Although conventional wisdom says that many small businesses fail, achieving success in business is entirely possible if you are prepared. As of 2013, there were more than 28 million small businesses in the United States, and 22 million people were self-employed. Since 1995, small businesses have created 65 percent of new jobs.
For many aspiring entrepreneurs, the most difficult part of the process is knowing where to start. From creating a business plan to opening day, there are a series of important steps to follow. Knowing your industry and customer is key, as is a solid financial plan.
When launching a new company, it is often helpful to view your startup as a solution to a problem in the marketplace. The company you build will provide something that is missing — and will grow through careful planning as it meets this need. According to the Harvard Office of Technology Development, there are several factors to consider when determining whether your startup idea is feasible.
- Demand: This represents the potential for your startup to be relevant in multiple marketplaces.
- Competition: It is important to identify any other companies that offer similar solutions.
- Funding: This refers to the availability of capital to build and grow your business.
- Commitment: Your investors should be both involved and committed to the launch.
- Support: This represents a leader for the startup — someone who is in charge of the new venture. Legal representation can also be beneficial.
- Management: The executive team should have the experience necessary to launch successfully. This includes establishing an advisory board or board of directors, made up of investors, individuals from the company and independent industry representatives.
Other questions to consider include:
- How soon can the product come to market?
- What are the goals of the company?
- Who are your customers?
- How large is the market?
- What is the level of risk?
Once you have completed the necessary research to address these considerations and questions, you can begin to develop your business plan.
Getting Started: First Steps
The Business Plan
A business plan enables you to solidify your goals as well as how you plan to achieve them — in detail. It defines and explains the most important aspects of your startup so that you have mapped out how you want to grow your business for the next six months, year or even five years out.
The U.S. Small Business Administration provides a template as well as a variety of resources to assist entrepreneurs like you craft a business plan for your specific startup. Some important aspects to include in this plan are:
- What products or services you will provide
- Pricing and cost information
- Your target market and customer demographic
- Your starting marketing plan
- How much seed money you will need, as well as what it will be used for
- Potential obstacles
- Short- and long-term goals
Participation in your industry is one of the best ways to publicize your startup. Achieve this by attending startup weekends and launch parties for other businesses in your area. Reach out to people you know, and then to the people they know. Though you will likely not be ready to begin a full-scale marketing campaign at this point, these smaller steps enable you form relationships with other entrepreneurs and establish contacts that could be invaluable as you move forward with your startup plans.
An important part of networking is perfecting your pitch. Because networking opportunities are frequent and can occur without notice, you may have to explain your business plan — in clear, concise terms — unexpectedly. Become well-versed in your concept so that you are able to state your mission and describe your startup’s project or service whenever the opportunity presents itself.
Ramping Up: Marketing and Financing
The next step in the process is generating funding — perhaps the most important aspect of launching a startup. Before you begin, you need to determine how much funding you need and possible sources. Funding can come from a variety of sources, including sales, investors and grants. Some considerations in determining your financing goals include:
- Time to market
- Employee benefits and salaries
- Legal fees
Your company can get seed capital from a variety of sources. For example, AngelList is a free online community for investors and venture capitalists to share ideas. It is an ideal platform to get your startup’s name out there and possibly be invited to pitch and gain funding.
Develop a Minimum Viable Product
Staying lean, or keeping costs low, is critical to success when launching a startup, because it makes profitability easier to achieve. You can do this by creating a minimum viable product (MVP) that offers a high return on investment versus risk. Your MVP should have core features that can be distributed to potential investors and customers to be evaluated for future success, but it should not include all the bells and whistles your product may eventually incorporate. This strategy lets you build a product that consumers want, at a sustainable cost with minimal overhead.
Presenting to Investors
Presenting your idea and the supporting research to potential investors is an important part of the startup process. This is where perfecting your pitch is particularly helpful. These presentations require extensive preparation, and the following questions should be addressed as you put your presentation together:
- What problem does your startup address?
- How does it provide a solution?
- What is the desirable market?
- Who is your competition?
- What is your startup’s advantage?
- Who is on your team?
- What is your pricing and sales strategy?
- What are your revenue projections?
- How much money is being requested?
- How will funding be used?
Essentially, an investor presentation allows you to summarize your business plan in person.
It should be engaging and interesting, so that your potential investors will be as enthusiastic about your startup as you are.
Though looking for outside sources of funding is vital, there are internal processes to complete when it comes to finances as well. When starting a company, the co-founders need to come to agreement on equity. This should be a discussion that happens early in the startup process — and make sure to formalize the agreement once it is made. You should determine whether each founder will have the same contribution and risk, then consider how equity can be used moving forward. For example, can it be used to leverage outside services like legal counsel, marketing and accounting?
Another aspect of equity to consider is how much should be set aside for your advisory board and board of directors. Furthermore, consider reverse vesting. In this situation, each founder’s equity becomes available over time. It allows each individual to receive stock immediately while maintaining vesting requirements, such as length of employment.
Once you have made decisions regarding both funding and the financial structure of your startup, a solid marketing plan can be developed. This is one of the most important steps before launch. Even though it may seem overwhelming at first, a marketing strategy is a lot like a scaled-down business plan. It needs to be specific in terms of actionables, and it must be thoughtfully constructed. Building an audience before you have a product is critical. The following six steps allow you to build a marketing plan in manageable, cost-effective stages.
- Create a contact list. This involves gathering your business and personal contacts and putting the information into a customer relationship management system (CRM). Then you can cultivate a list that includes different categories of contacts: press, influencers, industry insiders and more.
- Develop a website. This is the best way to capture the attention of people who are interested in a behind-the-scenes view of your company. Monitor this page on a daily basis.
- Start a blog. Another key to the pre-launch marketing process is developing quality content. Doing so enables you to build search engine optimization (SEO) for relevant keywords. Update and add content daily — and make sure it’s high quality. Each time you post new content, link it to your social media accounts to increase reach.
- Get noticed on social media. Create accounts on multiple social media platforms. Facebook, Twitter, Instagram and LinkedIn are all good options, and there are more depending on what specific type of startup you are launching. Follow and like your competitors, as well as news outlets that you want to cover your launch.
- Begin email marketing. Take the contacts you have in your CRM and invite them to be on an early-access list. Then, send a weekly email to any leads that sign up to be included.
- Gather data. It is also important to track and gather data on your marketing presence. You can use Google Analytics for engagement on your website, blog and emails.
Once you are ready to launch your startup, things begin to move quickly. When you complete the planning process outlined in this guide, you will have the information and groundwork you need for the process to go smoothly. One way to ensure lasting success is by pursuing an education in business. This shows both investors and employees that you have the skills and experience to lead. Southeastern University Online offers business degrees at both the undergraduate and graduate level.
- The Bachelor of Business Administration provides students with the knowledge base and skills necessary for successful business practice. The accelerated program is ideal for careers in business management, nonprofit organization management, police and military, church leadership, education and government.
- The Master of Business Administration (MBA) is designed to develop leaders who can manage complex organizations and have the desire and capability to move into high-level positions. The flexible MBA program allows students to tailor their education to their career goals, with three concentration options.
When it comes to starting a business, education and experience are an invaluable combination. Learn more about how the online business programs at Southeastern can help you succeed. Visit the online campus to get started.
This article is authored by Tricia Hussung of The Southeastern University. First published at The Southeastern University Online Learning.