Have you ever thought about starting your own business, but when you began thinking about everything you needed to do to get started you quickly dismissed the idea to a later date?
I have met many people that postpone their idea of starting a business venture because of uncertain details, negative reactions from friends and family, and more regularly, fear.
Many people would love to branch out and do something on their own, but let’s face it, it’s scary!
That’s why I developed these six simple steps to start your own business. Just follow the steps and soon you’ll be operating your very own business!
1) Explore Your Talents and Passions
Before anyone opens a shop or puts their services up for hire, they first need to explore what they’re passionate about. I would encourage you to take a few minutes, take out a piece of paper, and write down everything you’re passionate about doing in your spare time.
The point of this exercise is first to get a list of ideas in front of your face that could become a money-making side business. Secondly, you want to weed out those things that you might be good at, but that you don’t necessarily love to do or teach. For instance, I am a pretty good singer, but I don’t consider it a passion of mine. Would I aspire to travel around and sing for large groups of people? Absolutely not. And that’s why it’s not on my list.
What do you enjoy doing? Be sure to write everything down no matter how silly it might sound. If you’re passionate about bug collecting or fossil hunting, then write it down! We’ll sort the list out in the next step.
2) Find a Need
When you’re looking at your list, ask yourself if there is a need out there that has something to do with your passions and talents. We mentioned bug collecting before – I would think people’s need for dead bugs is pretty slim, so that one might have to come off your list.
But, if your interests are crafting items out of wood, teaching people to play the piano, or sewing clothing, then there is a definite need for your talents out there! Circle the items that you believe people would be willing to pay for.
To verify the need, start a small operation. Put an ad out on Craigslist, Ebay, or Etsy, and see if there is an interest in your product or service. If no one responds, then perhaps your business idea wasn’t as great as you though and you can move onto the next idea (without costing you a penny by the way).
If there is a consistent need for your product, then feel free to start small and fulfill some of those orders. You’ll likely earn a profit on your initial sales and your costs of overhead are still nothing because you didn’t need to rent out a big space to start a large scale operation. If the need continues, then perhaps that can come later.
3) Save Up for the Initial Starting Costs
If the orders keep rolling in, then it’s time to get a little more serious about your side business. Start using those initial sales to pad your business savings account. Since you had no scale to your operation, there likely weren’t big profits from each sale. But, with additional orders, it would be wise to buy your raw materials in bulk and officially set up your business entity.
Your initial costs are going to depend on the type of business you’re starting. If your business is a service, then all your expenses are likely marketing related. If it’s a product, you’ll need to save up for the material costs and perhaps a small space to build it.
At this point, keep your full-time job and use that income to put money into the initial start-up of your operation. Beyond the start-up though, be sure to fully fund your operations through the business profits. If you cannot, then the business is not profitable and should not be scaled any larger. It might be time to move onto the next idea.
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4) Apply for a Business License
At this stage, you have a definite business idea that is attracting the attention of your customer. Orders are starting to come in and your operation is growing. If you haven’t done it already, it’s definitely time to set up your business entity and register it with the state.
This sounds complicated, but it’s actually incredibly simple. Just hop onto your state’s .gov website, search for licensing, and print off the form for the business type of your preference. For small start-ups, I usually suggest a Limited Liability Company (LLC).
This simple paperwork (usually for less than $100) protects your personal assets from lawsuits and from the needs of the company should it ever go bankrupt. Licensing your business is a must for these simple reasons.
5) Develop Your Business Plan
Large start-ups typically require a formal business plan, mainly to get funding from the bank and private investors, but also to provide direction for themselves and the next stages of the company.
For small start-ups though, I often recommend that people just get out there and start testing the waters. The investment is small and the company might never take off. The benefit of starting small means that you are incredibly nimble.
If the idea just isn’t panning out, then you can quickly switch gears and move onto something entirely different. But, if your idea seems to be working, then it’s time to think seriously about the future of your company.
Since you’re not trying to sell your idea to the bank for financing, don’t stress too much about writing a business plan. It’s merely to give yourself direction for the future and to make sure that your company will continue to expand and grow. Here are a few points your business plan should cover:
- Executive Summary – after writing the entire plan, sum it all up in a short paragraph on the front of the plan
- Business Description – what does your business produce and why?
- Market Strategies – how will you continue to grow in the market?
- Competitive Analysis – who are your competitors?
- Development Plan – what is the next stage of your product?
- Operational Plan – how will you build your product as you ramp up operations?
- Financial Plan – can you continue to cash flow your business growth from profits? What will this look like?
6) Sell Your Products and Services
Now that you’ve grown from that initial “test-the-waters” phase, it’s time to really get serious about your business. Take as many orders as you can handle, produce the product as quickly as possible, and if your operation gets large enough, hire some people to help you.
All the while though, be certain not to take your eye off the monthly income as well as the day-to-day cash flow. As you might already know, one of the most common things to kill a business is not lack of interest in the product, it’s the lack of cash flow to keep the business afloat.
Since it might often take 60 days to collect the money for your orders, be certain to have at least that amount of operational cash stashed away somewhere. It might not seem important now, but you’ll definitely be glad you have it down the road when your receivables go through the roof and you have to depend on that wad of cash to continue.
Best of luck to you and your business ventures! I can’t wait to hear about all your future success!