Six Steps to Starting Your Own Business
Looking to be your own boss? Here's how to get started on the right foot as an entrepreneur.
Maybe you have a million-dollar idea, or maybe you have just grown tired of working for someone else. Either way, becoming your own boss requires a mix of creativity, strategy and street smarts. We've tapped the minds of experienced entrepreneurs and business experts to give you six secrets to success. Heed these guidelines as you take the next steps toward starting your own business.
Know your customer
The better an entrepreneur understands the target audience, the more likely he or she is to create products and services that buyers are willing to pay for, says Joel Wiggins, chief executive of the Enterprise Center of Johnson County, a business incubator in Lenexa, Kan. It sounds simple enough, but that critical edge, whether gained from experience or market research, can separate failing companies from successful ones.
That's certainly the case with Marcie Carson. Based on what she learned from running IE Design + Communications, a Hermosa Beach, Cal., graphic design firm she co-founded in 1995, Carson was confident that customers would pay a premium for high-end, eco-friendly paper products. But before jumping into the design process, Carson spent two years researching gaps in the upscale paper market. The result: a product line shaped not by aesthetic whim but rather by a thorough analysis of the target audience. Carson's new venture, Mixt Studio, sells sustainable goods ranging from cards and gift wrap to totes made from fabric-like paper.
Test your idea
One of the best decisions an entrepreneur can make is not to go into a business that's doomed to fail. A simple way to determine the likelihood of failure is to test an idea before sinking time and money into it. Business consultant and author Jim Beach recommends taking a new idea to ten prospective customers and finding out how many would buy it.
"The market will give you a very strong indicator, and you can save thousands or even millions of dollars by going to the market before you design your product or develop that company, because you'll know you're creating something the market demands," Beach says. You can also search patents and trademarks to see if someone has already registered your idea.
Pick a sales strategy
Understanding how your product will be marketed and sold is critical to its success, says Tom Fleckenstein, director of the Virginia Highlands Small Business Development Centers, in Abingdon, Va. Much will depend on what is standard in your industry, he says, but success will also depend on your preferences and skill sets. The best business owners aren't necessarily the best salespeople.
For example, Carson knew she would need to focus all of her energy on product development, design and manufacturing. As a one-person start-up, that would leave little time for sales. At her first stationery trade show in 2012, she found a sales agency that agreed to peddle her paper goods to retailers. The agency's sales representatives have already helped Carson place her products in about 200 stores in the U.S., Canada and Japan, a feat she couldn't have achieved on her own in that time frame.
Write a business plan
Any new business venture has myriad details. Capturing them in a business plan, which Fleckenstein calls a playbook, can help. The process of creating the document requires doing research to determine market factors, costs, operating structure, job responsibilities and other aspects of running a business, he says. Wiggins emphasizes the importance of writing the plan yourself, even if it's only a few pages.
Even experienced business owners can benefit from a business plan. Carson "never dreamed" that it would take two years and $60,000 in product development, marketing and manufacturing costs to start Mixt. "That's where a business plan would have been helpful," she says. "It always takes longer and costs more than you think it will." Bplans.com has free business-plan templates to get you started.
Find good people
When David Steele came up with the concept for Flour + Water, an upscale Italian restaurant in San Francisco, the first thing he did was assemble a team to help him turn it into reality. In addition to hiring a talented young chef, Steele brought in a partner whose first business had failed. While that seems counterintuitive, Steele says the restaurant actually benefited because the partner "had been humbled [by his prior business failure], and he watched money like a hawk."
Finding the right people who are willing to work hard and help you realize your vision is usually best done through networking, says Beach. Beyond your circle of friends, family and business associates, seek out potential partners and employees at professional events and trade shows. "If you have a strong network, you'll be able to find the people you need when you need them," he says.
Mind the money
Don't bother telling Fleckenstein how much money your idea is going to make. He's only interested in how much it's going to cost to get off the ground, how you're going to fund it and how you're going to support yourself until your business makes money. He finds that prospective business owners often underestimate their expenses and overestimate how quickly the cash will start pouring in.
Creating a realistic budget and cash-flow projections can help ensure you're managing your money appropriately. Working with a counselor from SCORE, the nonprofit business-mentoring organization, can help make the process smoother. And BizStats.com is a good resource for free financial benchmark reports for your industry.