Starting a small business has several benefits. You get to be your boss, work as you please, and bring your ideas to light. It can be one of your most exhilarating and rewarding experiences. However, setting up your business can be stressful if you don’t plan things properly.
Starting a business often means juggling a million tasks and not enough time to do them. Although thousands of startups get built annually, according to the BLS, 45% of businesses fail within five years. These enterprises shut down primarily because of improper planning and rash decisions in times of trouble. However, when you invest your time and energy in building something from the ground up, you must also take steps to ensure its survival and success.
Not surprisingly, you’ll learn most business tips and tricks through trial and error. But to set your company on the right track from the get-go, it’s helpful to direct your efforts towards the appropriate tasks. And so, to guide you, here’s a list of 5 things you must do before starting a small business.
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Table of Contents
Find a trusted digital partner
Financial management is a crucial aspect of any business–small or large. However, traditional banking systems have higher fees, limited accessibility, and lengthy application processes. And since the world is rapidly becoming more digitalized, embracing these technologies in your business makes sense. For example, partnering with digital banks can help you persevere through challenging economic periods. You must compare digital banks to see which of these aligns best with your goals and pick one that suits you. These can handle high-tech complexities, automate systems, and tailor financial tools for a company’s needs. Besides minimizing human error, these technologically advanced tools drive the efficiency of a business and attract customers due to their feasibility.
Conduct thorough research
Would-be business owners often get so excited about their startup idea and vision that they dismiss logically thinking of how viable it is. You don’t want to invest your hard-earned money into an idea that crashes and burns soon after it starts. And this is where conducting thorough market research comes in handy.
The purpose of conducting market research is to gauge the demand for your product or service. This step will ensure that you will have market share when you start your business, especially if your business concept is viable and sustainable. It can also help you understand the market dynamics and some key players in the industry, ensuring survival and booming profits. Look at it this way. You have an excellent idea for a business. But after doing your research, you find out you’re entering a saturated market or one with a well-established competitor. Now, you must rethink your business plan and bring it up to par with your rival company without suffering heavy losses as soon as you start.
A SWOT analysis tool is a vital business tool that can document your company’s strengths (S), weaknesses (W), opportunities (O), and threats (T). All these four characteristics help define your company’s objectives and determine your strategic direction. Additionally, this tool offers closer insights into a business’s present state and future goals. By conducting a SWOT analysis, you can plan better-targeted marketing strategies, create long-term achievable goals, and find efficient solutions to prevailing problems. It’s also beneficial in determining your startup’s capabilities and performance, defining its market share, and prioritizing objectives for the business.
Every small business enterprise’s small mistake can cost the company and lead to foreclosure. But with a SWOT analysis, you’ll have a better idea of where you stand in the industry and can therefore prepare for it accordingly.
Know your audience
It won’t matter how great your product or service is if you don’t have customers to buy it. Your target audience has a significant impact on every business decision you make. And so the first thing you must do is define their demographics, wants, desires, and needs—more commonly known as the buyer persona. Take the time to answer a few crucial questions like:
Who are your buyers? Where do they live? What motivates them to buy? What are they thinking and feeling, and how do they decide to buy?
These questions are critical in determining how you market to your buyers and what content you create. For example, if your target customers are teenagers or young adults, you might benefit more from digital marketing and social media platforms. But if you’re making a product for the elderly, you might want to use a multi-channel approach, online and offline.
Decide on a business structure
When starting a business, you must determine what legal structure it will follow. This legal structure dictates vital documentation like taxes, owner liability, and other aspects.
There are three business structures that most enterprises follow:
In this model, only one person owns the company, including all its products and services. Since there is no legal separation between the owner and products, this sole proprietor is fully liable for all business-related matters. It allows you to set up your company at relatively lower costs and much quicker. You won’t have to pay business taxes, and a formal business structure enforces no restrictions. However, you’ll have to suffer any potential losses on your own, which in extreme cases may go even as far as declaring bankruptcy.
The partnership business structure contains two or more people who distribute profits or losses among themselves. This model, too, has its pros and cons. While you’ll have someone to share the financial burden with, you’ll also have to split your earnings at the end of the day. More importantly, you can’t act independently and must work with your partner(s) to make all business-related decisions.
A corporation is separate from its owners and consists of a board of directors, shareholders, and officers. This structure is the most complicated and expensive to set up. It has more tax regulations and legal requirements that owners must follow. Corporations are ideal for businesses that have grown and better understand legal complexities.
While starting a business can seem exciting, it can be challenging to know where to begin. With so many things to take care of, it may seem overwhelming to get anything done. Fortunately, you can take out the guesswork from this process and start with the abovementioned tasks to ease your transition into a successful entrepreneur.