Starting a small business is undoubtedly difficult, but fortunately it is a project that can be carried out by anyone with an original idea, a developed professional ethics and valid resources. Starting a business requires the development of a business project, the drafting of a business plan, not neglecting its financial aspect and finally the marketing and launch operations.
Part 1 of 6: Establishing the Basics
Step 1. Identify your goals
Are you looking for economic independence, to then resell your business to the highest bidder? Are you aiming for an unassuming and manageable project that allows you to dedicate yourself to a passion of yours and from which you want to earn a fixed income? These are all aspects that it is good to evaluate a priori.
Step 2. Start with an idea
It could be a product you've always wanted to make, or a service that meets customer needs. It may even be something people don't know they need, because it hasn't been invented yet!
- It would be helpful if other bright and creative people joined you for a brainstorming session. Start with a simple question like “What do we do?”, Since the aim is not to create a business plan, but simply to stimulate an exchange of ideas. Many of these will be unfeasible and also quite common, but some brilliant and high-potential ones may emerge.
- Evaluate your talent, your experience and your previous knowledge when you opt for a specific business project. If you have particular skills or abilities, ask yourself how those resources can be leveraged to meet the needs of the market. Putting your skills and knowledge at the service of the community increases the chances of developing a successful business idea.
- For example, perhaps you have worked as an employee in the electronics sector for many years and have noticed the demand for a particular form of work in your area, so your experience associated with the needs of the market can allow you to attract customers.
Step 3. Think of a name for your business
You may even find one before you have a clear idea of the business and, if the name is valid, it could help you develop your business idea. As your project grows and things start to take shape, you may come up with the ideal name, but don't let that be a hindrance early on. Think of a name to use at the beginning and do not hesitate to change it later.
- Check that the name hasn't been used by someone else before you. Try to find one that is clear and easy to remember.
- Think of the well-known brand names like "Apple", which stick in your memory, are clear and easy to pronounce.
Step 4. Select your team
Are you planning to start the business alone or to make use of the collaboration of one or two trusted friends? This would allow for greater synergy, as it could lead to a fruitful exchange of ideas. Often the union is strength.
- Think of some of the most successful stories of recent times, like those of John Lennon and Paul McCartney, Bill Gates and Paul Allen, Steve Jobs and Steve Wozniak, Larry Page and Sergey Brin. In all cases, the union proved to be beneficial for both parties.
- Consider areas of expertise where you are lacking or are not particularly well versed. Finding partners compatible with your character and who are able to make up for your lack of certain knowledge or skills is an excellent way to ensure that the business has the necessary resources to be successful.
Step 5. Choose your partners wisely
When choosing the person or people to start the business with, pay attention. Even if he's your best friend, it doesn't mean he's a good business partner. Start with a trustworthy person. Things to consider when choosing your colleagues and the team that will support you in your business include:
- Can the other person make up for your shortcomings? Or do you both have the same skills? In the second case, be careful not to surround yourself with too many people who perform the same duties as you, running the risk of leaving other sectors uncovered.
- Do you fully agree on the final project? Differences of opinion on the details are obvious and useful for progressing, but not sharing the project in its complexity, that is, the real purpose of the activity, could cause irreconcilable conflicts.
- If you have to deal with recruiting, get a manual to learn how to identify real talent beyond the degree, certificates or lack thereof. A person's training area is not necessarily the one in which they are most talented. A candidate may have an accountant background, but their experience and your assessment may help you understand that they are the ideal person to join you in the marketing industry.
Part 2 of 6: Writing a Business Plan
Step 1. Write a business plan
It helps you identify the resources you think you need to launch your business, large or small. It summarizes the purpose of your business in a single document and also serves as a point of reference for investors, banks and other interested parties, so that they can evaluate how best to help you and decide whether your business is viable or not. Your business plan should keep in mind the elements highlighted in the next steps.
Step 2. Describe your business
Explain the characteristics of your business in more detail and explain its position on the market in general. Specify if your business is a SpA, an Srl or a sole proprietorship and the reason why you have chosen this legal form. Describe your product, highlighting its features and why people would buy it. Answer the following questions:
- Who are your potential customers? Once you understand who they are and what they want, develop a marketing strategy.
- How much are they willing to pay for your product or service? Why would they choose your product or service, rather than that of your competitors?
- Who are your competitors? Perform a competitive market analysis to identify the main competitors. Find out who is doing something similar to what you are planning and how they achieved success. It is equally important to find out who failed and the causes that led to the failure.
Step 3. Write an operational plan
This is to describe how you will build or distribute your product or service and all related costs.
- How will you make your product? Is it a service, or if it's software or a more complex item, like a toy or a toaster, how will it be built? Define the production phases, from raw materials to assembly and finishing, packaging, storage and shipping. Will you need more staff? Will trade unions be involved? All these aspects must be taken into consideration.
- Who will be in charge of the business and who will be its employees? Define the hierarchical structure, starting from the receptionist up to the administrators, establishing their position based on functional qualification and salary. Knowing the business organization will help you plan operating costs and establish the amount of capital needed to start your business.
- Listen to the opinions of others. Your friends and family are the ideal people to ask questions and get feedback from, so don't hesitate to use them as a sounding board.
- You need to expand your spaces. This happens more often than expected. When the stock starts to rise, it could pile up in your living room, bedroom, and garden shed. Consider renting a deposit if necessary.
Step 4. Write your marketing plan
The operational plan describes the production phases of your product, while the marketing plan describes the strategies to be applied in the sale of the same. When making your marketing plan, ask yourself how you will make it known to your potential customers.
- You will need to think about which channel to use. For example, will you advertise it through radio ads, social networks, promotions, billboards, participation in business meetings, or will you use all the channels mentioned?
- You will also have to define the message to convey: in other words, what will you say to persuade customers to choose your product? You will have to focus on your strength (known in English as "USP"), ie on the exclusive advantage that your product offers to its potential customers: for example it could be its competitive price, its greater practicality or its superior quality compared to to that of your competitors' products.
Step 5. Develop a pricing strategy
Start by analyzing the prices of your competitors. Try to understand the selling price of their product. Can you add something (added value) to make your item better and therefore its price more attractive?
Competition is not just about products and services themselves, but also about social and environmental credibility. Consumers are increasingly attentive to the conditions of workers and the impact that activities have on the environment. Certifications issued by recognized bodies can reassure your customers, demonstrating that your product or services are more in line with their values than those of a company that does not
Step 6. Take care of the financial aspect
The balance sheet translates into numbers, that is, into profits and cash flow, the marketing plan and the operational plan. It identifies the amount of money you need and the profit you could make from it. As it is the most dynamic part of your project, and perhaps the most important to ensure its long-term stability, you should update it monthly in the first annuity, quarterly in the second and annually thereafter.
- Deal with the startup cost issue. How are you going to finance your business in the beginning? By taking out a bank loan, selling stocks to investors, or with your savings? These are all viable options. When you start a business try to be realistic, as you will probably not be able to develop 100% of what you have planned, therefore you need sufficient funds to cover the expenses, until you really get on track and start the business. One of the most common causes of a company's bankruptcy is undercapitalization.
- At what price do you intend to sell your product or service? What costs will you have to bear for its production? It draws up a rough estimate of the net profit, including fixed expenses such as rent, electricity, wages, etc.
Step 7. Make an executive summary
The first part of a business plan is the executive summary. After developing the other sections, explain the general idea of the business, how it will be financed, how much funds you will need, its current position (even legal), the people involved with a brief history, and anything else that contributes to make your business look like a winning proposition.
Step 8. Build your product or develop your service
After planning everything, finding the funds to finance the activity and selecting the basic staff, proceed. Whether you need to request software coding and validation by engineers, pick up and ship raw materials to the factory (aka your "garage"), or buy in bulk and increase your profit margins, the build process is the phase in which you prepare for the market launch. During this stage you may realize that you need to:
Make slight changes to your initial ideas. Maybe you should change the color, shape or size of the product. Perhaps your services need to be expanded, reduced or made more detailed. Right now you need to take care of everything that comes up during the approval and development stages. You must learn to recognize when a product needs changes to be improved or to become competitive
Part 3 of 6: Managing Your Finances
Step 1. Provide for start-up costs
Most businesses need capital in the start-up phase. It usually takes money to purchase supplies and equipment, as well as to keep the business running before it produces a profit. You have to rely mainly on yourself..
- Have you made any investments or do you have savings? If so, consider using some of it to finance your business. You should never invest all your savings in one business, because it could fail. Furthermore, you should never spend all the money set aside to cope with emergency situations (experts recommend setting aside for this purpose at least the sum equivalent to 3 or 6 months) or the money you will need in the following years for the fulfillment of commitments undertaken towards banks.
- Consider a mortgage loan. If you own a home, this might be a good idea, as this type of loan is usually easily granted (as your home acts as a guarantee), although you should consider the interest rate charged by the banks.
- If you have a retirement plan, consider a retirement loan. This is a tool that allows the private worker to receive an allowance until the retirement requirements are met.
- Another option could be to put money aside. If you have a fixed employment, save a sum of your monthly salary to cover the costs of starting the business.
- Contact banks for information on commercial loans or credit lines. To make sure you get an advantageous interest rate, compare different lenders.
Step 2. Check the management costs
Make sure that the operating costs do not exceed the budgeted amounts. In case you notice high electricity and telephone bills and excessive expenses for stationery and packaging, look around to assess your real needs and reduce or eliminate expenses in all possible ways. Try to save in the start-up phase, for example by renting equipment instead of buying it and using prepaid service plans instead of entering into long-term contracts.
Step 3. Try to have more than the minimum capital
You may decide that 50,000 euros are needed to start your business, and that's fine. You have 50,000 euros available, which you spend to buy desks, printers and raw materials; the following month you are still in production, but you have to face the costs of rent and salaries for employees, so the bills suddenly skyrocket. When this happens, the only solution is to pack. If you can, try to have your back covered for a year without profits.
Step 4. Pull the strap
Try to minimize office equipment costs and overheads when starting up. You don't need megagalactic offices, the latest in furniture and expensive paintings hanging on the walls. A closet is more than enough, if every time you manage to make an appointment with your customers in a nearby bar (meet them in the lobby). Many businesses have failed because they focused on buying useless and expensive items, rather than on the business itself.
Step 5. Establish the payment method
You have to decide how to get paid from your customers. You can buy Square, which is perfect for small businesses, as it doesn't require you to fill out a lot of paperwork and comes with minimal commission fees. However, if you are not keen on technology, you may want to inquire about a traditional trading account.
- Opening a bank credit is a contract under which the bank offers a line of credit to a merchant who wishes to accept credit card transactions from a particular institution. In the past, without a bank credit, it was not possible to accept payments from major credit institutions, but with the advent of Square, the situation has changed, so do not preclude yourself from any possibility and get better informed.
- Square is a device with magnetic strips that connects to a smartphone or tablet and becomes a sort of cash register. You may have already noticed this device in the shops you frequent, because it is becoming common in bars, restaurants, street food outlets and other businesses (look for a plastic square, the size of a postage stamp, inserted in a tablet or mobile phone).
- Note that PayPal, Intuit, and Amazon offer similar solutions. Be sure to sift through all the options available to you before choosing.
- If you do business online, services like PayPal have an excellent system for receiving and forwarding payments.
Part 4 of 6: Dealing with the Legal Aspect
Step 1. Seek the advice of a lawyer or legal counsel
You will have to face many obstacles, from problems created by employees to overwork, perhaps underpaid. Some of these obstacles are piles of documents with rules and regulations, ranging from building agreements to municipal ordinances, regional permits, state charges, taxes, duties, contracts, quotas, and more. Being able to count on someone you can call in your time of need will not only reassure you, it will also offer you the resources you need to be successful.
Choose someone who you can communicate freely with and who demonstrates that they know your business. You will need to seek out an experienced lawyer in the field to avoid incurring fines or even prison sentences
Step 2. Find an accountant
You will need to look for one who can manage your finances well, but even if you feel you can manage your accounting records yourself, you still need someone with some experience in corporate taxation. Business taxes are a very complex issue, so you need to have (at least) a tax advisor. Remember that no matter how much money you manage, you need to be a trustworthy person.
Step 3. Choose the type of business
You will need to decide on the legal form that best suits your business, both for tax reasons and hopefully to attract potential investors. You will need to do this after deciding whether you need money in the form of loans or company shares and after consulting with a legal and business advisor. This is one of the last steps before you invest your money or ask someone for it. Most people are familiar with joint stock companies, limited liability companies, etc., but in most cases you will have to choose one of the following legal forms:
- Sole proprietorship, if you will run the business alone (excluding employees) or together with your spouse.
- General partnership, if you will run your business together with a partner.
- Limited partnership, made up of some partners who respond with their own assets and other partners who have limited liability and respond only with the capital invested in the company. All shareholders share profits and losses.
- Limited liability company in which the shareholders have, in fact, limited liability to the share of capital they invest.
Part 5 of 6: Advertise Your Business
Step 1. Build a website
If you sell your products online, give your e-commerce an edge and create a site or entrust it to someone else. It's your showcase, so don't hesitate to do your best to get people to “visit” and shop.
- Alternatively, if your business is more oriented towards the "ad personam" approach, traditional marketing could be just as important. If, for example, you are starting a design business, spread the word to your neighbors before creating a website.
- When building a website, remember that simplicity and clarity are key. A simple interface that illustrates your mission, sales methods and costs is much more effective. Remember to emphasize why your business is meeting the needs of its customers.
Step 2. Rely on professional web designers
If you decide to have your website built by a third party, make sure it looks professional. The work of web designers comes with costs, but an engaging and reliable site is essential. It must have a professional look and an easy to navigate interface. If you're going to accept payments online, invest in secure encryption and make sure you're dealing with reputable companies.
Step 3. Find out the advertiser in you
You may blindly believe in your product or service, but everyone has to believe in it for it to be successful. If you have no skills in advertising or marketing or you don't like slogans, now is the time to overcome your hesitations and take on the role of an advertiser. You need to come up with a short, impactful slogan to convince people that they need your product or service that reflects the value, purpose, and potential of what your business offers. Write the slogan in different forms, until you find one that satisfies you, that encompasses it all in one sentence and that is catchy. Next, repeat the slogan over and over!
Depending on your business, you may want to print some interesting and eye-catching business cards
Step 4. Work to develop an active presence on social networks, which guarantees greater visibility of your business
This could be done even before the business is ready, increasing customer expectations. Use Facebook, Google+, Twitter and any other social network you are subscribed to to create excitement and spread the word. You need to spread the news, so that people start following you (make sure you choose commercial accounts for your business and keep them separate from personal ones - messages should be worded differently, based on the account from which they are sent).
Step 5. Implement your marketing and distribution plans
After creating the product or developing the services, when you have a fairly realistic idea of when you will be ready for sale, take care of the marketing.
- If you will advertise in periodicals, you will need to provide the material or images two months before publication.
- If you will be selling in stores, proceed with pre-orders and reserve the necessary space on the shelves to display your product. If you will be selling online, prepare the site for sale.
- If you are going to offer a service, advertise it in the trade and professional newspapers and newspapers of the sector and also online.
Part 6 of 6: Launching Your Business
Step 1. Make sure you have the necessary spaces
Whether it's an office or a warehouse, if you need more space than your garage and bedroom, now is the time to find them.
- If you don't routinely need an office other than your home but may occasionally need a meeting location, there are places that meet these needs. By typing in the keywords "rent meeting rooms [city name]" in Google, you will see many rental options in your area.
- Contact your municipality to request information on urban and commercial planning. The opening of a new business is regulated by a series of regulations, in accordance with the minimum conditions of urban, environmental and functional compatibility.
Step 2. Launch your product or service
When the product is truly finished, packaged, approved, put online and ready to go, or when your services are fully functional and ready, throw a housewarming party to launch your business. Post ads in newspapers, spread the word as much as you can. Post ads on Twitter, Facebook and get the word out all over the market - you've got a new business!
Throw a party and invite people who might help you spread the word. It doesn't have to burden your finances: buy food and drinks in bulk and involve your family and friends to help you out (you can offer them your product or service in return)
- Always offer the best value and service to those who may become your customers, even if they are not currently. When they need your product, they will turn to you.
- With the advent of the internet, online businesses are probably the simplest way to get started and are less burdensome in terms of start-up costs than traditional stores.
- Always keep up to date and be flexible with respect to changes. Find friends, mentors, trade associations, forums on the internet and write an article on wikiHow to talk about the difficulties of running a small business. It is much easier for anyone to manage a business and thrive when energy and time are not wasted to start from scratch.
- Most direct selling companies have less start-up capital than brick-and-mortar stores. You may even break even fairly quickly compared to traditional businesses.
- You can also consider trading on eBay or Etsy.
- It's perfect to start with one or two products and then always add new ideas along the way!
- Don't be afraid to experiment with prices. You should determine the minimum price for your product or service to break even, but try with lower prices or with price changes based on market trends.
- Always have confidence in yourself even when the funds are falling sharply.
- Don't trust people who ask you for money upfront. Commerce is profitable if it is based on mutual gain, therefore a company should be willing to pay for your services. A franchise shop or home-based business should have legitimate startup costs, but they should have a fair cost to get you started - managers need to make money through your success, not just by giving you access to an activity.
- Be wary of those who offer you something in exchange for "nothing": sooner or later you will have to pay the expenses. These scams have many variations, some more unsuspected than others. The pyramid marketing model and fraudulent prepayment emails are examples of this.