The idea of starting up a business is very appealing for a range of reasons. And it’s never been easier to start a business either. From eCommerce platforms that take minutes to set up and start selling, to the tools and resources available to the modern entrepreneur, knowing how to start a small business is relatively straightforward.
The challenge is learning how to start a small business that will not only last the distance but grow profits from day one. So if you’re looking for tips on starting a business, here’s our quick guide to starting a business and ensuring that this time next year, it’s still around to earn you your profits.
Step 1: What kind of business to start?
Your first step is to decide what kind of business you want to launch. For some people, this is the easy part. If you already have a killer idea or product, you already have a head start. For those who know that they want to start and run a business but aren’t sure what kind, it’s time to narrow down your options.
Think about what kind of business you want to run. Are you looking for passive income, or do you want something that you actively work on day in and day out? Do you want to sell online only, or will you need a retail outlet? Do you have skills you can sell, such as practical skills like car repair or gardening?
When thinking about what kind of business you want to launch, think about what you’re passionate about. Some people love animals and start a dog-walking business. Others are driven by the power of the written word and can set themselves up as freelance writers. From yoga to fashion, choose a business that you can get excited about, not just tomorrow but ten years from now.
Step 2: Market research
So you’ve got a list of business ideas, or perhaps just a single idea that you’re extremely passionate about. Now it’s time to do some viability research. Who are your customers going to be? Who are your main competitors?
There are two tricks to help you here. The first is key to knowing how to start a small business: define who your target market is, and then offer a product or service that is currently unavailable to that market.
The second is to find a niche that includes you as a member of the target market. Starting a comic book store might be an option if you know the comic book industry inside out because you’re a fan. If you’re passionate about horse riding, then selling a superior saddle is something you will know a lot about.
When you’re part of the target audience, you will know the pain points, needs, and even the terminology used by other members of your target audience. Communication will be easier, which means your marketing will be more streamlined.
Step 3: Solve a problem
Every business solves a problem. From McDonald’s to the local hardware store, from your local plumber to the local multiplex cinema, the better they solve the problem, the more successful they will be. And the bigger the problem, combined with how well you resolve it, the more people will be prepared to pay for your solutions.
So if you want to improve your chances of business success, find a problem to solve in the niche that your previous steps have highlighted. You need to identify a good problem and ensure that you can resolve it. Of course, if you’re choosing an area where you’re already an active participant, such as camping or selling books, you may already have a good idea for a product or service that solves a problem.
If you don’t have a problem to solve, do some research. Join relevant social media groups and online forums, and look for issues people have. Ask about the common problems, and look for complaints about how an existing business fails. Once you have recognised a problem, look at how your competitors deal with it. If they aren’t, or they are doing so at a low standard, then you have a business opportunity.
Step 4: Establish (realistic) goals
Having vague, undefined business goals is one of the fastest ways to see a new business fail. It’s not enough to simply know how to start a small business but to understand that realistic goals are critical. If you set your goals too high, you and any employees you have will struggle to meet them.
It’s tempting to think of hundreds of goal ideas when you first start a small business, but if you aim too high, then it’s all too easy to damage your potential to grow steadily. So in your first year of business, you should have goals such as:
- Creating perfect financial management
- Hiring the right people
- Defining your customer’s buyer journey
Don’t just think about the short-term goals of your business. Think about the long term. Where do you want your business to be in five years, or ten years? Are you building a business so that you can sell it later, or are you hoping to build a business that can improve on and replace the big names in your chosen sector? The more you can define your business goals, the easier it will be to align your team, your small business marketing, and your growth strategies.
Step 5: Write a business plan
You likely have a lot of pages of notes and ideas, and you’re probably thinking about getting ready to launch your business. However, before you do anything else you have to write your business plan. Now, there are almost endless online guides that will walk you through creating a business plan. The problem is that many first-time entrepreneurs fail to understand its value.
Most people think of a business plan as one of the things that an investor or bank manager wants to see before they will consider a loan or an investment. While that’s undoubtedly one thing that your business plan can be used for, it can be used for a lot more than that. A business plan shouldn’t remain static, and it shouldn’t get put in a drawer and forgotten about once you’ve got the funding you need.
Instead, it should be a constantly updated document that keeps your goals clear and tailored to the changes that occur in your niche. Check out our free downloadable guide to business plans to find out more about how to write yours and (more importantly) how to use it to guide your business growth.
Step 6: Finding funding
Money will always be a big subject when you’re building and running your business. Balancing the books using your accounting software of choice is vital, but what about when you don’t have enough cash to start your business in the first place?
It used to be that if you needed money to launch a new business you’d head to your local bank manager with your business plan in hand. Those days are long gone, and it’s harder to get a small business loan from a bank than ever. But that doesn’t mean you don’t have options, and there are ways to fund your business without getting outside help.
A common way to find funding that doesn’t involve outside help is to bootstrap the launch of your business. That means finding ways to avoid spending where you would otherwise. Bootstrapping a business is an extremely popular money solution right now, and it has many benefits. However, if bootstrapping isn’t an option, outside help in the form of angel investors might be the solution you’re looking for.
Angel investors will be people who have money they want to invest in a business they can feel confident about. Those angel investors are easier to find than ever, and there are whole websites dedicated to connecting investors and small business owners. You may have to provide those investors with a percentage of your business, but they can be a valuable source of both cash and advice.
Step 7: Naming and registering
You’re almost ready to launch. You’ve got everything planned as well as possible, and your short and long term goals are identified. But have you thought of a business name yet? You likely have some ideas about the name of your business, and you may even have decided on one early on.
It’s not easy to come up with the perfect name for a business, especially when you also have to think about modern-day issues like ensuring you can buy the website address that includes your business name of choice. Again, plenty of tools and resources are available that can help guide your final choice of business name. Make sure that yours is memorable, distinctive, and easy to spell. Use a business name generator to kick off some brainstorming sessions and make notes about each option.
Once you decide on your business name, you need to register it. This can be done by using the government website, but be prepared to put a couple of hours aside before you start and make sure that you have all of the paperwork you need. That will depend on when you’re setting up your business as a sole trader, a limited company, or an LLP. Make sure that you do your research to choose the right business model as this will directly affect your taxes.
Learn how to start a small business
It might be easier than ever to start a business, but starting a robust, durable, and sustainable business remains a challenge. Despite the many tools and resources available to the modern entrepreneur, the key to success will always be research. Take the time to do as much research as possible on every facet of your new business, and be agile enough to learn lessons from that research.
Of course, most business decisions come down to finances. Managing your budget, understanding the importance of your cash flow management, and ensuring that you’re ready at the end of the tax year will improve your chances of successful entrepreneurship. So if you need to take greater control over your business finances, cloud-based accounting software is the key.
If you want to find out how financial forecasting and cash flow management can do more for you than simply satisfying your accountant, talk to the team at Big Red Cloud today. We can help ensure that you get the insights you need to grow your business based on real-time data from your finances. Alternatively, try out our software yourself with our free trial, and get hands-on with what could be your most high-value business resource.