a solid business plan, and then figure out how to create a quality product or service. Then you have to overcome the challenge of sticking to that plan and keeping the quality up. You should be ready to work a lot, especially in the beginning. You’ll be challenged with rejections from potential customers and it will be frustrating. New business owners are also tasked with managing their time so that they can maintain some type of work/life balance. No one said this was going to be easy.

What kind of business should you start? The answer to this question depends on the person. It depends on each individuals’ passions. You don’t want to start a business that you’re not going to thoroughly enjoy. But in the same breath, unless you’re loaded with money, you also don’t want something that’s going to take a bunch of money to fund. The business should have the potential to grow. It should also be something that you have at least a little experience in so that you kind of know what you’re doing.

What are the biggest mistakes entrepreneurs make? We know that not every small business is successful. So we looked into why. There are many small mistakes that businesses make even in the planning stages that can be avoided easily. This includes starting with enough capital and not expecting to become successful right off the bat. Make sure you’re carefully budgeting and are focused on delivering a quality product/service. Don’t underestimate how important it is to market your business, and take some time to understand how competitive the business landscape is. Pay close attention to legal and contract matters, and make sure you’re hiring great employees. And do some research into how much your product or service should cost that way you’re not losing money or customers.

How can you protect your business idea? Ideas come cheap, but implementing your idea is a whole other thing. If your idea is unique make sure you get it patented. A patent will entirely protect your idea, whereas you’ll only secure some protection through copyright, trade secret programs or NDA’s.

How to obtain that domain name you’re pining over? Most domain names can be purchased from the owner. And since all of the good “.com” domain names have been taken, you’ll probably have to find the owner’s contact info to offer a price. You can find this information by conducting a “WHOIS Search” on the Network Solutions site. Make sure you’re offering enough, but not so much that you’re getting ripped off. For example, you’ll probably be ignored if you offer only $500 for a premium domain name.

How can you drive traffic to your website? Google, Bing, Yahoo and other search engines can send traffic to your site, but you’ll have to pay for this service. So if you’re strapped for cash and can’t pay for the Google Adwords program, then you’re just going to have to build a great website. You can do this by posting high-quality content that is SEO based. If you’re social media savvy then you should use that to your advantage. Come up with a smart plan to drive traffic from Facebook, Twitter, LinkedIn, TikTok and other social media sites.

Do you have a business plan? A really good business plan will help you think through the marketing, financial projections and development of your business. Once you’ve come up with one get some feedback from trusted business/finance advisors. Many startups fail because they don’t have a business plan in place, but that doesn’t mean you need to go overboard with a 50-page plan. Keep it simple, but thorough enough that it’s easy to follow. Most of the time, your business is going to stray from this plan anyways.

How will you fund your business? There are several ways to fund a business, but it comes down to what the business owner has access to. If you can personally fund it without going broke then do that. Some business owners lean on their friends, family or investors to help fund their business. Others use credit cards. You may want to see what bank loans are available to you. Whatever way you go make sure it’s going to benefit you, your business and any investors you have in the long run.

What permits, licenses and regulations are required for your business? The types of permits, licenses and regulations you’ll need for your business will depend widely on where you’re located and the type of business you’re running. Regulated businesses that involve aviation, agriculture or alcohol require special permits to operate. It’s likely you’ll need a sales tax license or permit for your business. And if you’re running a business out of your home, you’ll need to look into home-based business permits. There are also permits and licenses required by city and county, as well as zoning permits you may need to acquire before moving into an office space. Some businesses, like restaurants, require a health department permit. And if you’re wanting to sell your product/service then you may want to check into getting a sellers permit.

What bookkeeping will you have to do? Every business requires some type of bookkeeping. We’ve narrowed down the most important documents you’ll need to file away. These include:
- Financial Statements
- Employee records
- Board and stockholder minutes and consents
- Stock and options ledger
- Tax filings and records
- Secretary of State filings
- Invoices and contracts
- Bank accounts
- Creditor records
What kind of insurance does your business require? Just like it’s important to have car insurance and renters insurance, it’s really important to insure your business. From liability insurance to worker’s compensation, you’ll want to figure out which of these insurances will best cover your business:
- General liability insurance
- Product liability insurance
- Professional liability insurance
- Property insurance
- Worker’s compensation insurance
- D & O (directors & officers) insurance
- Health insurance for employees
- Business interruption insurance
- Commercial auto insurance
- Data breach insurance
- Key-person life insurance

Business Ideas For When You’re Stumped

Maybe you’re sick of your boss or maybe you’ve been unemployed for a really long time, either way, you’ve decided it’s time that you start your own business. We’ve compiled a list of business ideas to help you get started. Whether you want to focus on something you’re really good at, or you want to focus on something you’re passionate about, you’ll find your inspiration here.

Bicycle Repair
Landscaping
Boat Cleaning
Cleaning Service
Dog Walking
Editorial Services
Electronics Repair
Event/Party/Wedding Planning
Financial Planner
Flea Market
Sports Coach
Interior Decorator
Household Organizer
Jewelry Making
Personal Trainer
Property Management
Car Repair
Tax Preparer
Music Teacher
Upholstering
Appliance Repair
Computer Training
Freelance Graphic Designer
Gift Basket Service
Hairstylist
Landscaper
Photographer
Website Developer
B&B
Day Care
Pet Sitting
Tutor
Construction/Home Repairs/Home Consultant

Refine Your Business Idea

Now that you have your business idea locked and loaded, you need to dig into it a bit more to really make sure your idea is truly ready. Soumitra Dutta, Professor of Management and Former Founding Dean at the SC Johnson College of Business at Cornell University, says:

“The most important advice is to listen carefully to the market. Talk to as many customers as possible. Get customer feedback as early as possible. Talk to some non-customers also. Ask yourself how can you get the non-customers to convert to your product/service.

Also, think carefully about how digital technologies can both improve your product/service and enable you to build a strong relationship with your customers. Digital technologies are becoming critical for business success in most domains.”

Marvin Ryder, Associate Professor of Marketing & Entrepreneurship at the DeGroote School of Business at McMaster University, says:

“There are two critical parts to your business idea or business model – exactly what are you going to sell and exactly to whom are you going to sell it? In terms of what you will be selling, the choice is usually some combination of a product and/or a service. I encourage budding entrepreneurs to be as specific as possible when defining this. For example, do not tell me that you want to sell “consulting services” because that could almost mean anything.

Someone might agree with me and then try again by saying they are selling “social media” consulting services. Again, that could mean almost anything. Don’t hide behind jargon. What exactly will you do for a customer? If you want to create websites, great. If you can draft newsletters which can be sent by e-mail, fine. Any time I read about a scaleable “solution” which can run on multiple platforms using secure socket encryption and cloud computing with guaranteed interoperability – my eyes glaze over. This is just gobbledygook.

“The same comes when defining a target market. One entrepreneur told me he was targeting “small and medium-sized businesses.” That description covers 98% of all businesses in the world. He might as well have said he was “targeting” people with two arms and two legs. A mistake many people make is to over define their target market – almost as if they are targeting everyone. “You see, I plan to start an e-business so anyone anywhere in the world could buy from me.”

While technically true, we live in a world where there are more websites than human beings. How will someone in Mongolia even discover your business? Have you tried a search engine before and found 70,000,000 hits meeting your needs? You have to drive traffic to the website and most start-up businesses do not have the cash to spend trying to drive “everyone” to the site.

“One other thing when defining a target market, start the business by serving the people who think most need your product or service and will repeat purchase frequently. Over time, you can target new market niches but start by targeting a core group. I like to call this – fishing where the fish are. You don’t have the resources to run after the fish. Find the group most likely to need your product or service and do your “fishing” there.”

Business Plan Examples

Just in case you’re wondering what your business plan should look like, we’ve included some example ones here. It’s important to note that not all business plans look alike, so if yours looks a little different than these examples one, it’s okay. So it could look like this: