Beforwe we go into the things you must know before starting up any business lets first of all know what business is.
What Is a Business?
The term business refers to an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or they can be non-profit organizations that operate to fulfill a charitable mission or further a social cause. Businesses range in scale from sole proprietorships to international corporations and can range in size from small to large.If you’re thinking about taking the plunge and starting a business of your own, there are some key steps you need to take first.
What Is a Business?
The term business refers to an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or they can be non-profit organizations that operate to fulfill a charitable mission or further a social cause. Businesses range in scale from sole proprietorships to international corporations and can range in size from small to large.If you’re thinking about taking the plunge and starting a business of your own, there are some key steps you need to take first.
Below are some of these steps you need to follow in oder to setup your business successfully.
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Every business starts with an idea – a super duper idea that actually works. If you want your business to stand out, you will need to offer something that no one else has offered till dateThat said not everyone can come up with a unique business idea.
what will you offer?
What are you going to sell in your business?
In general, you can choose to provide the following: service, merchandising or manufacturing.
Service – A service is a transaction in which no physical goods are transferred from the seller to the buyer. The benefits of such a service are held to be demonstrated by the buyer's willingness to make the exchange.
Merchandising – Merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to displaying products that are for sale in a creative way that entices customers to purchase more items or products.
Manufacturing – The term manufacturing refers to the processing of raw materials or parts into finished goods through the use of tools, human labor, machinery, and chemical processing. Manufacturing allows businesses to sell finished products at a higher cost than the value of the raw materials used. Examples are manufacturers of cars, gadgets, clothing, bags, daily essentials, etc.
This might take a lot of research and planning; but at the end all these efforts will ensure that you have everything in place to get your business idea off the ground.
Having a business plan can be highly advantageous at this stage. It will tell you whether your business has a place in the market and if the idea is worth or profitable enough to go ahead with.
If you have the knowledge you can construct one, all by yourself. If not, you can always hire a professional business consultant to do it for you.
Meanwhile you will have to continue with your research to keep your knowledge up-to-date.
Business tip: Never Compare Your Beginning To Someone Else’s Middle
Start by answering the question, who are your customers. If you are selling your product or service locally, you may have to assess the demand for it. In case you are taking up on an international level, you may have to understand the rules and regulations of dealing internationally.
A market survey should reveal all the details that you may need about the market for your product or service. Basically you are looking for:
Thankfully social media has made it possible to reach out to target audience, anywhere in the world, without having to put in too much of efforts.
If you are thinking of starting a manufacturing plant, your start-up costs could be very high. You may have to think about the cost of the land or building, setting up the plant, buying the equipment and machinery, investing in furniture and office equipment, and various other things.
In case of a retail business, you may still need to think of the cost of the store as well as the furniture required to decorate it. An office can be started with relatively lower cost since all you may have to invest would be in furniture and office equipment.
Once your business is set up, you will have to think about the working capital needed to run your business.
You will have to take into account the inventory that you need to maintain, the credit that you can extend to your customers and the supplier’s credit that you can get.
In not all cases can you expect credit to be given by the suppliers, especially if you are a new name in the market.
A target market is a group of customers within a business's serviceable available market at which a business aims its marketing efforts and resources. A target market is a subset of the total market for a product or service.
If yours is a retail business you will have to look for a well-populated area that is easily accessible.
If your product is a monopoly competition will not matter. Else, you will have to come up with an excellent strategy to fill in the demand and supply gap.
Gaining a market share should be on top of your mind if you are about to start a business. If there is a huge demand for your product, this shouldn’t be too difficult. If not you may have to strengthen the position of your business to gain an entry into the competitive market.
Analyzing competition includes getting to know your competitors, figuring out how they have positioned themselves, identifying their pricing and marketing strategies, and evaluating their strengths and weaknesses.
Once you have all the information it is all about conveying your unique selling point to your target audience. If you can do this well you will survive no matter how tough the competition is.
When starting a business, plan the assets that you’ll need to operate. This may include the following example: computers, equipment, furniture, vehicle, etc. List down not only the item but also the quantity and price.
Consider opening a bank account separate for your business. This is to simplify your record keeping and avoid mixing your personal to your business especially if you are a single proprietor. When choosing a bank, it must be accessible and available.
- A Business Idea
- Nature of the business
- Knowledge or Expertise
- Market or Demand
- Start-up Costs
- Target customer
- Location
- Formation
- Capital and Finance
- Competition
- Asset requirements
- Lease
- Suppliers
- Operating expenses
- Hire people or outsource
- Registration
- The business bank account
- Marketing
- Government compliance
- Accounting and financial analysis
- Staff
- Technology
- A Business Idea
Every business starts with an idea – a super duper idea that actually works. If you want your business to stand out, you will need to offer something that no one else has offered till dateThat said not everyone can come up with a unique business idea.
There might be hundreds of businesses just like the one you are going to start. Yet you can make it better by answering the following questions:
What do I need to do to make this better?
What is it that I can do better than what the other guys are doing?
Will I be able to grab some market share in this category?
You may have a great business idea; but unless it solves someone’s problem it is not going to work. So start by listening to frustrations – both of yours as well as others (your family members, your neighbors, your friends, and your associates). Once you have understood these, here is what you can do:
See what best you can do to address these frustrations.
Identify the skills in you that will help you offer the right solution.
Find out if you are actually passionate about offering that solution.
And Voila! You have your business idea.
What do I need to do to make this better?
What is it that I can do better than what the other guys are doing?
Will I be able to grab some market share in this category?
You may have a great business idea; but unless it solves someone’s problem it is not going to work. So start by listening to frustrations – both of yours as well as others (your family members, your neighbors, your friends, and your associates). Once you have understood these, here is what you can do:
See what best you can do to address these frustrations.
Identify the skills in you that will help you offer the right solution.
Find out if you are actually passionate about offering that solution.
And Voila! You have your business idea.
- Nature of the business
what will you offer?
What are you going to sell in your business?
In general, you can choose to provide the following: service, merchandising or manufacturing.
Service – A service is a transaction in which no physical goods are transferred from the seller to the buyer. The benefits of such a service are held to be demonstrated by the buyer's willingness to make the exchange.
Merchandising – Merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to displaying products that are for sale in a creative way that entices customers to purchase more items or products.
Manufacturing – The term manufacturing refers to the processing of raw materials or parts into finished goods through the use of tools, human labor, machinery, and chemical processing. Manufacturing allows businesses to sell finished products at a higher cost than the value of the raw materials used. Examples are manufacturers of cars, gadgets, clothing, bags, daily essentials, etc.
- Knowledge or Expertise
This might take a lot of research and planning; but at the end all these efforts will ensure that you have everything in place to get your business idea off the ground.
Having a business plan can be highly advantageous at this stage. It will tell you whether your business has a place in the market and if the idea is worth or profitable enough to go ahead with.
If you have the knowledge you can construct one, all by yourself. If not, you can always hire a professional business consultant to do it for you.
Meanwhile you will have to continue with your research to keep your knowledge up-to-date.
Business tip: Never Compare Your Beginning To Someone Else’s Middle
- Market or Demand
Start by answering the question, who are your customers. If you are selling your product or service locally, you may have to assess the demand for it. In case you are taking up on an international level, you may have to understand the rules and regulations of dealing internationally.
A market survey should reveal all the details that you may need about the market for your product or service. Basically you are looking for:
- The current size of the market (the approximate number of potential buyers)
- Its growth potential (whether it is likely to grow in size or contract)
- The market share that you can expect to take
- The buying habits of the target audience (and how to exploit them)
- The different segments of the market
- The kind of margins that you can expect from the market
Thankfully social media has made it possible to reach out to target audience, anywhere in the world, without having to put in too much of efforts.
- Start-up Costs
If you are thinking of starting a manufacturing plant, your start-up costs could be very high. You may have to think about the cost of the land or building, setting up the plant, buying the equipment and machinery, investing in furniture and office equipment, and various other things.
In case of a retail business, you may still need to think of the cost of the store as well as the furniture required to decorate it. An office can be started with relatively lower cost since all you may have to invest would be in furniture and office equipment.
Once your business is set up, you will have to think about the working capital needed to run your business.
You will have to take into account the inventory that you need to maintain, the credit that you can extend to your customers and the supplier’s credit that you can get.
In not all cases can you expect credit to be given by the suppliers, especially if you are a new name in the market.
- Target Customer
A target market is a group of customers within a business's serviceable available market at which a business aims its marketing efforts and resources. A target market is a subset of the total market for a product or service.
- Location
If yours is a retail business you will have to look for a well-populated area that is easily accessible.
Location-based marketing allows organizations to target consumers at a granular, person level with online or offline messaging based on their physical location. Using location data, marketing teams are able to reach consumers based on qualifiers like proximity to a store, events happening in their region, and more.
Make sure you identify or look for the best location for your business. Your business must be seen by your target customer or at least near them.
If it is a manufacturing unit you can choose a location that can let you save money on electricity, water, taxes, and transportation. Look for a place where manpower is easily available and raw materials can be sourced easily. You can even look for a location that can get you rebates and subsidies from the government.
If yours is a niche product or a service, you may have to look for a single location where all your competitors are. For instance, if it is a software company you want to start, you may have to look for a software belt where all other software companies have set their shops. Similarly, the ideal location for a gold vendor / jeweler would be a gold mart that has housed many such shops.
Offices can be set up in any place that is accessible and offers good facilities such as parking spaces, refreshments, transportation, and so on.
Make sure the location fits well within your budget and offers scope for expansion. An ideal location would be one that complements your business in the best possible way.
Single proprietorship – you’re the sole owner of the business. A sole proprietorship also referred to as a sole trader or a proprietorship is an unincorporated business that has just one owner who pays personal income tax on profits earned from the business. Many sole proprietors do business under their own names because creating a separate business or trade name isn't necessary.
Partnership – a partnership has two or more owners. When you have a partnership, you will work with at least one co-owner. Owning a business with someone else invites additional concerns, such as handling conflicts among the owners and allocating responsibilities, profits, and losses.
Corporation – A corporation is a business entity that is owned by its shareholder(s), who elect a board of directors to oversee the organization's activities. Corporations can be for-profit, as businesses are, or not-for-profit, as charitable organizations typically are.
Make sure you identify or look for the best location for your business. Your business must be seen by your target customer or at least near them.
If it is a manufacturing unit you can choose a location that can let you save money on electricity, water, taxes, and transportation. Look for a place where manpower is easily available and raw materials can be sourced easily. You can even look for a location that can get you rebates and subsidies from the government.
If yours is a niche product or a service, you may have to look for a single location where all your competitors are. For instance, if it is a software company you want to start, you may have to look for a software belt where all other software companies have set their shops. Similarly, the ideal location for a gold vendor / jeweler would be a gold mart that has housed many such shops.
Offices can be set up in any place that is accessible and offers good facilities such as parking spaces, refreshments, transportation, and so on.
Make sure the location fits well within your budget and offers scope for expansion. An ideal location would be one that complements your business in the best possible way.
- Formation
Single proprietorship – you’re the sole owner of the business. A sole proprietorship also referred to as a sole trader or a proprietorship is an unincorporated business that has just one owner who pays personal income tax on profits earned from the business. Many sole proprietors do business under their own names because creating a separate business or trade name isn't necessary.
Partnership – a partnership has two or more owners. When you have a partnership, you will work with at least one co-owner. Owning a business with someone else invites additional concerns, such as handling conflicts among the owners and allocating responsibilities, profits, and losses.
Corporation – A corporation is a business entity that is owned by its shareholder(s), who elect a board of directors to oversee the organization's activities. Corporations can be for-profit, as businesses are, or not-for-profit, as charitable organizations typically are.
- Capital and finance
No business in this world can run without money. Depending on the type of business you are starting and the initial costs that you will have to pay up for, you will know what kind of capital you would need to start your business.
Whatever steps you take, to finance your business, you will have to make sure you have the required funds to take you through the startup phase.
The financing pattern is one of the most important factors to consider before starting a business. This generally includes the capital that you can introduce from your savings as well as the funds that you can borrow.
Personal savings are what 77 percent of the small businesses rely upon while gathering their initial funds. But you can’t really go over the board if you cannot fund your entire business.
Funds can be borrowed for business, either through short-term or long-term loans. Nevertheless, you may have to keep in mind the terms and conditions of borrowing such funds including the cost of borrowing, the rate of interest, the repayment terms, and the security that is required. Approach a few banks and private lenders, get a few quotes, and compare them to identify the most beneficial type of funding.
It would be ideal to go for long-term funds only if you have to purchase any fixed assets. For working capital requirement short-term funds would be sufficient. This way you can make sure they are paid back once your business starts progressing.
Whatever steps you take, to finance your business, you will have to make sure you have the required funds to take you through the startup phase.
The financing pattern is one of the most important factors to consider before starting a business. This generally includes the capital that you can introduce from your savings as well as the funds that you can borrow.
Personal savings are what 77 percent of the small businesses rely upon while gathering their initial funds. But you can’t really go over the board if you cannot fund your entire business.
Funds can be borrowed for business, either through short-term or long-term loans. Nevertheless, you may have to keep in mind the terms and conditions of borrowing such funds including the cost of borrowing, the rate of interest, the repayment terms, and the security that is required. Approach a few banks and private lenders, get a few quotes, and compare them to identify the most beneficial type of funding.
It would be ideal to go for long-term funds only if you have to purchase any fixed assets. For working capital requirement short-term funds would be sufficient. This way you can make sure they are paid back once your business starts progressing.
The four major types of capital include working capital, debt, equity, and trading capital.
- Working capital- is a financial metric which represents operating liquidity available to a business, organization, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital.
- Debt capital- Debt capital is the capital that a business raises by taking out a loan. It is a loan made to a company, typically as growth capital, and is normally repaid at some future date. This means that legally the interest on debt capital must be repaid in full before any dividends are paid to any suppliers of equity.
- Equity capital- Equity capital is funds paid into a business by investors in exchange for common or preferred stock. This represents the core funding of a business, to which debt funding may be added. Owning a sufficient number of shares gives an investor some degree of control over the business in which the investment has been made.
- Trading capital- Trading capital is a term used by brokerages and other financial institutions that place a large number of trades on a daily basis. Trading capital is the amount of money allotted to an individual or the firm to buy and sell various securities.
- Competition
If your product is a monopoly competition will not matter. Else, you will have to come up with an excellent strategy to fill in the demand and supply gap.
Gaining a market share should be on top of your mind if you are about to start a business. If there is a huge demand for your product, this shouldn’t be too difficult. If not you may have to strengthen the position of your business to gain an entry into the competitive market.
Analyzing competition includes getting to know your competitors, figuring out how they have positioned themselves, identifying their pricing and marketing strategies, and evaluating their strengths and weaknesses.
Once you have all the information it is all about conveying your unique selling point to your target audience. If you can do this well you will survive no matter how tough the competition is.
- Asset Requirements
When starting a business, plan the assets that you’ll need to operate. This may include the following example: computers, equipment, furniture, vehicle, etc. List down not only the item but also the quantity and price.
- Lease
- Renovation and Improvements
- Suppliers
- Operating Expenses
- Hire People or Outsource
- Registration
- The business bank account
Consider opening a bank account separate for your business. This is to simplify your record keeping and avoid mixing your personal to your business especially if you are a single proprietor. When choosing a bank, it must be accessible and available.
- Marketing
- Government Compliance
- Staff
Your staff members are the ones that can make or break your business.
Without efficient manpower no business can ever succeed. That said an efficient staffing strategy needs to be in place if you want to reduce your staff replacement expenses.
You can hire a recruitment agency or use various recruitment tools to fill in your positions with the right talent.
There are also a number of websites that make it easy to find the exact kind of people you are looking for. Signing up for a couple of these can make your job, both easy and cost-effective.
Apart from hiring the right staff there is also the training that you need to think of. This will ensure your staff members will be in a better position to handle their responsibilities and meet the expectations you have set for them.
Finally you will also need to think about paying their salaries and perks to keep them motivated enough at work.
Whether it is office equipment, plant and machinery, or the software required to monitor your business, you will have to make sure it helps your business to perform well in the long-run.
Here are a few steps you can follow, while choosing the right technology for your business:
Conclusion:
I hope this article has given you some insights on the fundamental items you needed to consider when starting and a great business.
Without efficient manpower no business can ever succeed. That said an efficient staffing strategy needs to be in place if you want to reduce your staff replacement expenses.
You can hire a recruitment agency or use various recruitment tools to fill in your positions with the right talent.
There are also a number of websites that make it easy to find the exact kind of people you are looking for. Signing up for a couple of these can make your job, both easy and cost-effective.
Apart from hiring the right staff there is also the training that you need to think of. This will ensure your staff members will be in a better position to handle their responsibilities and meet the expectations you have set for them.
Finally you will also need to think about paying their salaries and perks to keep them motivated enough at work.
- Technology
Whether it is office equipment, plant and machinery, or the software required to monitor your business, you will have to make sure it helps your business to perform well in the long-run.
Here are a few steps you can follow, while choosing the right technology for your business:
- Assess the requirements of your business
- Make sure the technology you choose helps in making things run smoothly
- Consider leasing technological equipment if you want to stay up-to-date
- Always have a backup plan
- Make sure you have the required support for installing, upgrading, and troubleshooting the technology that you choose
- Invest in training so that you can make maximum use of the technology
- Accounting and Financial Analysis
Conclusion:
I hope this article has given you some insights on the fundamental items you needed to consider when starting and a great business.
Feel free to share thoughts in the comment box below.
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