Please note that this post is not just about starting a business, but accurately about building a business with grand success. Therefore, I’m digging deep. It is blended with insights that I gained through working with many startups, from their mistakes as well as wise decisions, and my challenges during the initial phase of the entrepreneurship journey.
It’s overwhelming to start a business. For many reasons, choosing to have your own business is better than doing a 9 to 5 job somewhere else. If you want to control your destiny and to be the boss of your passion, building a business is one of the choicest options.
There are very few who want to be an entrepreneur. Many of us run behind a job and work hard to be in the good book of the boss. The reason is simple. In business, there are lots of challenges that only able few dare to face. Even if you’ve already made a mighty decision to start your own business, your friends and family will suggest you not to take the risk. Why? Because they fear you might fail in your venture. It’s not surprising that not more than 10% start-ups achieve success.
What’s wrong with them? Why do startups fail? There are a few clear reasons:
- They have no clearly defined goals. They are even unaware of which objectives they desire to achieve.
- They are over-optimistic and dreamy. Without validating the idea behind their business, they make a long jump. Nothing wrong with a dream, but the dream should fill up with a practicable vision. Ideas should be tested and retested on a firm market background.
- They don’t have a proper business plan: A business plan is a handy document that describes the business model, potential customers, potential market and competition, operational model and organizational structure, pricing models, marketing and sales strategies, financial and legal aspects, and all other major issues of a business. It works as an axis around which all business activities revolve with proper control. Without a concrete planning document, no start-up can proceed even an inch further.
- They don’t have any first-hand analytical report on competition, customers, demand, and finances. All business models must be based on a proper survey and analysis.
- They don’t work hard. Businesses always need spontaneous involvement. Inattentiveness finally fails.
- They lack finance and resources: Absence of research-based data and analysis, lack of proper business planning, negligence in validating concepts and ideas, and negligence in proper finance management – altogether result in multiple deficiencies, and importantly deficiency in finance and resources. Therefore start-ups fail.
Then who makes success? Success comes to those who apply a practical approach, carefully choose goals and business models, work hard, and manage properly. To translate your dream into a great success story, to reap the reward of all your hard work, and to feel the pride of having something of your own, you need to proceed step by step. You need to be careful at each step. You not only should dare to start a business, but you also require to dare fulfill each aspect that a business venture requires.
After reading the post, slowly and steadily begin your journey. I suggest you not to ignore even a single aspect. Make a checklist, whether everything is in accordance. Are you missing something? Revision is the most crucial aspect.
Start with a Goal, Concepts and Research
What are the basic requirements to start a business?
- A clearly defined goal
- A set of concepts
- A unique idea (after examining/testing the concepts)
- Adequate research on similar businesses and the market
- A mode to discover the ‘Pain-Point’ of your potential customers
Each beginning, whatever it may be, starts with a goal. In a business goals helps in
- Understanding the direction of your business
- Achieving objectives
- Measuring growth
You must have a set of defined goals before you start. You should set new goals at each point of your business’s development. Your goal need be SMART (Specific, measurable, achievable, relevant and timely).
Here are a few things to consider when setting your goals:
- Specific – be clear about what you want to achieve. For a startup, the goals are obviously financial independence, better income and secure future. You may add few other aspects too.
- Measurable – make sure the goal can be measured. You can recognize if you’ve achieved your goal. It should be quantitative, not qualitative. Everything need to be in numbers. For example – How much percentage of ROI (return on investment) in how many years? How much will be your annual progress?
- Achievable – check that your goal is something you have the time, money and resources to meet. Be more practical while setting your goals.
- Relevant – ensure your goal is relevant to the direction you want your business to head in, for example, increasing profit, employing more staff, increasing brand awareness etc.
- Timely – set a realistic deadline for completing the goal. It may be two years, three years or five years. The deadline shouldn’t exceed five years.
While you’re going to start your business, you should define your goal more specifically. What and how much you wish to gain from your business? What’s the time frame within which you are going to achieve your objectives?
Concept and Idea
Concept is an abstract idea on which you are going to work.
When you started thinking of your own business, you came up with one or more ideas. In fact, these ideas are your basics. Roughly they contain your concepts about your product or service, customer, market and goal. But note that it’s abstract; no reality has yet been added to your concept. Hence you need to test the validity of your concept with research and analysis. If you find the concept is not valid to work, you need to change it. Test and retest your idea again and again
Your idea may be about a product or service that you want to sell and you believe that people need it. Here are two alternatives.
- The product or service is already in the market. But due to one or more reasons people are in need of better options either in term of quality or price or easy availability or value.
- People don’t know that they need a product or service because it has not yet been invented. If you take initiative to invent and produce the same, there will be an increasing marketing demand.
In the first case, you are entering to the market for a competition which is at about zero level. You are going to making it more competitive by offering better quality or lower price or some other values. In the second case, you’re going to create a new market for your product or service.
In both the cases, you’ve already thought that you’re a sure gainer; you’re going to serve your goal. But you might be wrong. For the first case, there may be adequate options for people to choose. And for the second case, your new product or service mayn’t be adopted by the people. Hence you need research – survey and analysis to validate your idea.
Your research better can be in three levels:
- Brainstorming with people around you.
- Browsing on the internet
- Sample survey in the market(s) you want to serve
It’s wise to start from an informal level. Start brainstorming seasons with people around you – your friends, colleagues and family. Be loud. Discuss the idea with them. Encourage them to be more critical. Be prepared to accept negative comments. Note down each aspects of the discussion. Caution: Be cautious about two things. Few people around you may discourage you. The best thing you can do is – neither accept nor reject them. Just note down what they are telling about you. Second, don’t take the result of your informal discussion as granted. Just observe and note down what your near and dear are telling.
At next level, do research on the internet to find out some important result. Your internet browsing and surfing sessions need to answer to some specific query, such as –
- Whether your idea is new and unique or not: Search for the product or service you want to sell. Verify with from bigger online market place to smaller online stores in your defined market area.
- What is the competition level: Specify who many large market place and small stores are selling the product or service. What is about the pricing features? Read some review to know what customers and expert are talking about the pricing, features and quality of existing similar products and services. Are they satisfied?
- Existence of the idea: Read some blog posts to find out whether there is some exactly or nearly matching ideas have already been viral or not. If yes, how much those match to your own idea.
- New idea: You may discover few new ideas through a blog posts or reviews which is though similar to your own, but seems better.
- Success and Failure Stories:
The internet can adequately help you in reading success and failure
stories in two categories: a) of general nature related to startups and
entrepreneurship and b) specific to your business idea.
- Read more failure stories in comparison to the success stories. Failure stories will help you in learning from other’s mistakes. That stuff will be your better guide. You will learn to not repeat the mistakes again.
- Success stories will someway inspire you but can’t provide the detail picture of the business inside.
- Stories specific to your business will help you in refine and redefine your idea.
At next level, go for a systematic survey as steps follow:
- Prepare two set of questionnaires. One set for the business owners similar to your dream business and another set for your potential customers.
need to mostly contain multiple choice based questions with the choices
indicating different degrees or levels, for example –
- Yes, no, don’t know,
- Highly Satisfied, Satisfied, It’s OK, Not Satisfied, Extremely Dissatisfied,
- Above 1000, 1000 to 700, 700 to 500, 500 to 200, bellow 2000 etc.
- Provide adequate choice options.
- At the end of the questionnaires, keep space for additional information and comments, if the surveyed want to provide.
- Your questionnaires should contain all relevant aspects those you need to investigate, but avoid to make them unnecessarily lengthy.
- It is best advisable to take the help of a professional researcher, if possible. Hire a research assistant.
- While you’re preparing questionnaires for business owners, divide it into three parts.
- First smaller part will collect demographic details.
- Second part in medium size will collect both contact and business details of general nature.
- Third part will be the largest part that will contain more specific questions like
- Their experience with business
- Their perception on the future of the business
- Their perception of the products or services
- Their experience with the customers
- If they have any new idea
- While you’re preparing questionnaires for target customers, divide it into only two parts.
- As in case two, the first smaller part will collect demographic data
- The larger second part will contain more specific questions like –
- What they are thinking about the quality of the specific product available in the market?
- How much they are willing to pay for a better quality product?
- Will they be interested in purchasing a product that can resolve their specific problem?
The main motto behind the survey is to discover the real ‘pain point’ of the people. What the problem or difficulty people are facing with the existing product or service or non-existence of a facility in terms of product or service.
The degree of the pain point will let you know the strength of your idea. If the people’s pain for the product is higher, you will get better success if you lunch your idea.
Now it’s time to analyze the opinion, knowledge and information you’ve collected through your three level investigations. The analysis will lead you to take the next big steps. Hence, take adequate care.
- Take sufficient care to make the investigation report readable, comprehensive, to the point and concise.
- Divide all the information and opinion into three categories:
- Semi-formal and
- Divide each category into further sub-categories –
- Semi-quantitative and
- You’ll find most of the informal data/information/opinion you have collected are qualitative and subjective in nature. But those come from different level of experiences. Avoiding any type of bias, have a deep look into them. You’ll get some deep insight.
- Semi-quantitative and quantitative data you have collected consist degrees, levels, comparisons and numbers. Those can be analyzed in more systematic way.
- Use a data analysis software like SPSS (Statistical Package for Social Sciences), Stata, SAB Business Intelligence or Statistix.
- Read the instruction to know how to use them.
- Put your data in the format given
- Follow the steps those come while applying the software
- You will get all the result in a comprehensive table. You’ll find the exact numbers, percentage, averages and values
- Now, make a comparison of the findings at different level. Make comparison of qualitative and quantitative suggestions (results).
Now, you’ll get a clear picture of what you were investigating for. Make a comprehensive report. Go to the last step of analysis, i.e., SWOC (strengths, weaknesses, opportunities and challenges) analysis. This well tested and widely used management tool is, in fact, adequately strong to –
- provide perfect vision,
- help in formulating better business model and marketing strategies and
- navigate your business in the right direction.
Strengths and Opportunities:
Make a list of all your strengths in entering the market. Clearly indicate the opportunities those are waiting for you.
Weaknesses and Challenges:
What’s the weakness with? Isn’t it bigger than your strength? Or your challenges aren’t bigger than your opportunities?
If weaknesses are not more than the strength and challenges are not greater than opportunities, you are in the good side. But there might be the opposite. If practical fortune is not with you, you need to conceptualize your idea. You should be in continuous effort to get bigger strength and better opportunities. Never overestimate your weaknesses and challenges, but be brave enough to fight. Throughout the investigation and analysis processes you have been introduced with many conceptions, many ideas, many insights and many options. If one idea doesn’t fit to the practicable frame, put another, but never apply force to make it fit. Be practical and always look at the ground reality.
It’s time to have a look where you were one or two months earlier and where you are at present. Obviously there have been a lot of changes in your perception and strength. Whatever the idea in your perception at present is far matured from the earlier one.
Prepare the Business Plan
You have already defined your goal, analyzed SWOC and validated your idea. Now you have to make the most of your brain on thinking on a proper business plan. A business plan can help you in
- Defining why you thing you need to lunch your business
- Summarizing the sense of your business in a single document
- Guiding you in operating your business
- Creating a map for investors, bankers and other interested parties to use when determining how they can best help you and to help them decide whether or not your business is viable
Your main plan should consist of:
- Executive Summary
- Introduction to your company and business model
- Your goal
- Your vision and mission statements
- Market analysis report
- SWOC analysis
- Your products or services with main features
- Your buying persona or potential customers
- Your competitors
- Operational and management structure
- Marketing and sales strategy
- Pricing model
- Details of financial plan
- Social responsibilities
- Conclusion and Appendix
Above blueprint of an ideal business plan is effectively capable of giving you a complete picture of what you need to include in your plan and what you have to do at the next steps till lunching your business. However, if you are looking for complete step by step guide to write a business plan, it’s recommended to read: How to Write a Business Plan: Step by Step Guide.
Arrange Startup Cost
Money is the backbone of any business. However, securing funds for a startup is one of the toughest challenges. According to a recent study about 76% of startups fail due to lack of finances. Funding a new business is always a painstaking activity. Therefore you should cautious enough to fund your business and make expenditure in accordance.
Before lunching your business make adequate financial arrangement. Try at each possibilities of arranging capital. Look at the following options –
- Bootstrapping: Self funding, aka bootstrapping is the first option of financing for startups. You can invest your own saving. You should never invest all your savings into a business due to the risk of failure. In addition, you should never invest money put aside for emergency savings (experts recommend having three to six months of income put aside for this purpose), or money you will need over the next few years for various obligations. In addition, you may ask your friends and family to invest in your business.
- Home equity loan: If you have a home, looking to get a home equity loan can be a wise idea, since these loans are typically easily approved and interest rates are typically lower.
- Product pre-selling: Product pre-selling is a good idea to manage the startup cost. You need a large online platform like Amazon or Flipkart to offer pre-lunch booking with exiting offers. The growth of Apple and Samsung is largely due to product pre-sale.
- Business Credit Card: You may apply for a business credit card. On the billing due date pay the minimum due and let the rest amount roll over for the next cycle. However, credit card interest rate is much higher than that of any other type of loan.
- Working Capital Loan: Working capital loan from a bank is the fund required to run one complete cycle of revenue generating process. Visit the websites of different banks to check the loan offers, rate of interests, eligibility criteria and other terms and conditions. Compare and apply for a loan from the bank whose interest rate is lower. Since it’s not easy to secure a loan for business before running, keep multiple bank options.
- Government Schemes for Startups: Check for different types of government funding for start-ups. If your business plan will be approved, you can get funding at lower interest rate
- Angel investment: Angel investors are individuals with surplus money to invest in a new business. They also work in group to collectively screen the proposal before investing. They prefer to take more risk in investment for higher returns.
- Venture capital: Venture capitals are professionally managed platform to businesses which have huge potential. However, they generally don’t invest in any new business having no profit record.
- Funding from incubators: Early phase businesses can get funding, training and guideline from business incubators. Look for any incubator available in your city.
Minimize Your Running Cost and Avoid Wastage
As a startup you have work with low fund for running your daily business. Monitor to keep your running cost in line with your projection. To avoid wastage, look through and estimate how much you really need, and minimize the cost in every possible way. Purchase nothing that is not an immediate requirement. Keep purchasing office equipment and stationery to a minimum when starting up. Brainstorm to get get better idea for lo cost management.
Keep Reserve Fund
There might be many unforeseen situations that you need additional finance. Be prepared for such situations. Keep adequate fund in reserve to fill the gap. It should be not less than 20% of your total budget.
Decide Payment Modes
You should have adequate options for your customers to make payment. Make a clear policy of accepting payment. You may include most of the following options
- POS (point of sale) swipe machine for payment through credit and debit cards at outlets.
- Online payments through secure payment gateways like PayPal, Amazon, CCAvenue etc.
- Payment through mobile wallet by scanning QR (quick response) codes
- Cash at outlets
- Cheques and bank drafts
Cover Legal Sides
Legal sides include:
- Product and zoning laws,
- Incorporation laws and
- Tax laws
Ensure that your business is following all government regulations. To do so at first you need to hire a qualified and experienced legal advisor who has sufficient knowledge of business regulations of the land. Follow the steps suggested by him/her.
With the help of your business advisor decide the type of your business entity. Check the website of Ministry of Corporate Affair to know incorporation regulations. You have the following options.
- Sole Proprietorship: A sole proprietorship is the simplest form of business entity in India. In this case, the owner of the business and the entity are not separated. If you’re the single owner of your business and willing to take all responsibilities of profit and loss of your business, you might prefer to adopt this form of entity. There is no separate regulation to cover sole proprietorship. You just need to have an establishment license from the local municipalities. You don’t need any paper work and annual compliance.
- Partnership: A partnership
is quite similar to sole proprietorship. The two basic differences
between partnership and sole proprietorship is that –
- more than one individual is involved in a partnership.
- The roles, responsibilities and the share of each partner are specifically defined in a legal partnership agreement.
- Limited Liability Partnership (LLP): An LLP is a separate legal entity from the partnership entity. Unlike the partnership and normal proprietorship business assets are separate from the personal assets of the partners. In case the business incurs losses, the personal assets of partners are not put at risk as the maximum liability of every partner is defined by his share capital in the entity. Compared to Partnership and Sole Proprietorship, Limited Liability Companies always have better credibility among investors. The main reasons include proper maintenance of financial records, incorporation records and tax records. However, formation of LLP is
- Private Limited Company: It’s one of the most sophisticated business entities in India. Minimum number of members required to form a private limited company is two which can be extended up to maximum 50 members. Minimum paid up capital required is Rs. 100,000.00. In this form, business is a separate entity than the individuals. The profit and loss of the business is not the profit and loss of the individuals forming it. The members are the share holders of the business. Such type of company can’t invite the public to subscribe share. The existing shareholders too can’t transfer their share. To form a private limited company a lots of paper works required and the registration process is complex.
- One Person Company (OPC): OPC is similar to Pvt Ltd. Company, but the advantage is that only one person can open the company. Similar to a Company, an OPC is a separate legal entity from its members, offers limited liability protection to its shareholders, has continuity of business and is easy to incorporate.
Get an Account
After forming the business entity open a bank account in the name of your company. The document required to open a bank account are:
- Certificate of incorporation or establishment license
- Document of formation, if any
- Legal agreement, if any
- Address proof of the business premise such as latest electricity or telephone bill or leas/rent agreement or property ownership deed.
- PAN of the company, if any
- PAN of the proprietor/partner/directors
- Address proof of the proprietor/partners/directors
- Passport size photographs of proprietor/partners/directors
Fulfill Taxation Norms
Fulfill all the taxation norms including individual income tax, company income tax, Goods and Service Tax (GST) etc. Click here to find out GST related laws.
Make Your Business
Start Creating Products/Services
It’s time to make all necessary arrangement to make products/services. Make all appointment or outsource manpower. Make a complete list of work processes and assign responsibilities to each one.
Check two important aspects:
- Whether you are fulfilling all government laws that apply to your industry.
- Whether you have adequate arrangement for quality test.
Get a Website
Having a business website has many advantages. Depending upon your sales strategy and structures, you may either have an e-commerce website or a simple website to showcase your products/services. Whatever it may be your website need to be interactive and full of quality content so that visitors to your website will be engaged. Continuous engagement results in converting the unknown website visitors to customers. If you are in eCommerce, your website is both of your sales and marketing channel, but if you aren’t in eCommerce, your website can serve you as your primary marketing channel.
Spend Time on Social Media
Next after building a website, what you need is spending time of social media. Social media are the platforms from where you will get approximately 55% of your customers. Creating a Facebook page, linking a group to the page and strategically diverting your fans to your website is not only exciting, but much rewarding. Daily active users of Facebook are not less than 1.45 billion and increasing at the rate of 13% annul.
After Facebook, you also need to add Instagram, Twitter, Pinterest and LinkedIn as your prominent online marketing channels.
Implement Your Marketing and Distribution Plan
Along with marketing and advertising online, you may require some offline channels such as television, radio, newspapers, billboards depending upon your area of operation and budget. Spend adequate time to monitor and evaluate your marketing efforts. Keep a close eye on how your marketing messages are reaching at your customers.
Have a close look on your distribution channels. Ensure that your sales executives are well trained. Make a check list of all your distributors.
Lunch Your Business
Time has come to lunch your business. Advertise sufficiently on social media, other online channels and newspapers. Send press release to all media houses and declare about opening of your new business. Never forget to invite media persons to the occasion. Arrange special event to lunch. Announce to the world loudly.
Evaluation is the most crucial step. Ignoring it can lead towards unrecoverable failure. Your primary road map for growth evaluation is your business plan. Make it your best friend in your big venture. Timely update it as required. Along with set your KPIs and other metrics so that you can measure your success rate properly.
You should have your balance sheet and account statements ready for each month. Quarterly report is a most for initial two years. Third year inwards, you may decrease frequency of report making.
Your customers are the real lifeline of your business. Encourage them to give feedback regularly.
Finally, keep one eyes on your mistakes. Doing mistakes is normal. But learning from those can really lead you to your goal to achieve early.
(While reading this article, many queries and doubts might have been aroused. You may need to know more about some aspects or you may have requirement for a piece of information. Please feel free to ask me everything you need to know.)