In today’s information age, there has been a significant rise in small businesses. Research shows there are around 400 million small businesses worldwide*. Small businesses are the backbone of economies worldwide and are believed to be the largest generator of new jobs.
With the success of small businesses, more and more people are now reflecting on their goals and passions and are getting inclined to take the leap and start their own small businesses.
With the right mindset and approach, starting a small business can be a fulfilling and rewarding experience.
However, starting a small business requires careful planning and execution.
To make this journey easier for you, we have come up with a Blog Series: How to Start, Launch and Scale a Small Business.
In this blog series, we’ll provide practical guidance and expert advice on starting, launching, and scaling a small business. From identifying the right business idea to developing a business plan, building a brand, and expanding your operations, we’ll guide you through every step of the process to help you turn your entrepreneurial dreams into reality.
This is the first part of our small business setup series.
Blog 1 of 4: How to start a small business?
Starting a small business – the pre-requisites
Recent years have seen an increase in the number of people considering starting their small businesses. This trend can be attributed to a variety of factors – including the desire for financial independence and zeal to bring innovative solutions to the market.
Fortunately, the current economic climate is also ripe for entrepreneurship in terms of advancements in technology and easy access to funds and mentorship programs. In fact, small businesses and startups play a crucial role in the economic development of a country.
As per statistics, there are 33.2 million small businesses in the United States (US). While if you look towards the APAC (Asia-Pacific) region, India is home to nearly 75 million SMEs and is projected to reach over 95 million in the next few years. Amazing, isn’t it?
So, undoubtedly, this is the right time to start a small business.
However, starting a new business or a startup is not as easy as it sounds. Whether you want to start a brick-and-mortar-based small business or a completely online business, it requires some key steps and strategies to get started.
To help you, we’ve broken down the key steps in starting a small business. Throughout this eBook, you’ll discover things required to start a small business and strategies and resources to convert it into a successful one.
Before we hop on to the major steps, it is also important to stop and re-analyze your small business goals. We have discussed some prerequisites of starting a small business which you need to analyze before finally launching your business.
1. Understand the commitment and challenges
While starting a business is an exciting prospect, it also comes with a great deal of commitment and challenges. From securing the initial funds or money required to start a business to invest a lot of time and other resources – it requires consistent efforts and undying enthusiasm.
As an entrepreneur, you need to be willing and courageous enough to ask difficult questions like – “Am I ready to start my own business?”. You need to be willing to put in long hours, make difficult decisions, and take on a range of responsibilities, from marketing to accounting.
Don’t be discouraged if you think you need more time. There’s no harm in taking a step back or two, in order to prepare yourself.
Another challenge to consider is competition. Depending upon the business you choose, ask questions like:
- “How many competitors does my industry have?”
- “How am I going to differentiate my offering or what new am I bringing to the market?”
- “What is my business’s unique value proposition?”
It’s important to note here that starting a business is not a quick fix for financial stability or success. It can take months or even years to turn a profit, and there may be setbacks along the way. It’s important to have a solid business plan, a clear understanding of your market and audience, and a willingness to adapt and evolve as necessary.
Despite the challenges, starting a new business can also be highly rewarding.
It offers the opportunity to pursue your passion, be your own boss, and make a positive impact on your community.
All you need is the right mindset, solid preparation, and dedication. Now, that you have made up your mind to start a business, let’s look at the next step.
2 Select a small business idea (if you don’t already have one)
Every great business is built on an idea.
When you are starting your business, it is great if you already have an idea in mind. If you do not have one, there’s no reason why you can’t think of one. Think about what your passion is and build a business around it.
Photo by Mika Baumeister on Unsplash
For example, if you have experience in application development, you could start a business creating customized apps for clients. Alternatively, you could create your own apps and monetize them through ads, in-app purchases, or subscriptions.
The key is to find a niche that aligns with your skills and interests, and then find a way to monetize it. However, it is also important to think if your idea can be converted into a profitable business.
You can think of the following questions to evaluate your business idea:
– “Does my business idea solve a problem?”
– “Can it be sold? Or will people pay for it?”
– “Is there a sizeable market for the idea?”
– “Am I passionate enough about this idea? Can I dedicate my time and efforts to it?”
Also check, if the idea can be tested. (A good place to start would be to ask your immediate and close friends and acquaintances whom you trust about the idea and what they think about it)
3 Perform market research
Once you’ve got a business idea – the next step is to perform detailed market research about it. Market research is important because it helps you identify:
Who you’re selling to?
It can help you understand your potential customers, competition, and market trends, allowing you to make informed decisions about your business idea and strategies.
Typical market research should revolve around the following:
• Analyzing the demand – Is there any demand for your service or product?
• Identifying your target audience – who are your potential customers, and what are their needs and preferences?
• Analyzing your competition – who are your main competitors, and what are their strengths and weaknesses? This is also called analyzing the market saturation.
• Evaluating the market – what are the current trends and opportunities in the industry, and how can you differentiate yourself from competitors?
• Gathering the feedback – conduct surveys or interviews with potential customers to gather feedback on your business idea and potential products or services.
Apart from the common steps in market research, you can also go a step further and dig deeper into your target audience’s economic status. This may include collecting data on the current income range and employment rate of your target audience. You can also research your target audience’s location (both geographic and online). All this information will help you come up with a buyer persona for your target audience.
If you are launching a tech or app-based subscription business, it is also a good practice to create a minimum viable product (MVP) or prototype and test it with a small group of customers to get feedback and validate your idea.
Remember, the market research approach you take will completely depend upon the solution or service you are offering.
4. Analyze startup costs
When you start a new business, there are some expenses that you will need to bear. And it is more than the usual cost of office space and furniture. The expenses will undoubtedly vary based on the nature of the business. For example, the expenses of starting a consultancy business can vary greatly from that of an e-commerce store.
Analyzing the startup costs will give you an estimate of the total investment required to start your business. It will also help you determine if you will need external funding for your business (more on this later). For example, in the previous step, we talked about conducting market research before starting a business, if you choose to hire a market research firm for help, this will add to your startup costs.
Let’s look at some of the most common startup costs businesses incur:
- Expenses related to tech equipment and software
This will include expenses related to any software you use or plan to use for yourself or your team. You will also need accounting software or POS (Point of Sale) software, HR or payroll software, etc.
- Expenses related to office space and utilities
If you choose to establish a brick-and-mortar space for your business, you will need to buy or rent an office space. You will also need to incur expenses related to the utilities like the water supply and electricity.
- Expenses related to marketing and advertising
Every business needs to be marketed. While marketing and advertising costs come in later in your business plan, it is still good to create an estimate for it in the beginning only. While there are organic modes like Instagram and Facebook to market your business for free, if you want, you can also go for paid advertising options available.
- Expenses related to employees (if you plan to hire)
Based on the business model, you will have to decide whether you will need external help for running your business or not. You can be a one-man army too, if it fits your expectations and goals for your new business. However, as your business expands, you will need to hire experts and professionals to do the important tasks for you. Here, you will have to consider the cost of hiring and maintaining employees.
5. Secure financing
When you have a clear estimate of the startup cost for your business, the next step is to secure financing.
Finance is an important part of your business and will help you to cover the startup costs and initial investments until your business starts generating revenues and profits.
How you secure the finance – is again dependent on your business model and your personal preferences. Below we have discussed some popular financing options for small businesses:
Personal savings – If you have personal savings, you can use them to fund your small business. This can be a good option if you don’t need a lot of capital and want to maintain full control over your business.
Small business loans – You can apply for a small business loan from a bank or a lending institution. These loans typically require collateral and a good credit score, and the interest rates can vary depending on the lender.
Crowdfunding – You can use crowdfunding platforms such as Kickstarter or Indiegogo to raise funds for your small business from a large number of individuals. This can be a good option if you have a unique or innovative idea that resonates with the public.
Grants – You can search for grants offered by government agencies, foundations, or other organizations that support small businesses. These grants may have specific eligibility criteria and requirements, but they can provide a valuable source of funding for your business.
Investors – You can pitch your business idea to investors, such as angel investors or venture capitalists, who may be willing to invest in your business in exchange for equity or a share of the profits.
Don’t burden yourself by trying to do everything at once. You can always start small and then expand as you get more market experience and knowledge.
What’s Next?
The journey of your new business is yet to begin!
We hope the first blog in this series will help you prepare for the launch of your new business. We’re excited to continue supporting you on your journey and have come up with a comprehensive guide on “Starting a Small Business” that will dive even deeper into the strategies and tactics you need to succeed.
You can download it here.
