In the U.S., 28 million small businesses are currently in operation, and more than 22 million of them have just one employee: The owner! In fact, about 52 percent of all small businesses are headquartered inside someone’s home.
Perhaps you have a business idea for starting your own company. Why not give it a shot? About a third of all new businesses last for at least a decade, and yours could be among that group. At the same time, maybe you never went to business school and aren’t sure how to start. Well, fortunately, there are concrete business-building steps that you can begin to take immediately.
Research & Data
First, conduct some research. Look into the buying habits of your target audience. Do they prefer shopping in person or online? Do they seem to respond to sales and coupons? Do they usually purchase what you’re selling at certain times of the year? When you learn the answers to these kinds of questions, you’ll make better decisions. For instance, if you discover that people between the ages of 18 and 24 have little interest in your items, you won’t waste money advertising on websites that are popular with young adults.
The internet offers new ways to raise money. Crowdfunding is defined as: The practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet.
Study how to approach donors and assemble successful crowdfunding campaigns. The two most famous crowdfunding sites are probably Kickstarter and Indiegogo, which together have raised about $4.35 billion. The average crowdfunding campaign lasts 35 days, and the average pledge amounts to $87. On Kickstarter, 43.4 percent of campaigns reach their financial objectives.
When you’re doing research, consult as many resources as possible. Especially helpful are trade associations and their publications as well as government agencies such as the Census Bureau and the Chamber of Commerce.
Do surveys of target markets or to determine who your target markets are. You can either do them yourself or hire a firm to conduct them for you. Do not underestimate the value of survey data. The most important components are of course who the surveys go to, the questions asked and the answers, but they must also go to enough people in order to get the right cross section of data.
Competition & Pricing
You should definitely examine the regional businesses with which you’ll compete. Scrutinize their stores and websites. What are they doing well? What could you do better? Come up with at least two ways in which you could improve upon what your competitors offer. For instance, imagine that you want to open a pet grooming studio. If you realize that no other such business in your area walks dogs, you might give your customers that service. In any event, once you’ve figured out your distinguishing characteristics, you can list them in your promotional materials.
Also, think about pricing. While business experts have differences of opinion on this matter, your best course of action is probably to set your prices as low as you can. That way, your business will appeal to as many people as possible when you’re starting out. As your reputation grows, you may choose to incrementally raise those prices. For some markets, exclusivity is the selling point, and people expect to pay for exceptional quality and personalized service. Luxury cars are an example, but some of those are now advertising low monthly rates and low interest.
Your Product & How It’s Presented
If you’re going to sell original products, design them and their packaging carefully, and solicit feedback from relatives, friends and associates. Surveys and test runs can also play a key role here.
You can build prototypes yourself if you’re handy with tools. Otherwise, you may choose to go to a website like ThomasNet.com to find manufacturers who can construct prototypes according to your specifications. For original products, get an international patent if you are able to do so. There are a number of different types of patents. Consult with a patent attorney but make sure it’s a good patent attorney who knows what he’s doing and will follow up on the patent. I’ve seen too many people get tripped up in this department.
The Business Plan
You’ll next need to assemble a formal, detailed business plan, one that will eventually attract backers and guide you during your company’s first few years. You should also produce a one-page summary of that document for anyone who wants an overview. A 2010 Palo Alto Software survey found that such a plan can double an entrepreneur’s chances of acquiring loans and investments. Be aware that you can contact the Small Business Development Center (SBDC) for assistance in putting it together. In addition, the website of the U.S. Small Business Administration (SBA) contains business plan templates.
Your business plan will name sources of capital, such as your savings or what you and partners have pooled. Indeed, if you can, it’s wise to invest some of your own money in your company. By doing so, you are demonstrating that you have faith in your brand, which can help give others the confidence to finance you. In your plan, you’ll also project your budget for a stated time frame, such as the first year or two. This budget must be detailed, and it should include inventory, equipment, insurance, rent, staff members’ salaries, advertising, and all of the other costs of running your business. Of course these are largely composed of estimates but they serve to give you and others a general framework for desired capital and future earnings and expenses.
Early on, you should start developing your internet infrastructure. You’ll need a company website with appealing photos and snappy descriptions. Web tools such as WordPress make the process of creating websites extraordinarily simple. However, don’t neglect to compose your site’s text with the latest search engine optimization (SEO) techniques in mind. After all, the highest four listings on search engine results pages (i.e. the first page) garner 83 percent of the first clicks.
You’ll also need a few social media accounts through which you can communicate with customers. At least half of all small business owners have professional Facebook pages, and about 57 percent of them have LinkedIn profiles. Your social media pages ought to briefly and clearly explain how your products or services can make people’s lives better. You might even ask a friend or family member who’s especially savvy with social media to help you make your accounts stand out.
Your last task during this initiation phase is to embark upon a trial run. First, determine how long your trial should last. Two or three months would probably be ideal. From there, set specific goals for this experiment, such as how much you intend to gross. If you meet your goals, your business formula could very well be viable over the long haul.
You might decide to only sell online, but it’s often worthwhile to have a real-world presence. About 78 percent of American consumers occasionally browse on the internet and then head to a physical store to buy something. It’s been given the name “webrooming” and is the practice of researching an item online before going into a local store to purchase it.
With that in mind, you could secure a short-term retail lease for your trial run. This kind of temporary business is known as a “pop-up store.” Globally, temporary stores take in a whopping $8 billion annually, and in the U.S., the number of these operations increased 16 percent between 2009 and 2013.
Once your interim brick-and-mortar establishment is up and running, ask your customers what they think of your business and make adjustments as necessary. If you find that you’re making lots of sales, you can then sign a long-term lease. On the other hand, if your sales are lackluster, adjustments are in order which can include pricing adjustments, new marketing tactics and possible relocation.
Those are few of the nuts and bolts of what we people are calling “bootstrapping” – getting a business up and running with little capital. It seems a new buzzword is invented for every “new” scenario. But factually, people have been building businesses ever since one tribe visited another tribe and traded furs for stone tools.
I didn’t even get into the subjects of motivation, persistence and vision in this article but I have covered them extensively in other posts. Nothing can replace you being utterly on fire to succeed and prosper. Knowing some of these basics helps dispel some of the mystery and uncertainty, but there comes a time when you just have to dive in and do it! Good luck!