If you’re considering starting a new business, first off, way to go! Taking this big step shows ambition and drive.
But starting a business is a big commitment of your money, time, and energy, so there are a few things you should consider before diving in too deep.
Here are the three most important things you need to think about before creating your business – whether you’re starting a new construction company or selling teeny-tiny cupcakes.
Let’s take a look.
Three things you must do if you want to start a new business
1. Define your audience (and make sure you have one!)
First off, consider who exactly the business will serve. You need to figure out whether other people actually want what you’re selling, whether it’s something a significant number of people are willing to pay for, and who those people are.
Depending on the size and scope of the business you want to create, this could mean something as simple as surveying local shop owners, friends, and internet groups. However, for most larger businesses, you’ll likely want to consider putting more resources into your research.
This could mean:
- Conducting formal surveys
- Submitting your product for focus group testing and feedback
- Hiring experts to conduct or review your market research and confirm your analysis
Properly done market research will help you ensure that your business has potential before you go investing all your resources into swimwear for dogs – or whatever it is that fuels your entrepreneurial fire.
Plus, good market research will help you determine the demographics of your audience (statistics like their age, gender, geographic location, marital status, and so on). This important first step will help you target your marketing and messaging to reach the people who are picking up what your business is, proverbially, putting down.
2. Scope out the competition
Once you’re certain about what you’re selling and who you’ll be targeting, the next thing you need to figure out is whether anyone else is selling the same thing or something like it.
For example, maybe your idea for a dinosaur-shaped minivan is one of a kind, but if someone else is selling shark-shaped vehicles for fun soccer moms, you should probably know about it.
You’ll want to take a close look at both direct and indirect competition, meaning both companies that are offering something very similar to what your company will offer and companies that do something that could work as an alternative to what you do. So, for example, you’ll want to survey all the other companies selling fun vans (direct competition) and any companies that somehow modify the outside or inside of your existing van to make it more fun (indirect competition).
Once you have a list of your possible competitors, you’ll want to really dig into the details:
- What’s their current price point? What is their pricing history?
- What does their marketing look like? Where are they marketing and to whom?
- What strategies and messaging have they tried?
- What do their clients like and dislike about their offerings?
- What makes you unique in the field? Particularly realistic dino-bits? Competitive pricing? Alarmingly fast turnaround times? Make a list of your USPs (Unique Sales Propositions) to help you stand out from the crowd.
- Identify their strengths and weaknesses: Work to match what they do well and outdo them where they struggle.
And this isn’t just about marketing! When you put these learnings into action, they can be the key to your brand-new business’ success. The wind beneath your terrifyingly-lifelike pterodactyl wings.
And don’t forget the old adage, “If you can’t beat ‘em, join ‘em.” If your competitors do something you simply can’t, consider offering to team up with them. Life is nicer when we work together – and business referrals tend to go both ways.
3. Nail down your financials
Alright, so you’ve identified your audience. You know they’re interested in the solution you’re offering. And you know no one else has your offering beat.
The money, baby.
You need to figure out if you can afford to start and run this business. And you need a solid plan of action. Consider:
- Start-up costs to get the business set up and ready for clients – materials, licensing, everything you need to be legit and deliver on your promises
- Funding sources and responsibilities (if you have a grant, what reporting do you need to do? If you’ll need to take out a loan, what will repayment look like?)
- Expenses you’ll incur once you’re up and running
- What you’ll need to charge to cover your costs and reach your financial goals
- How much you expect to make in the first weeks, months, and year
- Timeline from start-up to operating in the black
This last step is by far the most difficult and the one that causes the most difficulty for new and potential business owners. But any hurdles you come across aren’t necessarily insurmountable – it’s just about making sure that you don’t get yourself into trouble with a business that can’t or won’t make money.
If, at any of these stages, you realize that your brilliant business idea might not shine as bright as you thought, it might be painful, but you’ll have saved yourself a lot of heartache in the long run.
On the other hand, if you’ve gone through these three steps in detail, you can proceed with confidence. You have a great idea and are ready to get started!
But there’s one last thing…
Book a consultation with a reliable accounting and tax strategist to make sure you have all your ducks in a row.
At Prax, we’re always happy to talk to new, ambitious business owners. We even offer Quickbooks Online training sessions to teach you how to use QBO for your specific business and situation.
We call this program Prax Prep, and it helps save a lot of accounting headaches before they start. Trust us – we’re the ones who untangle the books when the Quickbooks goes awry. (Let us give you a hand before you get lost in the enchanted accounting forest!)
Ok, now you’re ready to start a business
And that’s that! Those are the 3 key steps – and one bonus step – you need to take before starting a new business. Feeling empowered? Get to it, you entrepreneur, you!
And give us a shout if you want to work with us – or just want to stay in the loop with more awesome business and financial content like this.