Building a business from the ground-up is one hell of a job, make no mistake!
However doing so is easier than most budding entrepreneurs think – if they know what they’re doing!
Understanding a business and some of the core processes involved in the building and running of a business can be very vital information for any entrepreneur. Knowing some of these processes can be the difference between success and failure, and this is precisely what I will attempt to summarize in this article.
So without further ado, here is the step-by-step guide to starting your very own business from scratch – 8 steps that should help entrepreneurs get the ball rolling:
Step 1: Identify a Problem
One of the first step towards starting a business is identifying a real problem, and devising a solution for that problem.
If you think about it for a moment, all businesses are made on this model: every business in the world aims to address and a solve a problem.
Start off with identifying a problem; look for problems around you, in your community for instance. Turn to the internet for ideas. Look at each problem as a business opportunity – look for ways that you can solve those problems.
Perhaps there’s a need which you can address, supply good or services to a particular market where there might be scarcity but a demand for such goods/services, provide better or cheaper alternatives to existing solutions, or something else.
Bear in mind that a problem doesn’t necessarily have to be a ‘local’ one. Look beyond your immediate surroundings for opportunities. Think big and think global, using the power of internet!
Step 2: Provide a Solution
… or perhaps more specifically, how you can provide a solution, and whether doing so would be feasible or not.
Some things that you might need to consider at this stage:
- Is there a market that is big enough? Is there a demand?
- Roughly speaking (we’ll get to the specifics later), do you have the financial power to address this problem?
- Will it be feasible for you to do so?
- Will you be able to provide this solution to your customers at a price that they will be willing to pay for it, WHILE earning a profit on it?
- Roughly speaking (once again, we’ll get to the specifics later), what will your supply chain look like?
- How many people will it take to provide this solution?
- What will be the mode of delivery?
All these are preliminary questions that you need to address right away, preferably right after you’ve identified a potential business opportunity. We will address all these in detail when we make a business plan.
Feel free to add to the list in the comments section below.
It might be a good idea to conduct a SWOT analysis here. SWOT is short for Strengths-Weaknesses-Opportunities-Threats. A SWOT Analysis will put all 4 of these factors on the table, and allow you to assess your business’s strengths and weaknesses, as well as the opportunities and threats to it.
It would also be wise to have a look at some of the risks associated with starting a business in general, as well as some of the economy-specific risks. Read this article in order to determine some of the factors to consider when conducting a risk-assessment.
Step 3: Create a Business Plan
A business plan is a formal, written piece of document, which details all aspects regarding how a business will be run. It provides vital information to all stakeholders – including the business owners, investors and other parties – on how the business will be run, generally speaking. It lists down all business goals, and tells the stakeholders how those goals will be achieved.
So essentially, it is the blue-print for a business.
We did a detailed post on business plans a few weeks back, definitely worth a read. Here’s a excerpt from that very posts, which lists down the contents of a business plan, along with a description for each:
- Cover page: The cover page is usually a one-pager that has the name of your business in big, bold letters. The name of the business will be the biggest and the most distinctive feature of this page, something which immediately catches the eye of the reader. This will be accompanied by contact information (address, telephone, email, website – whatever’s applicable). A cover page is usually followed by a Table of Contents.
- Executive summary: Your ‘elevator pitch’! A management summary; another 1 or 2-pager, which summarizes your business plan comprehensively. It provides readers with a way to know everything in the plan without having to read the whole thing. This is your opportunity to really pitch your idea in a solid manner, as this is where an investor will develop initial judgment about your business.
- Description of the idea and the business: Self-explanatory. Explain in detail about your idea/business. Start with the basics – address all the what’s, who’s, where’s, and why’s.
- Industry background: Information about the industry your business will belong to.
- Market analysis: Marketing analysis looks at the potential of the market (within the chosen industry) that your business intends to enter. A marketing analysis is usually very interesting (well, at least for me). The biggest component of a marketing plan is the SWOT Analysis (mentioned in Step 2 above).
- Competitor analysis: Self-explanatory: a look at your competitors and who you will be in direct and indirect competition with, their strategic strength in the market and industry, as well as their strengths and weaknesses.
- Marketing plan: This is different from a market analysis; the marketing plan details your business’s marketing strategy and its marketing efforts. This is where good marketers, business men and entrepreneurs make their bread; how you will market your business, reach your potential customers and clientele, advertisement details, sales promotions, merchandising… the whole lot!
- Operations plan: Information about some of the physical aspects of your business and things related to the operations, including the office space, the facilities, equipment and assets, suppliers and the supply-chain, manufacturing process, and inventory, for instance.
- Financial Plan: Self-explanatory. Everything that the person reading the document needs to know about the money: including initial investment, projections, projected cash-flows, break-even analysis, financial ratios, expenses, expected profits, and the short-term and long-term financial health projections of the business. The financial plan needs to be realistic, for obvious reasons.
- Management and organization summary: This is your business’s HR department. This part of the plan includes information about the people who will be running the business, including the organizational hierarchy, senior management and key personnel, staffing requirements, as well as recruitment and selection policies, trainings, bonuses and rewards, internal and external promotion criteria, and all costs associated with this.
As you can see, a business plan lays down all aspects of the business in a detailed manner. It doesn’t need to be lengthy, just to-the-point, precise and comprehensive. You shouldn’t skimp out on essential details when making the business plan, and try using as many charts, graphs and figures so that the data can be broken down and easily-consumed by anyone who comes across it.
Step 4: Raise Finance
Some might argue that this particular step should feature higher up the list, and I won’t disagree with that.
In business, the buck stops with money; you need to have money to run the business, and you need to be able to make some out of it in order to make it worth your time.
When it comes to start-ups, raising capital can be a bit of an issue. There are a plenty of ways you can consider however:
- Self-financed: Self-explanatory. This includes dipping in your savings, or selling your liquid assets to finance the business.
- Loans: These come in various forms, including but not limited to bank loans, business loans, small business loans and grants, micro loans, government-backed loans, home-equity loans, etc.
- Borrow money from friends and family: What’s the harm right? Plus it might be interest-free, or much less than what you get otherwise. Do consider the following points: make sure it’s a loan, not equity, and get everything in writing, and make sure that you try your best to make payments on time (like all other forms of loans).
- Investors: Look for investors who might be interested in investing in new start-ups and particularly in businesses such as yours. Investors will give you a loan, usually on terms better than what you would get elsewhere.
- Venture capitalists and angel investors: These too are investors, but instead of giving you a loan, they buy equity (shares, or in other words, ownership) in your company.
- Crowd-funding: Kickstarter.com is a great example here.
Step 5: Choose a Location
In the golden words of Donald Trump: “Location, location, location!”
Your business location will have a big influence on everything that happens from this point on. A good location choice could just be the difference between a successful business that blossoms, or just another failed startup that withers and dies away.
You might not even need an office-space. Most entrepreneurs, depending on the type and nature of their business, may think about working from home. For instance if you develop plugins or WordPress themes, all you need is a laptop with an internet connection, and you could be on your way to starting your business from the comforts of your living room!
With the passage of time, you might need t0 hire people (more on this in a bit) which is when you might want to get an office space. Alternatively, you could do away with an office space, and go for a freelance/off-shore team instead.
If you have a business that requires you to supply stuff or cater to buyers at a specific location (think food-truck), you’ll need to choose your location wisely. As an example, a hot-dog stand, for instance, will do very well in downtown areas especially during lunch hours.
Step 6: Hire People
Hiring can be tricky business. You want to have the best-possible human resource working for you, but above all, you want to hire the right people.
But before that, it is essential to assess whether you really need more people working for you, and if this would be a sound business move, financially-speaking. Would your business be better-off as a one-man operation before it starts making some money?
Determine the positions, if any, that you want to hire for. Make a list of tasks, jobs, responsibilities and TOR’s for every position. Determine the skills and talent that would be required for each position.
Determine what kind of additions would you want to make: full-time, part-time, or freelancers.
In addition, what sort of compensation and incentives can you give for each position, once more keeping in perspective the financial situation of your business – will it be a fixed-salary (hourly, weekly, daily, monthly wages) , bonuses and incentives, and/or a goal-based compensation?
Questions, questions, questions! It all boils down to the nature of your business. Think long and hard before hiring – the whole purpose of hiring is (a) the workload is too great for one person to handle, and (b) you will pay someone a certain amount of money, and be able to earn many times that amount in return as a result.
Enlist the help of the internet during this process. To get you started, here are some of things to look for in exemplary employees.
Once you’ve made the decision, advertise in newspapers, online on job boards and job portals, and look for freelancers on websites such as Fiverr or Elance for instance. This piece on ‘How to Have the Best Human Resource Working For You‘ might help here.
Step 7: Start Selling (and Marketing)
Run a marketing campaign before you begin, or do it when you start selling. You need to get the word out and let people know about your business.
Use the internet, and in particular social media for this purpose – it’s effective, not to mention free! Here’s why developing a social media strategy is essential, and how you can go about doing it (Facebook and Twitter-specific posts here).
Identify your target market. Start small. How you reach out to the potential customers and clients will be crucial. However what will be even more important is how you intend to convert leads into sales, and one-time buyers into returning customers.
Keep an eye out on customer feedback and satisfaction. Always put the customer first (here’s why it’s important, how it should be done).
Step 8: Improve and Refine
Look out for ways to improve your business processes, and become more efficient. Streamline and refine your internal business processes. Six Sigma is perhaps one such concept which you should read about.
Monitor and improve constantly. Make it a part of your business!
Speaking of reading about, do plenty of it! Grab some good books from your local library, or check for e-books on startups on iTunes for your iPad. Look for informative resources on the internet!
(So that got larger than a summary, didn’t it! Leave me a comment if below if you wish to add anything to this, feel free to do so in fact!)