What does the thought of being your own boss seem like?
The idea of creating a business model that solves a pertinent issue and monetising it, as well as the freedom of making decisions, strategising and riding the market tide — if all these excite you, it is time to unleash the hidden entrepreneur in you.
Starting a new business is something almost everyone has thought of doing at some point in their lives. But making it a flourishing one or keeping the idea alive is not an easy task.
Identifying a problem, understanding the need for a solution and its viability, and then launching services in the market are some crucial steps that a business owner must consider before embarking on the journey. Next comes the whole spectrum of fundraising, investments, expenditures and payments.
However, if all this sounds difficult, there is nothing to be disheartened about. At one point, giants like Facebook, Google, Reliance and Amazon had taken their nascent steps before becoming the reputed names that they are today. Therefore, no matter how much your valuation is or how much bootstrap investment is involved, if there is a vision and potential customers, then there are opportunities to grow big.
Additionally, the surge in the entrepreneurial wave because of the rise in the number of startups and small businesses shows a huge potential in the country that can be harnessed as an asset to boost the economy.
8 things to keep in mind before starting a business
1. Narrow down your business idea
In today’s highly competitive world, standing out in the crowd is not an easy job. As a business owner, one must be very clear of their business idea, purpose and the viability of the product or service that they want to sell.
All amateur entrepreneurs must do thorough market research and narrow down ideas. Often, businesses start great but eventually fizzle out in the first year itself, as startups try to take on too many new products to diversify their brand base. This might sound like a good idea, but it often backfires because there is no clarity or a sense of dominance in one field.
Streamlining thoughts, narrowing down on one product or viable commodity and keeping the services simple and accessible are likely to ensure a better market grasp.
2. Determine your target audience
Not all products can serve and benefit all people. Hence, another important thing to keep in mind before starting a business is to understand your market and have a clear view of your target audience (TA).
Every business has a niche and caters to a specific market that will buy the bulk of the product or service. For instance, branding a sweet ice popsicle for the health-conscious crowd won’t yield much return as compared to the TA of kids and young adults.
Similarly, setting up a posh restaurant next to a school or college may not be very profitable as the TA should be high-end customers instead of the youth who would prefer fast-foods that are easy on the wallet over signature dishes by a renowned chef.
This brings us to the point of business flow or how to reach the TA. Determining whether to adopt a business-to-business (B2B) plan or a direct business-to-customer (B2C) service, will have a deep impact on the reach and brand awareness.
3. Finance planning and cash flow
From laying its foundation to its sustenance, every new venture requires capital. Additional expenditures incurred by various departments and processes, such as tech support, packaging costs, marketing efforts and shipping, need cash flow and meticulous financial planning.
While putting in your money or funds from friends and family might help in the beginning, the initial corpus amount will not last long, and spending it will affect the business over its course. Additionally, you must be mindful of not overspending and incurring hidden costs such as fees, permits and administrative costs. If the expenditure exceeds cash inflow, it will lead to an imbalance — recovering from which will be very difficult.
To help acquire more funds, you can reach out to angel investors or venture capital firms who can invest in your company and help the business grow.
At a later stage, applying for small business loans through banks is an option, too.
4. Establish a business structure
Another important aspect to keep in mind before starting a business is to be sure of the business model and have a proper structure in place.
Now that you have a clear vision, it is important to be sorted on the grounds of the company’s structure as well as its legalities. Getting your company registered is one of the first steps.
This will help in laying down the co-owners’ liabilities, dividing the tax burden, any legal documentation and other financial and legal responsibilities.
5. Build a strong team
To make any venture a success, you need the backing of a hardworking and intelligent group of people working for you.
Having like-minded people as partners, strategists and co-founders onboard is one of the major steps to build a new business. Dividing roles and company shares among each team member is one of the crucial things to do before starting your business.
However, not all support teams need to be strategic business advisors. Hiring mentors for professional advice and to manage junior team members is also a valued addition to a business as it sets processes in place.
A strong and driven team will give the venture a major boost, as there will be a reliable bunch working towards the same goal who will also bring in new ideas and perspectives to the table.
Additionally, reaching a consensus on matters will be easier. However, business partners must understand that stakeholders’ opinions will need to be in tune with the goal of the company. Offering equity is another way to keep employees motivated as well as involved in the company proceedings.
6. Understand the risks involved
No business is a bed of roses. One of the pivotal things to keep in mind before starting a business is that there is going to be a certain level of risk involved.
Understanding the market risks, the scope of scalability of your product and gauging the prospects of your business are some of the points that must be considered.
Dedicating all your time to build a business and then realising the risks involved might come as a huge shock. Hence, being honest, farsighted and upfront with the risks will help in assessing the downside of a business plan and working to overcome the shortcomings.
It is true that you must take risks to succeed. However, it is equally important to stay realistic and be aware of what kind of risks you can take while keeping the business afloat.
7. Generate income at the earliest
At the end of the day, money matters and that is what all businesses aim to do. Bootstrapping or taking help from investors might help bring in the capital and generate income initially but sustaining the long run is the ultimate test.
The most crucial aspect here is to figure out how soon the business can start generating income and profits. Small business owners or those just starting must be extremely mindful of this.
It is done to understand your market position and build a strong TA base as soon as possible.
Businesses, no matter how big or small, must begin generating revenue for entrepreneurs to reinvest and keep it going. Pre-orders, deposits, online sales or even buying off the shelf — getting the cash flowing in is extremely important.
8. Numbers matter
This is a hard reality that all budding entrepreneurs must know and accept. You may be immensely passionate about your business, implement great strategies and have all the funding needed, but numbers and sales records matter the most.
Just getting customer engagements on your ads and posts is not enough. Seeing the clicks transforming into transactions and charting growth in sales is what you must aim for.
One of the important things to keep in mind as you start a business is that you must be thorough with your numbers. Gross margin from each service, net profit, cost of service, month-on-month, yearly growth and other evaluations must be made throughout the year.
This will help you get an idea of how to maximise the margin and if the cost that is incurred is worth it.
[Hero and featured image credit:Andrew Neel/Unsplash]