how to start a new business: 5 basic steps to owning your own company

Starting a business from the ground up can be a lucrative and rewarding experience. There is nothing better than the feeling of "being the boss". Setting your own hours, having creative control, and not having to answer to anyone but yourself is definitely a perk of being a business owner. However, as the spiderman quote goes... with great power, comes great responsibility.

When you begin to think about starting a new business, the world is your oyster. Everyday a new and exciting idea will come to your that will be 'perfect" for your business. Unfortunately, despite the idiomatic ideology of aforementioned oyster analogy (say that 3 times fast...), you eventually come to realize that while having all these oysters is great, they are not all going to fit in your boiling pot of water...Basically, what I am trying to say is that most new business owners think to broad. While it is good to have goals and aspirations for your business, it is even more important to a set basic plan of action. If you were building a house you probably know that you need to pour the foundation before you start worrying about the paint color. The same is true when you start a new business. In the next section I will talk about laying the groundwork of your business.

The foundation of your new business venture begins with you. As the owner/operator, you are the cornerstone to your business. You need to have all the answers, or at the very least, be able to find someone who can find the answer.

As a business owner you should be able to do the following:

1. Know your business: Be familiar with the ins and outs of your industry. You may not need to be need to be the best out there (though that would certainly help), but you should definitely have a certain practical knowledge of your new venture. {If you don't know anything about computers, stay out of the computer business, and if you don't know anything about restaurants stay out of the restaurant business}. It is also important that you know your competitors.

2. Have the proper attitude: Make sure you have a strong personal commitment to follow through on the business. Not only could it affect you and your family, but anyone who is willing to finance you, or work for you. Make sure that, along with setting realistic expectations, you are ready to put in the necessary work. {Hint: It's hard... so make sure you are ready}

3. Managing the businesses finances: While you don't need an MBA or even a background in accounting, it is helpful to have some basic bookkeeping knowhow. Even if you have an accountant on staff to deal with the day to day issues is very important that you know these basic business principles.

4. Provide high quality goods and/or services: This is a very critical component of owning a business. If you can't provide what your potential customers are looking for, they will look elsewhere. Customer satisfaction helps you and your business maintain credibility and will ultimately decide whether or not your business is successful..

5. Adhere to regulations: Owning a business is a complex beast. you are the sole person responsible to make sure that you are following the rules and regulations (of both your industry and the government). Make sure you know what certifications you need, where and when to file paperwork, and are withholding the proper amount of taxes from the business and your employees. Lots of the government regulations (tax information), can be delegated to a CPA, but you are still responsible for the company, and therefore should be checking up on this person to make sure they are compliant with your state law.

Assuming you have already read through the 5 basic steps of starting a new business (above), and have not been scared away, then you are probably looking for a specific step by step approach to start your new business. I promise we will get to this... but for now I want you to take a little time to do some serious self-evaluation.

So why do you want to start a new business venture? Is it the thrill of success? Do you just want the extra income? Do you love being your own boss (or even being other peoples' boss...)? Or, maybe you just love a specific industry and can't picture doing anything else?

All of these are perfectly valid, and good reasons, to start your own business. It is likely that it could even be a combination of several different reasons... but you should know why you are starting it. Don't lie to yourself and say that you are starting a new cleaning company because you love to clean if you don't. It happens quite often, where someone will jump into a business without fully knowing why they are doing it, and the reasons may not fit the business plan. Another example of this would be starting a hedge fund because you love being your own boss, then when it comes time to go and  create a plan to get customers you are left looking around for someone to tell you who to do this... well, there is no one there to tell you how to do this.... this is what you signed up for...

Now, I am not trying to discourage anyone, I just want people to be fully aware of the life of an entrepeneur. It's challenging, it's rewarding, it's both... but don't expect to find one without also finding the other.

The first step (assuming you want a step by step approach to starting your own business) is to create a legitimate business plan. A business plan is important because it will detail all the important components of your business and allow you to really think things through as you get it down on paper. Business plans will let you set and look back on goals and strategies you have for your company. It is also critical for business financing. Nobody is going to invest a dime in you if they can't first see your ideas on paper. A successful business plan should have 5 basic sections (more sections could be added depending on the type of business you plan on owning and the level of financing you will need).

Section 1: Executive Summary

Section 2: Company Background

Section 3: Products and/or Services

Section 4: Market Analysis

Section 5: Marketing and Financial Planning

Section 1:Executive Summary

The executive summary is an overview of the business plan for your new business. It is widely considered be the most important part of a business plan. Think about it this way, it's the first thing that any potential investors will ever see from you... basically, it's your first impression... you only get one, so make it good!

A basic executive summary will outline your business plans and include the following:

Type of Business

Financial objectives

Products and/or services offered

Owner and management information

Marketing strategy

Section 2: Company Background

In the company background section of your business plan you will want to further discuss your basic business structure as well as the goals you have for the business.

In this section you will want to state your mission statement (the purpose of your business), short and long-term goals (specific numbers help... especially if you are looking for financing. the type of business (sole proprietorship, LLC, Partnership, Corporation), location of the business, financial status (how you intend to get the funds for the business start up), the management team and owners (if there is more than one), growth stategy, a brief history of your background in th business (if any...), any other important information that your potential investors should know, and finally why your new business will succeed.

Section 3: Products and/or Services

In this section you will provide a detailed description of your products and services. Do not simply write "clean houses" if you are starting a cleaning business. This is too basic and there is too much gray area... Will you clean their gutters? what about high outside windows? will you shovel snow leading up to there house? Are you going to do their dirty dishes or laundry? Will you clean their garage?

You need to be as specific as possible...

This section of your new business plan should also include some competitive comparisons. How is your good/service better than the people down the street? Make sure you make the readers know exactly why you are unique and why people are going to use your business rather than the competition. If your company has documented research and development or any patents or trademarks, this is also the section where you would acknowledge this information.

Section 4: Market analysis

In this section you will need to further differentiate your new business from the competition (which we talked about in the previous section)

Start with summary that details why your business will be successful. you should also include some possible drawbacks (barriers to entry). Be sure to do some research and use facts to back up your information. You can generally find industry statistics by going to your local library, searching the web, and even through talking with competitors. You will then want to provide an industry analysis where you discuss any trends in your business (good and bad) and be sure to provide more details on why your new business will succeed in the industry. It is also a good idea to provide information about competitors, and any projected growth of the industry.Your should wrap up this section by going into great detail about your target market(s). your target market should be broken down into specific demographic (age, income, family status, etc...) and geographic (where your customers live) segments. Include any other information that seems relevant about the customers you intend to service with your new business.

Section 5: Marketing and Financial Planning

Marketing and Financial Planning is a way to show your potential investors that you have really thought out every detail of your new business plan. you should be sure to include your pricing strategy (will you charge less than or more than your competitors?), product positioning (who will your product/service appeal to?), and promotional strategy (how will people hear about your new business... word of mouth, print advertising, web banners, radio, TV?). you will also want to be sure that you have a detailed idea of the initial capital requirement that you need to start the business. Do not just write down something vague like "as much as it takes", or "a couple hundred thousand to start". have it written down to the penny. Be sure to account for everything (payroll, cost of goods, advertising, insurance, etc...). The financial planning section can make or break whether you get the capital you need to start the business, so be sure to be very specific. highlight where the new business will be in one, three, five and ten years out. You should have this broken down into projected income statements and balance sheets, as well as a cash flow analysis for all the projected years to come. A break-even analysis (where you show when the company will have paid back it's investors and begins to becoem profitable), is also recommended. This shows investors what your expect, and what they shoudl be able to expect in return.

Thank you for reading my article on starting a new business. Now go out there and start making money like its your job. If you enjoyed it please feel free to drop a comment (below), or check out my other recent articles on similar subjects...

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