Learn How to Start Your Small Business - Steps to Launching a Small and Profitable Venture
People often hear about overnight success stories, but they don’t see the months or years of effort and trial that precede success.
While some entrepreneurs dive headfirst into this journey without prior study or a business plan, handling issues as they arise, others get caught in the web of analysis and planning without taking a single step forward. The best approach is to combine both, and that’s where you should aim to be.
Undoubtedly, the best way to start any business is to write down every possible step needed to achieve your goal, then prioritize those steps according to what needs to happen first. Some steps may take minutes, while others may take a long time. The important point is to always take the next step.
Also read: What are the best ways to make money online? Guaranteed, tried, and effective methods.
In this article, we will guide you through the essential steps to turn your idea into a profitable business, starting from defining your business concept and conducting market research, to creating a business plan and marketing your venture.
Steps to Starting a Small Business:
- Define Your Business Concept
- Study the Market and Research Your Competitors
- Create a Business Plan
- Determine Your Business's Break-Even Point
- Acquire the Right Tools for the Job
- Market Your Business
1. Define Your Business Concept:
Although your business must be in a field you are passionate about, there are two more crucial elements: the field must be profitable, and it must involve something you are already skilled at.For instance, you may love music, but how viable is your business idea if you are not an exceptional singer or songwriter? Perhaps you love making soap and want to open a soap shop in your small town, which already has three nearby stores. In this case, it would be difficult to dominate the market when you offer the same product as other nearby stores.
If you don’t have a clear idea of what your business will involve, ask yourself the following questions:
- What do you love to do?
- What do you hate to do?
- Can you think of something that would make these things easier?
- What are you good at?
- What do others come to you for advice about?
- If you were given ten minutes to deliver a five-minute speech on any topic, what would it be?
- What is something you’ve always wanted to do but lacked the resources to do?
Before choosing the type of business to start, there are some basic factors to consider:
- What kind of funding do you have?
- How much time do you have to invest in your business?
- Do you prefer working from home or in an office or workshop?
- What interests do you have?
- Can you sell information (like a training course) instead of selling a product?
- What skills or experience do you have?
- How quickly do you need to scale your business?
- What kind of support do you have to start your business?
- Are you partnering with someone else?
2. Study the Market and Research Your Competitors:
If you're seeking external funding, the first thing a lender or potential partner will want to know is: What sets you (or your business idea) apart from others? If your market analysis indicates that your product or service is saturated in the targeted area, consider whether you can approach it differently. Therefore, you must conduct thorough research on the target market, which is divided into two types:A. Primary Research:
The first stage of any market study is primary research, which involves gathering data directly from potential customers rather than drawing conclusions based on past data. You can use surveys, questionnaires, and interviews to understand what consumers want.
In this step, it's not advisable to survey friends and family unless they are your target customers. The last thing you want is to launch your business and then struggle to sell because all the people who said they would buy from you don’t do so. After all, the product isn’t something they truly want to purchase.
In this step, it's not advisable to survey friends and family unless they are your target customers. The last thing you want is to launch your business and then struggle to sell because all the people who said they would buy from you don’t do so. After all, the product isn’t something they truly want to purchase.
B. Secondary Research:
Use existing information sources, such as census data, when conducting secondary research. Existing data can be studied, compiled, and analyzed in ways that meet your needs, although it may not be as detailed and precise as primary research.
Projects can take a long time to start generating profit, so it’s best to overestimate startup costs and prepare for the worst-case scenario to avoid any surprises. Many experts recommend having enough cash to cover at least six months of operating expenses.
When you know how much you need to start your business, you need to identify the point at which your business begins to make money and generate profit. This is known as the break-even point. To calculate the break-even point with a simple formula, the break-even point equals fixed costs divided by the contribution margin, which is the cost of making the product subtracted from total sales revenue.
In this case, the break-even point can be calculated as follows:
Break-Even Point = $500 / ($1.50 - $0.40) = $500 / $1.10 = 456 units
This means you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units in the first month, you’ll make a profit.
If you sell products or services in a physical store, be sure to include a page on your site where customers can find your locations and hours of operation. Other pages to consider adding are an "About Us" page, product or service pages, a Frequently Asked Questions (FAQs) section, and contact information.
You don’t necessarily need to be on every social media platform available. However, you should have a presence on Facebook and Instagram, as they offer e-commerce features that allow you to sell directly from your social media accounts.
3. Create a Business Plan:
A business plan is a document that serves as a roadmap for establishing your new business, making it easier for you to bring your idea to life and identify potential problems early on. When writing a comprehensive business plan, include the following sections:- Executive Summary: The executive summary should be the first element of the business plan but should be written last. It describes the proposed new business and highlights the project’s goals and methods for achieving them.
- Market Analysis: This section of the business plan analyzes how your business will stand against competitors. The market analysis should include the target market, market size, growth rate, and an assessment of competitors' strengths.
- Mission and Goals: This section should contain a brief mission statement and details about what you want to achieve and the steps needed to get there. These goals should be specific, measurable, realistic, and time-bound.
- Products or Services: This section includes the products you will offer to consumers at the start of your business, how they compare to existing competitors, the cost of your products, how you will source materials, and their cost.
- Marketing Plan: The marketing plan outlines the characteristics of your product or service, summarizes the SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats), and analyzes competitors. It also discusses how you will promote your business, how much will be spent on marketing, and the expected duration of the campaign.
- Financial Plan: The financial plan is arguably the core of the business plan because, without money, the project won’t move forward. Include a proposed budget in your financial plan showing how you will support your business financially until it starts generating income. Typically, five-year financial projections are acceptable. This section is also where you should include your funding request if you are seeking external financing.
4. Determine Your Business's Break-Even Point
Before financing your business, you must be aware of all the startup costs associated with the project. To identify these costs, make a list of all the physical supplies you need, estimate the cost of any services you’ll require, determine the price of any licenses or permits needed to start your business, and calculate the costs of storage spaces and other needs.Projects can take a long time to start generating profit, so it’s best to overestimate startup costs and prepare for the worst-case scenario to avoid any surprises. Many experts recommend having enough cash to cover at least six months of operating expenses.
When you know how much you need to start your business, you need to identify the point at which your business begins to make money and generate profit. This is known as the break-even point. To calculate the break-even point with a simple formula, the break-even point equals fixed costs divided by the contribution margin, which is the cost of making the product subtracted from total sales revenue.
- Break-Even Point = Fixed Costs / Contribution Margin
- Contribution Margin = Total Sales Revenue - Cost of Making the Product
In this case, the break-even point can be calculated as follows:
Break-Even Point = $500 / ($1.50 - $0.40) = $500 / $1.10 = 456 units
This means you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units in the first month, you’ll make a profit.
5. Obtain the Right Tools for the Job:
Several essential tools can help make your life easier and ensure your business runs more smoothly. The right tools can save you time, automate tasks, and help you make better decisions. Below are some important tools you can use to manage your business with ease:- Accounting Software: These programs allow you to track your business’s income and expenses and prepare financial statements. You can use software like QuickBooks or FreshBooks.
- Customer Relationship Management (CRM) Software: This software will help you manage customer relationships, track sales and marketing data, and automate tasks such as customer service and follow-ups. Examples include Zoho CRM and monday.com.
- Credit Card Processing Tools: These will enable you to accept credit card payments from customers. Examples include Stripe and PayPal.
- Virtual Private Network (VPN): A VPN provides a private and secure connection between your computer and the internet, which is important for businesses that handle sensitive data. Examples include NordVPN and ExpressVPN.
- Email Hosting: This allows you to create a professional email address using your domain name. Examples include G Suite and Microsoft Office 365.
6. Market Your Business:
Many entrepreneurs invest heavily in manufacturing, purchasing, or storing their products, leaving no budget for marketing when it comes time to launch. This sets their business up for failure before it even begins. Marketing is one of the fundamental pillars of any successful business. To do this, you can undertake some or all of the following:A. Create a Website:
Whether you already own a business or are preparing to launch one, having an online presence is essential. Creating a website doesn’t require much time or effort; you can have one up and running in less than a day. You can either create a marketing site for your products to attract customers to your physical store or set up an e-commerce site where you sell products online.If you sell products or services in a physical store, be sure to include a page on your site where customers can find your locations and hours of operation. Other pages to consider adding are an "About Us" page, product or service pages, a Frequently Asked Questions (FAQs) section, and contact information.
B. Search Engine Optimization (SEO):
After setting up your website or e-commerce store, focus on increasing its reach by optimizing it for search engines (SEO). This way, when a potential customer searches for specific keywords related to your products, the search engine can direct them to your site. SEO is a long-term strategy, so don’t expect a significant amount of traffic from search engines right away, even if you’re using all the right keywords.C. Create Good Marketing Content:
Good content marketing ideas include videos, customer testimonials, blog posts, and offers. Consider content marketing one of the most important tasks on your daily to-do list. Of course, you can do this on your website while simultaneously posting on social media. Your potential customers use social media every day, so you should be there too. Post content that is interesting and relevant to your audience so customers can learn more about what you do and buy your products or services.You don’t necessarily need to be on every social media platform available. However, you should have a presence on Facebook and Instagram, as they offer e-commerce features that allow you to sell directly from your social media accounts.
In conclusion, embarking on the journey of starting your small business is exciting and full of challenges. As we’ve explored in this article, the path to establishing a successful business involves careful planning and detailed study. By following the steps outlined in this article, you can lay a strong foundation for your business.
Remember that every successful venture begins with a single step, and perseverance is key. There will be obstacles along the way, but it’s important to be able to adapt, consistently address them, and learn from them.
As you engage in your business venture, keep in mind that the rewards far exceed financial gains. You will gain invaluable experience, personal growth, and the satisfaction of seeing your hard work come to fruition. We wish you the best of luck on your entrepreneurial journey and hope that this guide serves as a valuable resource in starting your business.