Every entrepreneur should use this formula as a tool because it informs you about the minimum performance your business must achieve to avoid losing money. Furthermore, it helps you understand exactly where your profits come from, so you can set production goals accordingly.
Refine your idea.
If you’re thinking about starting a business, you likely already have an idea of what you want to sell online, or at least the market you want to enter. Do a quick search for existing companies in your chosen industry. Learn what current brand leaders are doing and figure out how you can do it better. If you think your business can deliver something other companies don’t (or deliver the same thing, only faster and cheaper), or you’ve got a solid idea and are ready to create a business plan.
Define your “why.”
“In the words of Simon Sinek, ‘always start with why,’” Glenn Gutek, CEO of Awake Consulting and Coaching, told Business News Daily. “It is good to know why you are launching your business. In this process, it may be wise to differentiate between [whether] the business serves a personal why or a marketplace why. When your why is focused on meeting a need in the marketplace, the scope of your business will always be larger than a business that is designed to serve a personal need.”
Brainstorm your business name.
Regardless of which option you choose, it’s vital to understand the reasoning behind your idea. Stephanie Desaulniers, owner of Business by Dezign and former director of operations and women’s business programs at Covation Center, cautions entrepreneurs against writing a business plan or brainstorming a business name before nailing down the idea’s value.
Clarify your target customers.
“You need to clarify why you want to work with these customers – do you have a passion for making people’s lives easier?” Desaulniers said. “Or enjoy creating art to bring color to their world? Identifying these answers helps clarify your mission. Third, you want to define how you will provide this value to your customers and how to communicate that value in a way that they are willing to pay.”
TIP: To refine your business idea, identify your “why,” your target customers and your business name.
During the ideation phase, you need to iron out the major details. If the idea isn’t something you’re passionate about or if there’s not a market for your creation, it might be time to brainstorm other ideas.
Secure Financing to Fund Your Business
Common ways to fund your startup
Choosing the right structure is about balancing the legal and financial protection you need with the flexibility offered by different options. It’s an important decision, and it’s one you should consider carefully before you launch your business.
A sole proprietorship is great if you’re the only person involved in the business, and is usually the lowest-effort structure to pursue, but it leaves you personally liable for the business and its activities. As a sole proprietor you can hire employees, but you’ll need an employer identification number (EIN) to do so, which means registering your business entity.
Limited liability corporation (LLC)
A limited liability corporation (LLC) is a common type of small business entity in the US. It provides liability protection for the business owner(s), so you are not financially responsible if legal claims are brought against your business. An LLC can be formed by one or more owners.
A C corporation is a business structure where proprietors are taxed separately from the entity. Shareholders own the business and each has a fractional share of the company. The benefits of a C corp are normally enjoyed by large, multinational corporations, like Walmart and Apple. However, they can be leveraged by small businesses that want to garner investment by issuing stock.
Legal structure factors
Where is your business located
What kind of business are you starting
How many people are involved
Next Step: An accountant or lawyer can be helpful in evaluating the different options available in your area and with the process of setting up a business. You can also check out this sole proprietorship vs. LLC comparison.
Get Federal and State Tax ID Numbers
Federal tax ID (EIN)
You’ll need an EIN if
Having an EIN will
Next Step: The application process to get an EIN is simple. You can just go to the IRS website and fill out an application online. Then the IRS will conduct a compliance review and, once you’ve been accepted, will send you your EIN paperwork either in the mail or to your email inbox as a PDF.
State tax ID
A state tax ID has a similar purpose to an EIN in that it helps your business comply with state laws. However, each state has different requirements, regulations, and even tax laws. So you’ll have to research your individual state’s laws to see whether your business will need a state tax ID.
Laws vary from state to state. A good place to start is your state’s taxation department, department of treasury, or secretary of state. Get in touch with them to find out any state tax ID requirements you may need.
Home Business Ideas
Frontend, backend, and every type of code in between, this skill requires no in-person interaction with your clients. But one skill you’ll want to carry over from the in-person world for this type of business is active listening. It can be easy to zone out while building a product, but developing a connection with the client is just as important as developing the code for their website.
4. Data Entry Clerk
5. Audio or Video Editor
As of March 2021, there are 1.75 million podcasts available to listeners. For this reason, brands are turning to audio and visual content to connect with consumers. The catch is that many don’t have the time to invest in the production of this content, or they don’t have the skills to do it. Audio and video editors are in demand when it comes to producing quality content for hungry audiences.
6. Voiceover Artist
Speaking of podcasts and videos, many content creators recognize the value and level of professionalism that great voice talent can bring to a project. There are gigs out there for podcast intros/outros, narration for explainer videos, or even voice work for audiobooks. Learn how to get started with no experience from Kat Theo below:
7. Dog Walker, Groomer, or Trainer
Licensing and insurance will be the two most important factors in opening a dog walking, grooming, or training business, but your canine colleagues will surely make up for the initial red tape. To test the waters before jumping in, consider walking dogs through companies like Rover. Ready to run your own show? Consider a franchise like Dogtopia.
8. Candy Seller
If you grew up in a close-knit, southern neighborhood, you’re probably familiar with the “Candy Lady”. This home business can be started by anyone who’s trustworthy in the community. Aside from selling the most popular snacks, a candy seller can provide the neighborhood with fresh fruit and produce that may be harder to find if you live in a food desert.
9. Online Class Instructor
Tutoring is often done in person and with one client at a time. Remotely teaching an online class offers more flexibility because you can teach multiple students from home. English is a common subject for online classes because of how many people want to learn it. But anything that you have a mastery over could be translated to a virtual class.
10. Small-Batch Goods Seller
Using organic, all-natural ingredients is more expensive, but worth it. There are many products you can learn how to make at home without any preservatives, chemicals, or toxins. Candles, soaps, shampoos, and moisturizers are some examples of goods you can create and tailor with custom scents. Try starting out making soap with this complete beginner’s guide to soapmaking:
Easy Businesses to Start
Whether you’re looking to start your venture today or you simply don’t want to jump through the normal hoops of launching a small business, the below ideas are extremely easy to start — so easy, all you’ll need to do is sign up on a website or tell your friends about your services.
1. Vacation Host
2. Pet Sitter
Do you have a passion for pets? Consider becoming a pet sitter. While the pet’s owners are away on vacation, either host their pet at your home or make visits to their home. Join a pet sitting service like Wag to get started.
3. Daycare Owner
Childcare continues to be in high demand. While nannies and nanny shares are popular right now, a good daycare is hard to find. Fill a need in your neighborhood by opening your own. And, as always, make sure you’re complying with your city and state’s zoning, licensure, insurance, and inspection requirements.
If there’s a topic you have a heavy interest in, then there’s an audience out there with a heavy interest in it too. A blog can be used to build an online community whose engagement can be monetized. Affiliate marketing, sponsored content, and co-marketing are some ways to make money once your blog develops a following.
How to start a business
At this point, you may be wondering where to start. Should you work on your business name and logo or tackle your business structure? Does it make sense to already start applying for loans or focus on product development?
1. Determine if entrepreneurship is what you want
Conduct a self-assessment
As you get started, your business will likely dominate your life so make sure that what you’re doing is stimulating and challenging, but not completely outside of your expertise. You’re going to be in it for the long-haul. Use what you learn from the SWOT analysis to think through what you want your life to be like, not just what you want from your business.
Answering these questions (and many more) about yourself and your abilities isn’t necessarily going to ensure you’re successful, but it will get you thinking about your goals and about what motivates and inspires you. Use this time to make sure that you are matching the business you want to start to your personal aspirations.
2. Refine your idea
Once you know why you want to start a business, it’s time to find and develop your idea. More than likely, you already have something in mind after going through your self-assessment. But if you need inspiration, you can check out our sample plan library to explore different industries, or read up on trending start-up ideas.
Start with a Lean Plan
We’ll get into the specifics of how to explore the market and determine if you’re idea is a good fit in just a moment. Right now, we recommend that you consider starting a Lean Plan to help make the rest of this process much easier.
The Lean Plan is a simple, one-page document that helps you refine your idea. It ensures that you’re considering your mission and value proposition early on, while also providing structure for the more technical portions of your business. In fact, it will provide you with the perfect template to tackle the rest of these steps.
3. Conduct market research
Once you decide on a business that fits your goals and lifestyle, it’s time to evaluate your idea. Who will buy your product or service? Who will your competitors be? This process will help you address your opportunity, value proposition, the market size, and competition sections of your Lean Plan.
Evaluate your target audience
- How urgently do people need the thing you’re selling or offering right now?
- What’s the market size? Are there already a lot of people paying for products or services similar to yours? Have you honed in on who exactly your target market is? Being specific will help you focus your marketing message and investment.
- How easy is it (and how much will it cost you) to acquire a customer? If you’re selling enterprise software, this may require a significantly larger investment than a coffee shop.
- How much money and effort will it cost to deliver the value you would like to be offering?
- How long will it take to get to market? A month? A year? Three years?
- How much up-front investment will you need before you can begin?
- Will your business continue to be relevant as time passes? A business that repairs iPhone X screens will only remain relevant so long as the iPhone X sticks around. If your business is only relevant for a specific period of time, you will also want to consider your future plans.
Research the competition
If you like, you can even take things a step further and consider the consumer needs currently not being met by businesses in the industry. This is a good time to take a look at potential competitors. And remember, the presence of competitors is oftentimes a good sign! It means that the market for your product or service already exists, so you know that you have potential customers who are willing to spend money on your product or service.
While you’ve got the time, learn as much as you can about your competitors, about what they provide to their customers, how they attract attention, and whether or not their customers are happy. If you can figure out what’s missing before you even get started, your job will be made that much easier when you do finally set up shop.
Validate your idea
Lastly, it’s important to field test your idea, services, or products. As you conduct research, take the time to actually speak to your potential customers. Present them with the concept you intend to launch to gauge interest, as well as confirm which competitors they may already use and the price they’d be willing to pay. If you can, it may be worth developing a minimum viable product (MVP) to help showcase what you’ll be providing.
4. Write your business plan
If you will be seeking outside financing, a business plan is a necessity. But, even if you are going to finance the venture yourself, a business plan will help you figure out how much money you will need to get started, what it will take to make your business profitable, what needs to get done when, and where you are headed.
Prepare for growth
The best thing you can do to take advantage of any mistakes is set up review processes to help you make decisions. This is where the Lean Plan, or full business plan, you’ve been working on comes into play.
If you have your plan up to date, you can set up monthly review meetings to go over the numbers, your strategy and develop forecasts for the next month, quarter, and year. This is a simple way to keep track of performance and actively make decisions based on actual results. So, rather than reacting to bad situations, you are preparing for them and facing uncertainty with certainty.
To help you start your review process, you can download our free cash flow statement and balance sheet examples to begin tracking your financials. And for a simpler solution, that makes reviewing forecasts and financial statements faster and simpler, you may want to consider LivePlan.
With LivePlan, you can create your Lean Plan, full business plan, pitch, and develop forecasts all within one platform. But, if you’re not quite ready to invest in a planning platform, the templates within this guide will be enough to help you get your business up and running.