by Starting a business is one of the most exciting and rewarding experiences you can have, but where do you start?
There are many different ways to approach starting your own business, but it’s essential to consider your business idea, how much time you have, the time you’ll need, and the amount of money you want to invest before making any decisions.
By knowing these tips you won’t be afraid to start this venture into business. With effort and dedication you can achieve success just like some famous entrepreneurs, among them felipe antonio bosch gutierrez.
To help take the guesswork out of the process, follow the steps to learn how to start a small business.
1. Know your competition.
Most entrepreneurs spend more time on their products than they do on knowing their competition. If you ever apply for outside financing, the potential lender or partner will want to know: What differentiates you (or your business idea)? If the market analysis indicates that your product or service is saturated in your area, see if you can think of a different approach.
Take cleaning services, for example: instead of general janitorial services, you might specialize in homes with pets or focus on garage cleaning.
The first stage of any competitive study is primary research, which involves obtaining data directly from potential customers rather than basing your conclusions on past data. You can use questionnaires, surveys and interviews to find out what consumers want.
Surveying friends and family members is not recommended unless they are your target market. People who say they would buy something and people who do are very different.
The last thing you want is to take so much stock of what they say, create the product and fail when you try to sell it because all the people who said they would buy it don’t because the product is not something they would actually buy.
Use existing sources of information, such as census data, to gather information when conducting secondary research. Current data can be studied, compiled and analyzed in various ways that are appropriate for your needs, but may not be as detailed as primary research.
SWOT stands for strengths, weaknesses, opportunities and threats. Conducting a SWOT analysis allows you to see the facts about how your product or idea might work if brought to market, and can also help you make decisions about the direction of your idea. Your business idea may have some weaknesses that you had not considered or there may be some opportunities to improve on a competitor’s product.
2. Create your business plan
A business plan is a dynamic document that serves as a roadmap for establishing a new business.
This document simplifies understanding and absorption by potential investors, financial institutions and company management. Even if you intend to be self-financing, a business plan can help you develop your idea and identify potential problems. A complete business plan should contain the following sections:
An exit strategy is important for any business seeking financing because it describes how you will sell the business or transfer ownership if you decide to exit or move on to other projects.
An exit strategy also allows you to get the most value out of your business when it comes time to sell. There are a few different options for exiting a business, and the best option for you depends on your goals and circumstances.
The most common exit strategies are:
As you grow your small business, it is important to have a scalable business model so that you can accommodate more customers without incurring additional costs.
A scalable business model is one that can be easily replicated to serve more customers without a significant increase in expenses.
Some common scalable business models are:
One of the most important things you should do when starting a small business is to start planning for taxes. Taxes can be complex, and there are several different types of taxes you may be responsible for, including income tax, self-employment tax, sales tax, and property tax.
Depending on the type of business you are operating, you may also have to pay other taxes, such as payroll tax or unemployment tax.
3. Choose your business structure
When structuring your business, it is essential to consider how each structure affects the amount of taxes you owe, day-to-day operations and whether your personal assets are at risk.
Before deciding on a business structure, discuss your situation with a small business accountant and possibly an attorney, as each type of business has different tax treatments that could affect your bottom line.
4. Register your business and take care of the paperwork.
There are several legal issues to address when starting a business after choosing a business structure. The following is a good checklist of items to consider when setting up your business:
5. Get your finances in order.
Before you finance your business, you should have an idea of your start-up costs. To determine these, make a list of all the physical supplies you need, estimate the cost of professional services you will need, determine the price of any licenses or permits needed to operate, and estimate the cost of office space or other real estate. Add payroll and benefit costs, if applicable.
Businesses can take years to turn a profit, so it’s better to overestimate start-up costs and have too much cash than too little. Many experts recommend having enough cash on hand to cover six months of operating expenses.
When you know how much you need to start your business, you need to know the point at which your business makes money. This figure is your break-even point.
Break-even point = Fixed cost ÷ Contribution margin
Whereas contribution margin = total sales revenue – cost of manufacturing the product.
This means that you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units your first month, you will make a profit.
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