What Are the Steps to Start a Business

Before you begin to think about starting a business, I would start with understanding why businesses fail. According to The U.S. Bureau of Labor Statistics (BLS), approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.

But, why is this? And, is it preventable? 

1. Market Analysis 

In 2010 I had my first business idea. I did not know it then, but I was doing market research when I began to ask those around me if it were something they would be interested in. Surprisingly, a lot of people said they were interested and at the same time told me not to pursue it because they thought it would fail. What a contradiction! However, I was wise enough to know then that fear inspires doubt and they were simply reflecting their own fears onto me. So, my next step was to seek free counseling outside of my circle of influence because I had no moral support and absolutely no money to invest in market research. After weeks of asking around I was directed to the Small Business Service (SBS) center located right on my college campus. Ironically, I had no idea they existed, yet I walked by their office just about once a week for four years. Not only were they able to guide me through market research, but they also helped to formulate a plan of action. You’ll come to learn that resources are everywhere, but it’s only when you are actually looking that they appear. 

2. Write Your Ideas on Paper 

After a preliminary market research exercise was completed, the SBS encouraged me to write my business ideas down on paper. This took me about an hour. When I returned to the office the counselor laughed at my poor execution. At that time I had no idea what a business plan entailed. He gave me a blueprint and told me to come back with no less than 12 pages. I thought that was a ridiculous amount of information just to think through an idea and I would eventually run out of ideas to fill up that many pages. However, a business plan actually forces you to look at many aspects of the business that you didn’t consider before. For example, what would it cost to acquire a customer? Do I understand the science behind a brand and brand marketing? Am I solving a real problem? Is the customer base large enough for me to make a profit? What are my margins? And, who is my competition? 

If you want more detail about writing a business plan click here!

3. Passion 

Once you have your business plan written down I would then ask yourself what I consider to be the most important question; am I passionate about this? When you look back at your business plan (which should be no shorter than 20 pages if done correctly) you’ll come to realize the amount of work you have ahead of you in order to simply launch the idea. That does not take into consideration all the pit falls waiting for you as you begin to navigate this uncharted territory. As you begin to face challenges like making mistakes, running out of money, wanting to be with your friends and family instead of your computer, you’ll start to second guess your decision to embark on the journey of becoming a business owner. Every entrepreneur reaches this point and the only thing that will get you to the other side is the passion you have for the problem you are solving or the industry you are attempting to make your mark on. That’s it. There is no amount of outside encouragement or financial assistance that will encourage you to keep going unless you feel it from the pit of your gut. You need that fire because it will be tested several times. If you burn out your business will die with it. 

4. Flexibility 

Although this topic is not a necessity to start your business, I encourage you to take a hard look at whether you are flexible in terms of changing the original thought of what you want your business to be. We all have a vision, but that vision may change and if you’re not tuned in to the market you will face hardship. Being stubborn is a trait that may kill your business before it even gets off the ground. Make sure you have the patience and open mind to explore other opportunities as they come your way. A lot of successful businesses start off as one thing and slowly transform into another. For example, my business was originally an online sports meeting place for enthusiastic handball players in New York City. A few months into my launch, I was contacted by players in Ireland who wanted to use the software for their community of players. From there I was introduced to Red Bull who needed assistance with a handball event production and outreach. After (2) years of working with Red Bull, kids began asking me if I had tournaments for their age group (Red Bull is caffeinated so there were age restrictions on who could compete in their events). After 5 years of launching what initially started as an online meeting place, I found myself organizing handball tournaments for kids that were fully funded by the government, traveling around the world to manufacture my own ball and organizing world-class events with participation from over 35 countries. If I had been stubborn or short-sided about my business being only online, I would have limited opportunity my personal potential to do more. 

5. Your Initial Investment

I launched two businesses with virtually no start-up funding as a single Mom with a newborn boy living in the hood. When you are raised in an environment with scarce resources, it teaches you how to be resourceful. There are some particularly important and practical things you are going to need money for. For example, you should consider incorporating your business. There are tax breaks and personal liability protections associated with being incorporated. I go deeper into the types of corporations available to you such as S Corps, C Corps, LLC and sole proprietorships in my “Hard Knock” Entrepreneurship Course. There, we will weigh out the pros and cons of each as it pertains to your personal preference and what is necessary for your business. I used LegalZoom.com to form my entities. The cost is minimal, and a lot of the work is done online. However, I firmly suggest you understand the benefits and limitations of each entity before you spend the money to form one. 

One of my next small investments was creating an online presence. Have you established your brand? Do you need to create a logo? Do you have your website domain secured? These days it is a necessity to have a website and the barrier of entry is so low that you do not need to be an expert in this field to build your presence online. For example, there are companies like Wix.com that have easy to navigate templates so you can create your own website and logo all in one place, for one small price or subscription. This doesn’t require the expense of a consultant if you invest the time to navigate the platform. 

Also, keep in mind you may need some permitting or licensing when starting your business. For example, if you plan to go into the food industry you should consider investing early into a food handling license or certification. They are easy to obtain. If you have a bottomless budget and think you can hire people with these certifications, great. But have you considered the fact that you might need at a minimum base knowledge in order to be able to identify challenges or mitigate future risk? In my case, I was in sports and recreation and didn’t realize that I needed a hefty insurance policy in the event of injury. This was not on my radar until I was deep into my business with no money allocated for this expense. Consider liabilities, certifications and necessary trainings in advance. 

Lastly, your business may require professional services such as accounting, bookkeeping and legal consulting. I had no idea that this would also become awfully expensive. In my experience, I own an LLC and founded a 501(c)3. I must be extremely careful with keeping both entities separate. This requires separate names, bank accounts, Board of Directors and most importantly a different set of rules when filing for taxes. For example, my LLC is filed along with my personal taxes in what is called a Schedule C. My 501(c)3 organization must file an annual 990 and CHAR500. Do not get too caught up in the names and numbers because at first it can seem confusing and overwhelming. But this is exactly why you are going to need to outsource some professional assistance. I don’t recommend attempting to do this on your own. At least not in the beginning. 

In summary, there is a lot to consider before you take the first step of launching your business. You need to really dig deep and ask yourself if you have the passion for what it is you are about to embark on. Did you take the time to write details on paper? Is there a real problem to solve? When things shift will you be open-minded enough to go along for the ride? Do you have a few dollars available to invest in the practical expenditures?

If you answered yes to all these questions and want to dive deeper into each topic then register for my free Webinar here.